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EXHIBIT 99.1









BCE INC.

2002 ANNUAL REPORT





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Bell Canada Enterprises

Whats important.

2002 Annual Report



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ABOUT BCE
BCE is Canadas largest communications company. It has 25 million
customer connections through the wireline, wireless, data/Internet
and satellite television services it provides, largely under the Bell
brand. BCEs media interests are held by Bell Globemedia, including
CTV and The Globe and Mail. As well, BCE has eBusiness capabilities provided under the BCE Emergis brand. BCE shares are listed
in Canada, the United States and Europe.



|                                           |  |                   |   
|------------------------------------------ |  | ----------------- | --
|TABLE OF CONTENTS                          |  |                   |   
|Whats Important                           |  |                   | 1 
|Chairmans Message                         |  |                   | 10
|Letter from the President and CEO          |  |                   | 11
|Financial Highlights                       |  |                   | 12
|Operational Highlights                     |  |                   | 16
|2002: The Year in Review                   |  |                   | 17
|Corporate Social Responsibility            |  |                   | 26
|Managements Discussion and Analysis       |  |                   | 28
|Consolidated Financial Statements          |  |                   | 54
|Notes to Consolidated Financial Statements |  |                   | 58
|Board of Directors                         |  |                   | 82
|Committees of the Board                    |  |                   | 84
|Shareholder Information                    |  | Inside Back Cover

In this annual report, we, us, ourand BCEmean BCE Inc., its subsidiaries, its joint ventures
and its investments in significantly influenced companies. See page 28 for more information.



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In 2002, we set a new course

for BCE and began

the process of simplifying our

business. As we move into

the future, certain principles will

guide our decisions.

Bell Canada Enterprises  1  2002 Annual Report



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Simpler is better.

|                                                                                                                                                                                                                             |  |                    
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------
|Customers want things to be as simple as possible. They want things to be easy
to
access, easy to understand and easy to use. In a world that is getting more
complex
by the day, our services must simplify peoples lives. |  | (WOMAN ON COMPUTER)

Bell Canada Enterprises  2-3  2002 Annual Report



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|              |  |                            
|------------- |  | ---------------------------
|(HIGH JUMPER) |  | Its all about performance.

Performance matters. Results matter. Customers and shareholders expect them,
and in these
times, expectations are high. They want action, not words. And they want to see
more than
effort. They want to see progress  real, measurable progress. We know we must
deliver.

Bell Canada Enterprises  4-5  2002 Annual Report



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|                           |  |                      
|-------------------------- |  | ---------------------
|Good is never
good enough. |  | (MAN CLIMBING STAIRS)

Excellence is an unending journey, not a destination. Nothing but great
will suffice, and
great is a moving target. Improvement must be a continuous process of
questioning the
status quo and pushing to be better. There is always room to improve.

Bell Canada Enterprises  6-7  2002 Annual Report



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|               |  |                                
|-------------- |  | -------------------------------
|(WOMAN IN CAR) |  | The customer drives everything.

Nothing in business is sustainable without loyal, satisfied customers. You
must gain the right
insights on what the customer needs, wants and expects  and let those
insights drive
everything you do. Because real shareholder value doesnt happen without
customer value.

Bell Canada Enterprises  8-9  2002 Annual Report



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Chairmans Message

|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(PHOTO OF RICHARD J. CURRIE, C.M.) |  | It was a
tumultuous year for your company.
In
April, your Board of Directors, recognizing that the primary job of
the
Board is to be
accountable to shareholders  not to run the company  separated the
positions of Chairman
and CEO. As the year progressed, it became ever clearer that the
responsibility of the Board is
to operate in a transparent manner. To that end, the BCE Board is
examining its structure and
committee mandates. Under the present TSX and NYSE guidelines, your
Board,
with the exception
of the CEO, is composed entirely of independent, unrelated directors.
Whatever guidelines ultimately
emerge, BCE will maintain the majority of its Board, all its committee
chairs and the majority of
members on each committee as independent, unrelated directors, with an
audit committee entirely
composed of financially skilled, independent, unrelated directors.
     Through
another important Board initiative, the director stock option
program has been
eliminated. Furthermore, we have increased the minimum share ownership
for
your directors from
3,000 shares to 10,000 shares in order to better align the interests of
your directors with those
of the shareholders. Until a director has met such minimum share
ownership
guideline, directors
fees are payable in deferred share units (DSUs). The DSUs cannot be sold
while serving as a
director. The minimum share ownership guideline and the DSUs are designed
to make all directors
major shareholders of BCE. Share options will be only for management,
have
performance criteria
and be recorded as an expense on our financial statements.     In
becoming transparently accountable to shareholders, your Board of
Directors will focus
its efforts and its interaction with management in three areas 
stewardship, strategy and
succession. Stewardship involves concentration on the core competencies
of
the business. In
terms of strategy, the Board must endorse the strategic direction for the
company as developed
by the senior management team. Succession requires timely and effective
programs to ensure
management development is continuously taking place.
|                                   |  | Jean C. Monty resigned in 2002 as Chairman and CEO of the company. On
behalf of the
Board of Directors of BCE Inc., I would like to recognize the many
contributions he made during
his almost 30 years with this organization.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                   |  | The breadth of expertise on your Board has been increased by the addition
of three new directors:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                   |  | André Bérard, Chairman of the National Bank of Canada, The Honourable
Edward C. Lumley,
Vice-Chairman of BMO Nesbitt Burns, and Thomas C. ONeill, former
Chairman
of PwC Consulting.
Two of our directors  Ted Newall and Guy Saint-Pierre  have announced
they will not stand for
re-election in May. We are grateful for the experience and insights of
these well-known business
leaders over many years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                   |  | We look to the future with enthusiasm and confidence, not, of course,
just
because of
governance changes, but primarily because the real talent of Michael
Sabia
and his management
team has been so capably demonstrated. Their quick recognition of issues,
the precision of their
action plans to resolve those issues and the quality of their results,
achieved in such a short
period of time, all attest to their standards and their skill.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                   |  | Yours is a great Canadian company
 now fully in control of its future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                   |  | (CURRIE SIG)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                   |  | Richard J. Currie, C.M.
Chairman of the Board                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

Bell Canada Enterprises  10  2002 Annual Report



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From the President and CEO

Dear Shareholders,

Whats important? For us
its simple: Putting the customer
at the centre of all that we do. Meeting their needs quickly,
simply, competitively. Executing on our business plans.
Reaching our goals. Delivering on our promises. Being
leaders. Our direction is clear. Were focused.

Bell Canada Enterprises  11  2002 Annual Report



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Financial Highlights

|                                                          |  |      |        |      |  |      |        |  |  |  |        | 
|--------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|                                                          |  | 2002 |        | 2001 |  | 2000
|                                                          |  |      |        |      |  |     
|Revenues (in millions)                                    |  |      | 19,768 |      |  |      | 19,340 |  |  |  | 16,668 | 
|EBITDA* (in millions)                                     |  |      | 7,622  |      |  |      | 7,242  |  |  |  | 6,715  | 
|Net earnings per common share                             |  |      | 2.74   |      |  |      | 0.56   |  |  |  | 7.32   | 
|Net earnings before non-recurring items per common share* |  |      | 1.81   |      |  |      | 1.74   |  |  |  | 1.87   | 

(BAR CHART)



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|* |  | The terms EBITDA (Earnings before interest expense, income taxes,
depreciation and amortization) and net earnings before non-recurring items 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 page 32 of this Annual Report for a description of these terms.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Bell Canada Enterprises  12  2002 Annual Report



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2002 was an important year.

Perhaps thats an understatement. It was
a veryimportant year. It was a year in which
we put a tremendous amount of uncertainty
behind us and turned our eyes confidently
again to the future. Thats important.

We severed our
ties with Teleglobe in
the context of
unprecedented turmoil
in the global
telecommunications
industry. It was not an
easy decision. But it
was an essential
decision.

We regained full ownership of our most
important asset, Bell Canada, successfully
financing the transaction in one of the
toughest financial markets anyone can remember.
In fact, according to industry expert Cap
Gemini, the equity component of the financing
was the only truly successful such offering in
the entire global telecom industry during 2002.

In the face of this, we delivered solid
financial results, outperforming the North
American telecom sector across most important
measures, despite very difficult conditions in
most of our customer markets.Youll see
highlights of these results on the left, and
more detail in the back section of this
report, but thats not what I want to talk
about in this letter.

(PHOTO OF MICHAEL SABIA)

We accomplished a great deal in 2002.
Early in the year, it became clear that the
pace of change in the telecommunication
markets demanded some fundamental changes of
BCE, so we did what we had
to do. We are now what we always must be:
a strong Canadian company in complete control
of its destiny. What lies ahead?
Thats what I want to talk
about in this letter.

An increasingly competitive
marketplace

First of all, what
lies ahead is
competition  more of
it from a growing
roster of players
eager to enter our
traditional
businesses. It is no
longer just BCE
competing with other
telecom companies.
We compete with cable companies, which in turn compete
with satellite companies. Wireless
companies compete with other wireless
companies and with traditional telephone
service. The complexity in the marketplace is
growing with global software companies, system
integrators, massive media conglomerates, all
now vying for the customer.

The very nature of competition in our
industry has changed, but I am convinced BCE
has what it takes to win. We have a business
model for a telecom company that is

Bell Canada Enterprises  13  2002 Annual Report



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unique in North
America, with unrivaled
breadth of platforms.
We have a tremendously
strong brand and a
solid franchise, with
more than 25 million
customer connections
across Canada. Within
these established
relationships there is
much potential for
growth. Just one in 100
customers uses all four
of our core services:
wireline, wireless,
high-speed Internet
access and satellite
television.

To put it simply, we
have to make it easier
for our customers
to manage their
businesses; easier to
manage their lives.

Taking action: a focus on customers and financial discipline

Attributes and potential are not what matters
at the end of the day. What matters is action.
Whats important are the things we do to build
upon our strengths and translate them into
profitable growth.

The customer has to be at the centre of
everything we do. This is critical to our
success. Theres a phrase in our business,
the last mile. It expresses a certain view
of the world, a view of the customer as an
extension of the network. We dont think of it
that way. The customer connection is the first
mile. Its where it all starts. That is why we
have to be focused on learning more about our
customers, understanding their needs and
wants, and delivering the right products,
services and solutions to meet them.

Whether the
customer is an
individual moving to a
new apartment or a
global corporate giant
that needs a secure
and reliable network,
delivering the right
solution simply is the
key to winning and
keeping their
business. To put it
simply, we have to
make it easier for
each customer to do
what they want to do.
Easier to decide what
they need, and easier
to account for it.
Easier to get
questions answered.
Easier to manage their
businesses; easier to
manage their lives.

While we intensify our focus on
customers across every aspect of business, we
are placing
equal emphasis on financial discipline
and execution. We are emphasizing
productivity improvements, focusing on the
right metrics, including return on equity and
free cash flow. We have set aggressive
targets, but its important to be clear: We
are not pursuing productivity strategies to
hit a given target. Were pursuing
productivity as a discipline, not an
initiative. Were working to strengthen
ourselves, step by step, to give us the kind
of cost structure we need in an increasingly
intense competitive world.

We have been, and will continue to be, careful to execute
productivity improvements and cost reduction strategies

Bell Canada Enterprises  14  2002 Annual Report



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while continuing to strengthen our service
quality. Many of our efforts are aimed at
improving both productivity and service at
the same time  Emily, the new voice of
Bell, is an excellent example. Overall, our
goal is not just to have the best cost
structure in the industry. Its also to have
the best service and customer satisfaction
levels at the same time.

A simpler company

One of our greatest strengths, the breadth of
our platforms, is also one of our greatest
challenges. It is difficult to bring together
our many different capabilities and provide
them seamlessly to customers. In short,
delivering simplicity is an exceedingly
complex undertaking.

But it begins with the fundamental belief
that connectivity is the foundation and the
core of our business. Around that connectivity
we must build the layers of value-added
services that focus on meeting specific
customer needs in a simple fashion. For us to
meet that imperative, our company must be
organized around the customers we serve 
consumers, small business and large
enterprise. We will do that. We will leverage
our brand and build on our strengths to build
a great company.

A new attitude

Every day, I come to work committed to earning
anew the right to have this job. Thats the
attitude I want to see among all our people.
Because organizations do not serve customers.
Organizations do not build relationships; they
do not innovate.
People do. We must all come to work, every
single day, with
a commitment to make a difference  and by
making a difference, earn the right to be
our customers communications company.

Take nothing for granted. Work hard,
every day, to earn their business. Never stop
thinking about how we can get better at our
jobs, about how we can serve our customers
better.

Our heritage, our future

This company has a long and proud heritage as a
national institution in Canada. I am honoured
to lead it. As we achieve our business goals,
and as we reach the levels of customer service
we aspire to, I believe that we will be
contributing to a more connected, stronger and
more prosperous Canada. This will always be
important.

Bell has been an institution in Canada
for more than a century. Today, this is still
where our core strengths reside, and as we
move forward, this is where we will
concentrate our efforts. If we keep our focus
on whats important  creating simplicity,
pursuing excellence, delivering results,
focusing on the customer  there are no limits
to what we can accomplish.

(SABIA SIG)Michael J. Sabia
President and Chief Executive Officer
BCE Inc.

Bell Canada Enterprises  15  2002 Annual Report



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Operational Highlights

|                                                        |                                   |  |        |        |      |  |        |       |  |  |        |     | 
|------------------------------------------------------- | --------------------------------- |  | ------ | ------ | ---- |  | ------ | ----- |  |  | ------ | --- | 
|                                                        |                                   |  | 2002   |        | 2001 |  | 2000  
|                                                        |                                   |  |        |        |      |  |       
|Local and access                                        |                                   |  |        |        |      |  |        |       |  |  |        |    
|Network access services (thousands of lines in service) |                                   |  | 13,154 |        |      |  | 13,296 |       |  |  | 13,341 |    
|Long Distance                                           |                                   |  |        |        |      |  |        |       |  |  |        |    
|Conversation minutes (millions)                         |                                   |  | 19,034 |        |      |  | 18,200 |       |  |  | 17,898 |    
|Average revenue per minute (cents)                      |                                   |  | 12     |        |      |  | 13     |       |  |  | 15     |    
|Wireless                                                |                                   |  |        |        |      |  |        |       |  |  |        |    
|Cellular & PCS subscribers (thousands)                  |                                   |  | 3,919  |        |      |  | 3,454  |       |  |  | 2,764  |    
|Cellular & PCS net activations (thousands)              |                                   |  | 465    |        |      |  | 690    |       |  |  | 595    |    
|Average revenue per subscriber ($/month)                |                                   |  | 46     |        |      |  | 46     |       |  |  | 47     |    
|Data                                                    |                                   |  |        |        |      |  |        |       |  |  |        |    
|Equivalent access lines  Bell Canada only (thousands)  |                                   |  |        |        |      |  |        |       |  |  |        |    
|                                                        | Digital equivalent access lines   |  |        | 3,683  |      |  |        | 3,713 |  |  |        | N/A | 
|                                                        | Broadband equivalent access lines |  |        | 12,568 |      |  |        | 9,109 |  |  |        | N/A | 
|DSL high-speed Internet subscribers (thousands)         |                                   |  | 1,110  |        |      |  | 757    |       |  |  | 336    |    
|DSL high-speed Internet net activations (thousands)     |                                   |  | 353    |        |      |  | 421    |       |  |  | 272    |    
|DTH satellite television services                       |                                   |  |        |        |      |  |        |       |  |  |        |    
|Total DTH subscribers (thousands)                       |                                   |  | 1,304  |        |      |  | 1,069  |       |  |  | 722    |    
|Net subscriber activations (thousands)                  |                                   |  | 235    |        |      |  | 347    |       |  |  | 306    |    
|Average revenue per subscriber ($/month)                |                                   |  | 44     |        |      |  | 45     |       |  |  | 47     |    

Bell Canada Enterprises  16  2002 Annual Report



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Delivering whats important

| |  |                                                                 
| |  | ----------------------------------------------------------------
| |  |                                                                 
| |  | Consumer
Small to mid-sized business            Large
enterprise

| |  |                         
| |  | ------------------------
| |  |                         
| |  |                         
| |  |                         
| |  | 2002: THE YEAR IN REVIEW
| |  |                         
| |  |                         
| |  |                         

Bell Canada Enterprises  17  2002 Annual Report



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Consumer

In a world thats complex and getting more so, consumers want simplicity.
Theyre looking for easier access to information, simpler choices and products
that make life less complicated. In the consumer segment, breadth of platforms
and simplicity of delivery are critical advantages.

(MAIL BOX)

In 2002, we made
significant progress
toward our goal of
providing single-bill
simplicity and
convenience for
customers.

One customer, one bill; flexibility for Sympatico.ca

In 2002, Certen, the joint
venture between Bell Canada
and leading billing system
specialist Amdocs, completed a
major step toward realizing
the goal of a single,
consolidated bill for multiple services. In December, Certen delivered
the single-bill capability for
residential customers covering
basic access, long distance,
SmartTouch, Sympatico and Bell
ExpressVu. Bell began a pilot program
in January with a plan to phase in the
capability over time. Once completed, the
system will give Bell
customers the simplicity of a
single bill; it will give Bell
a modernized, flexible billing
platform that supports revenue
growth while reducing costs
through economies of scale.

Meanwhile, Certen worked
with Sympatico.ca to create
new billing system
capabilities  designed to
flow into the one-bill
capability  that can evolve
as the Internet service
provider grows. Launched in
June 2002, the new
capabilities can quickly be
adapted to accommodate new
product offerings, which is
key to getting to market
faster and giving customers
more choice. A similar system
for Bell wireless service is
planned for launch in the
third quarter of 2003.

Bell Canada Enterprises  18  2002 Annual Report



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(OFFICE CUBICLES)

Call centre agents at 310-BELL are key to retaining and growing
our customer relationships. With advanced tools and technology
at their fingertips, agents are equipped to solve problems and
provide answers more quickly than ever before. Equally
important, 310-BELL is focused on cross-selling a full range of
Bell services, using bundling and other means to help customers
take advantage of opportunities for single-provider simplicity,
efficiency and value.

Bundling to simplify choice

Increasingly, were packaging
services together to make it
easier for customers to
understand their options and
make choices that fit their
lives. In the fourth quarter
of 2002, we launched pilots
for consumer bundles such as
the Connected Home, which
combines local and
long-distance telephone
service with high-speed
Internet and Bell ExpressVu;
Surf & Watch, high-speed
Internet and Bell ExpressVu;
and a product package for
basic telephone service. The
goal over time is to support
bundling with single-bill and
advanced call centre
capabilities to deepen
relationships and reduce
churn while simplifying
choice, payment and service
for customers.

Just call 310-BELL

Easy to remember and easy to
use, 310-BELL represents a key
to our ongoing drive to
simplify customer interaction,
quickly deliver what
callers want and support
future efforts to provide
single-provider convenience.
During the year, 310-BELL call
centre agents, using software
that puts customer information
at their fingertips, focused
on matching the right mix of
products to each callers
unique needs with targeted
cross-selling and bundled
service offerings.

Bell Canada Enterprises  19  2002 Annual Report



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Eventually the goal is for
310-BELL to be a single front
door to all of Bells
offerings  wireless,
wireline, Internet, DSL and
satellite television  for
sales and service.

Say hello to Emily

Beginning in January 2003,
callers to 310-BELL in Ontario
were greeted with a very
pleasant surprise: the voice
of Emily, the most advanced
voice-activated call routing
technology in Canada. Emily is
friendly, knowledgeable,
helpful  and shes a
computer. She answers each
call with an engaging,
thoroughly human voice,
providing prompt assistance to
customers needing changes in
phone services or information
on any of Bells products.
Emily also efficiently directs
callers who have questions
about billing, repair,
technical support or customer
service. Part of Bells
broader plan to simplify
customer access, Emily
significantly reduces the
number of steps and time
required to accomplish what
callers want, proving that
technology can be used to make
life easier, not more
complicated. The plan is to
gradually
introduce Emily throughout
Bells entire service area;
she will be helping
French-speaking customers by
mid-year 2003.

(TELEPHONE OPERATOR AND MAN VIEWING TV)

Top photo:Is she a person, or is she a computer? Actually,
shes both. Emily is Bells new automated call routing
capability. Emilys state-of-the-art voice recognition
technology significantly reduces the number of steps between
callers and what they want.Bottom photo:Subscriber and
market share growth are evidence that more and more Canadian
viewers are discovering the advantages of Bell ExpressVu
satellite television.

Bell Canada Enterprises  20  2002 Annual Report



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Bell ExpressVu: Great entertainment, Great technology, Great value

Bell ExpressVu continued its
solid growth throughout 2002,
increasing its subscriber base
by 22 per cent to more than
1.3 million households.
Customer choice and innovative
technology were again the main
drivers of growth as Bell
ExpressVu offered subscribers
the widest range of
all-digital programming,
featuring crystal-clear
picture and sound on more than
300 video and audio channels
in 16 themed packages that
include sports, movies, kids
and much more. Bell
ExpressVus innovative,
one-button-recording Personal
Video Recorder continued to
win rave reviews from
customers for the way it
fundamentally changes the way
they watch television,
allowing them to pause live TV
and replay, rewind and fast
forward all at the touch of a
remote.

Bell Globemedia creates Juno Award success

CTV broadcast The 2002 Juno
Awards, Canadas annual
preeminent music awards program 
and Bell Globemedia brought its
considerable assets
together to promote it.
High-energy program
initiatives in the months
leading to the event raised
awareness and created a buzz.
Countdown to the Junos
Concert Series, on CTVs
late night talk show, Open
Mike with Mike Bullard,
featured live performances
by Juno nominees and
performers. On CTVs
morning news program
Canada AM, viewers saw
The Road to the Junos,
where hosts profiled and
interviewed Juno performers
and nominees. During the
Junos, Sympatico.ca treated
Internet surfers to an
exclusive backstage show
with behind-the-scenes
footage and interviews of
nominees and winners. The
result of the comprehensive
promotion? More than 1.4
million Canadians tuned in
to the broadcast, reversing
a three-year ratings
down-trend and establishing
a new benchmark for success
in Canada.

(BLACK BOX)

Top photo:Whats in the
black box? Freedom and
choice. Personal Video
Recording (PVR) brings Bell
ExpressVu subscribers the
ability to pause, replay and
digitally record live
television.

Bottom photo:The Barenaked
Ladies were hosts of the most
successful Juno Awards
presentation in years. For
the first time, CTV,
Sympatico.ca andThe Globe
and Mail combined to promote
and broadcast the program.

(BAND NAMED BARENAKED LADIES)

Bell Canada Enterprises  21  2002 Annual Report



---



##### 



Small to mid-sized business

Small to mid-sized businesses represent an extremely broad and diverse group,
with widely varying wants and needs. As different as businesses in this segment
are from one another, all seem to share a desire for a telecom provider that
takes the time to understand their operations and offer tailored solutions to
help them compete.

(WIRELESS POCKET PC)

Bell Mobilitys exclusive offering
of the Audiovox Thera puts a
desktop  and
unparalleled access to
Canadas best wireless network  in
the palm of your hand.

2002: The journey of understanding begins

Small to mid-sized business
is a customer segment with a great
deal of potential to
drive profitable growth. Of
customers in this
segment, currently less
than one in 10 use all of
Bells relevant services:
telephone, high-speed
Internet and wireless.
2002 was the year we used
our call centres as a
means to begin developing
an understanding of this
groups unique needs.

Call centre agents
started by changing the way they
approached calls. They asked
questions, listened and offered
more comprehensive
solutions, rather than limiting
their focus to just fulfilling a
request. Based on initial
insights gained, we
developed a range of
product bundles tailored
to deliver maximum value,
simplify the customer
experience and build
relationships in this
important segment.

Bell Mobility for small business

With smarter devices and
smarter applications, Bell
Mobility is a key enabler for
small and mid-sized
businesses wanting to build
their own mobile offices.
Bells exclusive offering of
the Audiovox Thera, a
wireless pocket PC, delivers
computer, cell phone,
organizer and entertainment
functions in a handheld
device. An exclusive
relationship with Motivus, a
mobile desktop company,
provides a breakthrough
application to easily view
attachments. Tailored rate
and wireless service plans,
and VoiceNet,

Bell Canada Enterprises  22  2002 Annual Report



---



##### 



(LAPTOP PC ON DESK)

Top photo:Bells DataValet brings high-speed Internet access
to the comfort of a hotel room. Its faster. Its better. And
with a low daily flat rate, its less expensive for travelers
accustomed to paying hotel long-distance telephone costs to
access the Internet via conventional wireline.
Bottom photo:Bell is making life simpler for Canadas leading car dealers by
providing single-source convenience through an agreement with
dealer co-op Leader Auto Resources.

a wireless data product that
allows Web navigation by
voice through a cell phone
or PDA, complete the
picture.

DataValet keeps business travelers in touch

Small-business operators were
among the growing number of
travelers in Canada who
enjoyed high-speed Internet
access from their hotel rooms
with Bells DataValet. The
service also provides a
direct-from-the-room
connection to participating
hotels business centre
printers and fax
machines  all for a daily
users fee that is far lower
than the cost of accessing
the Internet through
conventional wireline.

Delivering simplicity for Canadas leading car dealers

Leader Auto Resources (LAR),
a co-op of Canadian
automotive dealers, chose
Bell in 2002 to provide
single-source convenience 
local and long-distance
telephone, wireless and
Internet services  for its
1,100-plus members. LAR
dealers, the majority of
which are based in Québec,
benefit from group rates,
full access to Bells
industry-leading network and
product offerings, and a
dedicated Bell sales force.
Signed in February 2002, the
agreement was implemented in
record time  we launched it,
flawlessly, on March 1, 2002.

Bell Canada Enterprises  23  2002 Annual Report



---



##### 



Large enterprise

Large businesses, institutions and municipalities are under pressure as never
before. A strong and growing imperative to manage or reduce costs is colliding
with an increasingly complex and dynamic technology landscape. The
result is an active  and highly competitive  outsourced network services
market.

Bell Nexxia: an MNS leader

Bell Nexxias Managed Network
Services (MNS) add value
through outsourced network
management, Virtual Private
Networks (VPNs), security
services and consulting.
Security is a critical and
increasingly complex concern.
Bell Nexxia offers a
comprehensive array of
security services  among them
audit and testing, network

(COMPUTER NETWORK)

protection and, in
conjunction with BCE Emergis,
privileged access services
 to address issues at the
network level. In addition,
Bell Nexxia VPNs enable
absolutely secure integration
of voice, data and video
traffic through a common
Internet protocol (IP)
infrastructure.

High-speed promise and potential

Bell Canadas advanced
high-speed data networks create promising new
applications for both private and
public sector industries. One such
application is a telerobotics
capability that enables surgeons to complete
surgical procedures from remote locations.
The Canadian government spends more
than $100 million per year
transporting patients from
outlying areas to centres of
excellence for surgery.
Telerobotics could reduce
that figure while bringing
top-quality care to a wider
group of Canadians.

(MAN IN FRONT OF COMPUTER SCREEN)

Photo above:Bell Virtual
Private Networks deliver
integrated voice, data and
video traffic to users
desktops  with total security  through a common Internet
protocol (IP) infrastructure.

Photo at left:Bells
advanced network is making
amazing strides possible in
medical technology
such as telerobotics,
enabling certain procedures
to be done from afar. (Photo
courtesy of Computer Motion,
Inc.)

Bell Canada Enterprises  24  2002 Annual Report



---



##### 



(MAN AND WOMAN IN FRONT OF COMPUTER SCREEN)

A Bell-developed e-City portal will make it possible for
Mississauga residents to use the Internet to access
city services. Even non-computer users can do it  just go to
the public library.

An e-portal for Mississauga

In a groundbreaking
public/private sector
partnership, Bell won the
contract to develop and
maintain an e-City portal
for the City of Mississauga
that offers Internet access
to many city services and
information. Some of the
features of the e-City portal
will enable citizens to
personalize their Web pages,
interact with city staff and
residents in real time,
access online Planning and
Building services and
subscribe to mailing lists.
Bells solution will help
Mississauga reduce operating
costs while improving the quality
of service the city provides
its residents.

Measuring and building customer loyalty

Bell Nexxia is committed
to building stronger,
more long-term customer
relationships in the
large enterprise
segment. Using a
comprehensive customer
feedback process called
the Voice of the
Client (VOC),
Nexxia measures and defines
degree of loyalty while
identifying specific problems
and issues that affect it. A
comprehensive follow-through
process called Close the
Loop (CTL) ensures that VOC
data/results are directed to
the right individuals at all
levels within the Bell
organization to
ensure timely, meaningful
improvements.

(WOMAN ON CELL PHONE)

Even in the largest
corporations, strong
customer relationships
come down to satisfied and
happy individual users.
Bell Nexxia is using a
proven customer feedback
process, called the Voice
of the Client, to
continuously convert
complaints into meaningful
improvements  and growth.

Bell Canada Enterprises  25  2002 Annual Report



---



##### 



Corporate Social Responsibility






Doing the right thing

Exemplary corporate citizenship has been a
guiding force for BCE throughout our 122-year
history. We believe that our success as a
company is inextricably linked to good
relationships with all our stakeholders. We
make a difference by:

Investing in communities

BCE strives to enhance the quality of life in
Canadian communities by supporting arts and
cultural, educational, health care, and
community development initiatives with a
special emphasis on programs that use
communication technology in innovative ways.
Contributions by Bell Canada and its employees
in 2002 include:



| |  | $6.7 million in donations to registered
charities, including $2.03 million to United
Way ($616,000 raised by employees and
retirees).
|- |  | -------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | $1 million over three years to
the Ontario Community Development Fundthat
supports local economic development
commissions.           
| 
| |  | $1 million donated by employees to
registered charities through payroll
deductions. Bell Canada matched $671,000.                    
| 
| |  | At least 226,923 hours of volunteer
work by employees and retirees, which
translates into an economic
contribution of $3.83 million. 

Bell Canada is designated by Imagine as a
Caring Company and is committed to donating
at least 1 per cent of pre-tax profit,
including cash, sponsorship and in-kind
donations, to charitable, non-profit
organizations. In a 2002 survey, 81 per cent
of Bell Canada customers gave the company a
positive rating on Corporate Social
Responsibility.

(PHYSICIAN WITH HANDHELD PC)

Evidence to Point of
Care uses technology
to put valuable
medical information
at patients
bedsides, resulting
in more accurate
diagnoses and better
health care. Its
just one of the many
research projects
supported by Bell
Canadas $5.7 million
university R&D
investment in 2002.
Bell University
Laboratories, where
this innovative
technology is being
developed, is an
integrated research
and commercial
network that links
Bell with renowned
university
researchers and
students in Ontario
and Québec.

(WOMAN HOLDING CUP)

Tele-working is one of the many flexible work
options that help Bell employees achieve more
balanced lives. Others include a reduced work
week, additional time off with deferred
payroll deductions, personal leave, community
leave to do volunteer work and educational
leave.

Supporting employees

In 2002, BCE companies employed 66,266
people. Bell had 42,729 employees (excluding
Aliant and ExpressVu) and a training and
development investment of more than $35
million. In response to employee feedback,
Bell Canada introduced a number of programs
including:



| |  | Omniflex: A unique, flexible benefit
program that integrates both a share
component and a vacation component.
Employees can purchase vacation days and
other benefits.   
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Mentor Match: Lets employees browse and
select from a cross-organizational pool
of potential mentors based on work
experience, location, language and
preferences.       
| 
| |  | Click & Learn: More than 400 online
learning solutions that help employees
take charge of their development.                                                             
| 
| |  | Wellness Checkpoint: A confidential,
interactive tool that helps employees
assess lifestyle and well-being, while
obtaining practical suggestions and
health information.
| 
| |  | Go Leadership Edge Attributes: A defined
model and performance evaluation tools
that promote partnering, a winning
mindset, speed and simplicity among
employees.        

Bell Canada Enterprises  26  2002 Annual Report



---



##### 



Protecting the environment

In 2002, Bell Canada increased electronic
services and transactions such as online
billing, electronic directories and electronic
data interchange, which saved considerable
energy and resources. During the year, we also
recovered 5,740 tons of recyclable materials
such as cables and hardware, and 154 tons of
hazardous residual materials such as
batteries, aerosols and fluorescent tubes. BCE
was rated first among telephone companies and
in the top 10 overall in the Corporate Knights
annual ranking of Canadas Most
Environmentally Responsible Companies.

For more information on Bells corporate and
social responsibility initiatives, visit
www.bell.ca.

Helping Canada prosper

Every dollar spent in the communities we
serve has a ripple effect that fuels the
countrys economic engine. Bells 2002
investments include:



| |  | $3.77 billion in capital expenditures, $22
billion over the past six years (includes all
BCE companies)                                                                                  
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | $8 billion in goods and
services in the communities we serve                                                                                                                             
| 
| |  | $2.95
billion in corporate income and sales taxes
paid                                                                                                                                   
| 
| |  | The first instalment of an $81 million
investment over a four-year period to
extend service to unserved areas in
Ontario and Québec, where costs to
provide service are unusually high.

(PERSON INSIDE PHONE BOOTH)

Every day, 1,000 kids
from almost 3,000
Canadian communities
call a Kids Help
Phone counsellor with
questions or concerns
about issues such as
relationships,
school, bullying,
suicide and abuse. In
May 2002,
approximately 15,000
Canadians, including
many BCE employees,
raised more than $1
million for the cause
by participating in
the first annual Bell
Walk for Kids.

Bell Canada Enterprises  27  2002 Annual Report



---



##### 



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, 2002 and 2001.

The MD&A is presented in seven sections:

About Our Businessdescribes BCEs
businesses, objectives and strategies for
growth.

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

Financial Results Analysisprovides
detailed information and analysis about our
performance for the past two years. It focuses
on our consolidated operating results and
provides financial information for each of our
four business segments.

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

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

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

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

Please refer to the audited
consolidated financial statements starting
on page 54 when reading the MD&A.

MD&A AT A GLANCE

|                                    |  |  |    | 
|----------------------------------- |  |  | -- | 
|About Our Business                  |  |  | 28 | 
|Performance Highlights              |  |  | 31 | 
|Financial Results Analysis          |  |  | 32 | 
|Financial and Capital Management    |  |  | 40 | 
|Risk Assessment                     |  |  | 44 | 
|Our Accounting Policies             |  |  | 50 | 
|Supplementary Financial Information |  |  | 53 | 

In this MD&A, we, us, ourand BCEmean
BCE Inc., its subsidiaries, joint
ventures and investments in significantly
influenced companies.

Bell Canada, Aliant Inc. (Aliant),
Bell ExpressVu Limited Partnership (Bell
ExpressVu) and their subsidiaries and
investments in significantly influenced
companies are referred to as the Bell
Canada segment.

Significantly influenced means that:



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

(GRAPH)

ABOUT FORWARD-LOOKING STATEMENTS

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

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

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

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

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

It is important to know that:



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

You will find a more detailed assessment
of the risks that could cause our actual
results to materially differ from our current
expectations in the Risk Assessmentsection of
this MD&A, starting on page 44. In particular,
all of our expectations contained in the
outlook sections of this MD&A are subject to
these risks.

ABOUT OUR BUSINESS

WHO WE ARE

BCE is Canadas largest communications
company. Through the Bell Canada segment, we
provide local telephone, long distance,
wireless communications, Internet access,
data, satellite television and other
services to residential and business
customers through our 25 million customer
connections.

We reach millions of people daily
through Bell Globemedia Inc. (Bell
Globemedia), a leading Canadian media
company, which includes CTV Inc. (CTV),
Canadas leading private broadcaster, and
The Globe and Mail, the leading Canadian
national newspaper. We also provide
eBusiness services through BCE Emergis Inc.
(BCE Emergis).

WHAT WE DO

BCEs primary focus is the Bell Canada
segment, which represented 88% of our
revenues in 2002. Bell Globemedia and BCE
Emergis together represented about 8% of our
revenues in 2002. For management purposes,
all of BCEs other businesses are combined in
the BCE Ventures segment.

Bell Canada Enterprises  28  2002 Annual Report



---



##### 



Managements Discussion and Analysis




BELL CANADA SEGMENT

(PIE CHART 88% OF REVENUES)

The Bell Canada segment is
Canadas leading provider of
wireline and wireless
communications services,
Internet access, data
services and Direct-to-Home
(DTH) satellite television
services to residential and
business customers.

At December 31, 2002,
the Bell Canada segment
customer connections were as
follows (in millions):

|                                                             |  |  |      | 
|------------------------------------------------------------ |  |  | ---- | 
|Telephone service subscribers                                |  |  | 13.2 | 
|Cellular and personal communications service (PCS) customers |  |  | 3.9  | 
|Paging customers                                             |  |  | 0.6  | 
|High-speed Internet                                          |  |  | 1.1  | 
|Dial-up access                                               |  |  | 0.9  | 
|DTH subscribers                                              |  |  | 1.3  | 
|Digital
equivalent access lines (1)                          |  |  | 3.7  | 



---

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

The Bell Canada segment operates
primarily as the incumbent telephone
company in:



| |  | Ontario and Québec, through Bell
Canada, Télébec Limited Partnership and
Northern Telephone Limited Partnership
|- |  | ---------------------------------------------------------------------------------------------------------------
| 
| |  | Atlantic Canada, through Aliant                                                                                
| 
| |  | Canadas northern territories, through Northwestel Inc.                                                        

We also operate as a competitive local
exchange carrier (CLEC) in Alberta and British
Columbia through Bell West Inc. (Bell West).

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

The following chart shows Bell Canada
segments operating revenues by line of
business for the year ended December 31,
2002.

(PIE CHART OPERATING REVENUES BY LINE OF BUSINESS)

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

Local and access services

The Bell Canada segment operates an extensive
local access network that provides local
telephone services to business and
residential customers. The 13.2 million local
telephone lines, or network access services
(NAS), we provide for our subscribers are key
in establishing customer relationships and
are the foundation for the other products and
services we offer.

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



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

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

Long distance services

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

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

Wireless services

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

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

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

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



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

Data services

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

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

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

Bell Canada Enterprises  29  2002 Annual Report



---



##### 



Managements Discussion and Analysis




DTH satellite television services

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

Bell ExpressVu uses two satellites in
orbit owned by Telesat Canada (Telesat), Nimiq
1 and Nimiq 2. Nimiq 2 was successfully
launched on December 29, 2002, although it has
since experienced a malfunction affecting its
available power. This malfunction is still
being investigated. Notwithstanding the
malfunction, the additional satellite capacity
will allow Bell ExpressVu to offer additional
programming in 2003. Please see Risk
assessment  BCE Ventures  Telesaton page 49
for more details.

Signal piracy is a major issue facing all
segments of the Canadian broadcasting
industry. Bell ExpressVu has undertaken a
number of actions to combat signal piracy,
including taking legal action, implementing
electronic countermeasures targeted at illegal
devices and leading public awareness
campaigns.

Other products and services

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



| |  | renting, selling and maintaining business
terminal equipment                   
|- |  | -------------------------------------------------------------------------------
| 
| |  | print and electronic
directories advertising until November
2002              
| 
| |  | Aliants remote communications, information technology and emerging
businesses.

In November 2002, we sold the directories
business for approximately $3 billion in cash,
as part of the financing plan to repurchase
SBC Communications Inc.s (SBC) 20% interest
in Bell Canada Holdings Inc. (BCH), the
holding company of Bell Canada. BCE now owns
100% of BCH, 100% of Bell ExpressVu and 53% of
Aliant.

BELL GLOBEMEDIA

(PIE CHART 6% OF REVENUES)

Bell Globemedia provides
information and entertainment
services to Canadian customers
and access to distinctive
Canadian content. It includes
CTV, Canadas leading private
broadcaster, and The Globe and
Mail, Canadas leading national
newspaper.

In 2002, Bell Globemedias revenues primarily came
from selling advertising
through its TV, print and Internet businesses.
Revenue is also generated from subscriptions
to The Globe and Mail and subscription fees
that cable and DTH companies pay for carrying
Bell Globemedias specialty TV channels such
as TSN, RDS and Discovery.

On September 13, 2002, Bell Globemedia
bought Lycos Inc.s 29% stake in the
Sympatico-Lycos joint venture and took full
control of Sympatico.ca, Canadas largest
Internet portal. Bell Globemedia then
transferred its electronic directories
business to Bell Canada, which Bell Canada
then sold in November 2002.

On February 7, 2003, an agreement was
announced to transfer the Sympatico.ca portal
from Bell Globemedia to Bell Canada so that
it could be more closely tied to Bell
Canadas Sympatico Internet access services.
In conjunction with this announcement, Bell
Globemedia announced that it will be aligning
its online operations
with its core media products to best
leverage this capability for the future. The
operations of Bell Globemedias other online
products will be aligned with the specific
Bell Globemedia brands that they support
(e.g., CTV.ca will be aligned with the CTV
network).

On February 11, 2003, Bell Globemedia
announced an agreement to acquire an
approximate 15% interest in Maple Leaf Sports
and Entertainment Ltd., the owner of the
Toronto Maple Leafs, the Toronto Raptors and
the Air Canada Center. This acquisition is
subject to regulatory and other approvals.

BCE Inc. currently owns 70.1% of Bell
Globemedia, and the balance is owned by The
Thomson Corporation and an affiliated
company. Upon closing of the transfer of
Sympatico.ca to Bell Canada and of the $100
million additional equity investment to be
made equally by BCE Inc. and an affiliate of
The Thomson Corporation, BCE Inc.s ownership
will be reduced to 68.5%.

BCE EMERGIS

(PIE CHART 2% OF REVENUES)

BCE Emergis provides eBusiness
services focusing on
business-to-business
transactions in the financial
services and health industries.

Its revenues come from
recurring and non-recurring
sources. Recurring revenues
include transaction or
usage-based charges for access
to BCE Emergis technology and for services
including claims processing and cost
containment, drug-claim adjudication and
payment, invoice presentment and payment
processing and electronic messaging, as well
as fixed and/or user-based monthly charges,
primarily for hosting and secure network
services and access to its provider network.
Non-recurring revenues include fees for
professional services related to the
development, integration, installation and
maintenance of BCE Emergis solutions for
clients and initial software license fees and
activation fees. It is important to note that
recurring revenues refer to the underlying
nature of the revenues as described above and
that revenues from contracts that are not
likely to be renewed will be included in this
category if they result from the activities
described above.

In 2002, BCE Emergis completed a major
streamlining of its services and reduced its
workforce by 20%.

BCE Emergis is publicly
traded. BCE Inc. owns approximately 65% of the
company.

BCE VENTURES

(PIE CHART 4% OF REVENUES)

The BCE Ventures segment
combines, for management
purposes, various assets
including Telesat and CGI Group
Inc. (CGI).

Telesat is a leader in
satellite communications and
systems management and a leading
consultant
in establishing, operating
and upgrading satellite systems
worldwide. BCE
Inc. owns 100% of Telesat.

CGI is one of Canadas largest
information technology (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. As at December 31, 2002, BCE Inc.
owned approximately 32% of the outstanding
shares of CGI.

OUR OBJECTIVES AND STRATEGY

Our governing objective is to achieve
balanced performance that will lead to
profitable growth, positive free cash flow
and improving returns.The successful
achievement of our governing objective is
dependent on achieving three key strategic
objectives: Simplicity, Efficiencyand
Financial Discipline.

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

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

Bell Canada Enterprises  30  2002 Annual Report



---



##### 



Managements Discussion and Analysis




Efficiency has become an integral part of
the way we do business. We generated
productivity gains of more than $1 billion
over the past two years and are targeting more
than $600 million in further efficiency gains
in 2003. We have substantially reduced our
capital expenditures while growing our
customer connections. But increased efficiency
cannot come at the expense of service. Service
is the cornerstone of our brand, and we are
committed to improving customer service as we
continue to focus on efficiency.

Financial discipline demands decisive
action to ensure long-term financial success.
The steps we took in 2002 have made us
stronger and have put us in full control of
our future. We will continue to manage our
company with a view to providing consistent,
solid returns while strengthening our balance
sheet and generating free cash flow for our
shareholders.

PERFORMANCE HIGHLIGHTS

In 2002, we set a new course for BCE and
began the process of simplifying our
business. BCE faced a number of challenges.

We took decisive steps to address these
issues. In late April, we stopped the
long-term funding of Teleglobe Inc.
(Teleglobe) and began treating it as a
discontinued operation. On December 31, 2002,
we sold our shares of Teleglobe to the monitor
appointed by the court in the Teleglobe
restructuring proceedings.

We came to a mutually agreeable
arrangement with SBC to repurchase its 20%
interest in BCH. Despite unprecedented
turbulence in the capital markets, we put the
necessary financing in place by successfully
executing Canadas largest-ever debt and
equity offerings by a public company and by
selling our directories business.

As a result, we exited the international
connectivity business and gained full control
of our core asset, Bell Canada. These actions
strengthened our balance sheet, increased our
financial flexibility and brought a renewed
strategic focus to BCE.

Revenues

Revenues increased by 2.2% to $19.8 billion in
2002, driven by subscriber growth in wireless,
data and DTH services. Excluding revenues from
the directories business in 2002, we expect
these services to drive continued revenue
growth in 2003.

EBITDA(1)margin and productivity improvements

BCE generated productivity improvements of
$655 million in 2002 in addition to the $470
million of productivity improvements made in
2001. This contributed to an improvement in
our EBITDA margin from 37.4% in 2001 to 38.6%
in 2002. For 2003, we are targeting additional
productivity improvements at similar levels to
those achieved in 2002.

Free cash flow

Free cash flow improved significantly from
negative $2.8 billion in 2001 (including the
one-time acquisition of spectrum licenses) to
negative $670 million in 2002, largely due to
lower levels of capital spending and improved
cash flow from operations. Our target is to
achieve a modestly positive free cash flow in
2003.

Capital intensity

We reduced our capital spending as a
percentage of revenue from 25.8% in 2001 to
19.1% in 2002. In 2003, we expect to further
reduce our capital expenditures as a
percentage of revenues.

Net debt to total capitalization

The net debt to total capitalization ratio
increased from 47.1% in 2001 to 48.4% in
2002, mainly due to the financing of our $6.3
billion repurchase of SBCs 20% interest in
BCH. The increase in debt related to this
financing was offset by the deconsolidation
of the debt of Teleglobe and Bell Canada
International Inc. (BCI) from our balance
sheet. Our net debt to total capitalization
ratio is still below the year 2000 level. Our
objective in 2003 is for net debt to total
capitalization to decrease as we pay down
debt.

Return on equity (ROE)(1)

BCE achieved an ROE of 20.1% in 2002
compared to 2.8% in 2001 mainly as a result
of:



| |  | net gains on investments (principally
relating to the gain on the sale of the
directories business in 2002)
|- |  | -----------------------------------------------------------------------------------------------------------
| 
| |  | the loss
from discontinued operations in 2001                                                              
| 
| |  | the
transitional goodwill impairment charge that
significantly reduced common shareholders
equity in 2002 
| 
| |  | improved earnings in 2002.                                                                                 

ROE excluding non-recurring items was
12.8% in 2002 compared to 8.7% in 2001 mainly
as a result of the transitional goodwill
impairment charge that significantly reduced
common shareholders equity in 2002, and
improved earnings.

(4 BAR GRAPHS AND 2 LINE CHARTS)

Return on common shareholders equity
(ROE) is calculated as net earnings applicable
to common shares as a percentage of average
common shareholders equity.



|*   |  | Adjustments to GAAP results to derive
earnings excluding non-recurring items
are outlined on the next page, along with
comments on the use of this measure.  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) |  | EBITDA and ROE do not have any
standardized meaning under Canadian GAAP.
Please see Non-GAAP Measureson the next page
for more information on EBITDA and ROE.

Bell Canada Enterprises  31  2002 Annual Report



---



##### 



Managements Discussion and Analysis




NON-GAAP MEASURES

EBITDA

The term EBITDA (earnings before interest,
taxes, depreciation and amortization) does
not have a standardized meaning under
Canadian generally accepted accounting
principles (GAAP). We define it as operating
revenues less operating expenses, which means
it represents operating income before
amortization expense, net benefit plans
(credit) expense and restructuring and other
charges. The way we define EBITDA may be
different from the way other publicly traded
companies define it or similar terms. EBITDA
should not be confused with net cash flows
from operating activities. We use EBITDA,
amongst other measures, to assess the
operating performance of our ongoing
businesses. The most comparable Canadian GAAP
earnings measure is operating income. Please
see the reconciliation below by operating
segment and on a consolidated basis of EBITDA
to operating income.

|                                     |  |        |       |        |  |         |      |          |  |          |      |          |  |  |     |        |  |     |      |   |  |  |       |  
|------------------------------------ |  | ------ | ----- | ------ |  | ------- | ---- | -------- |  | -------- | ---- | -------- |  |  | --- | ------ |  | --- | ---- | - |  |  | ----- | -
|                                     |  |        |       |        |  | Bell    |      |          |  |          |      |          |  |  |     | Corpo- |  | BCE
|                                     |  | Bell   |       | Globe- |  | BCE     |      | BCE      |  | rate and |      | Consoli-
|                                     |  | Canada |       | media  |  | Emergis |      | Ventures |  | other    |      | dated   
|                                     |  |        |       |        |  |         |      |          |  |          |      |         
|For the year ended
December 31, 2002 |  |        |       |        |  |         |      |          |  |          |      |          |  |  |     |        |  |     |      |   |  |  |       |  
|EBITDA                               |  |        | 7,289 |        |  |         | 180  |          |  |          | 30   |          |  |  | 289 |        |  |     | (166 | ) |  |  | 7,622 |  
|Amortization expense                 |  |        | 2,935 |        |  |         | 67   |          |  |          | 66   |          |  |  | 122 |        |  |     | (44  | ) |  |  | 3,146 |  
|Net benefit plans
(credit) expense   |  |        | (38   | )      |  |         | 3    |          |  |          | 2    |          |  |  |    |        |  |     |     |   |  |  | (33   | )
|Restructuring and
other charges      |  |        | 675   |        |  |         |     |          |  |          | 119  |          |  |  |    |        |  |     | 93   |   |  |  | 887   |  
|                                     |  |        |       |        |  |         |      |          |  |          |      |          |  |  |     |        |  |     |      |   |  |  |       |  
|Operating income (loss)              |  |        | 3,717 |        |  |         | 110  |          |  |          | (157 | )        |  |  | 167 |        |  |     | (215 | ) |  |  | 3,622 |  
|                                     |  |        |       |        |  |         |      |          |  |          |      |          |  |  |     |        |  |     |      |   |  |  |       |  
|For the year ended
December 31, 2001 |  |        |       |        |  |         |      |          |  |          |      |          |  |  |     |        |  |     |      |   |  |  |       |  
|EBITDA                               |  |        | 6,876 |        |  |         | 108  |          |  |          | 127  |          |  |  | 290 |        |  |     | (159 | ) |  |  | 7,242 |  
|Amortization expense                 |  |        | 2,934 |        |  |         | 265  |          |  |          | 452  |          |  |  | 152 |        |  |     | 23   |   |  |  | 3,826 |  
|Net benefit plans
(credit) expense   |  |        | (128  | )      |  |         | 1    |          |  |          |     |          |  |  |    |        |  |     | 6    |   |  |  | (121  | )
|Restructuring and
other charges      |  |        | 975   |        |  |         | 5    |          |  |          |     |          |  |  |    |        |  |     |     |   |  |  | 980   |  
|                                     |  |        |       |        |  |         |      |          |  |          |      |          |  |  |     |        |  |     |      |   |  |  |       |  
|Operating income (loss)              |  |        | 3,095 |        |  |         | (163 | )        |  |          | (325 | )        |  |  | 138 |        |  |     | (188 | ) |  |  | 2,557 |  
|                                     |  |        |       |        |  |         |      |          |  |          |      |          |  |  |     |        |  |     |      |   |  |  |       |  

ROE

Return on common shareholders equity (ROE) is
calculated as net earnings applicable to
common shares as a percentage of average
common shareholders equity.

Net earnings applicable to common shares
before non-recurring items represent net
earnings applicable to common shares adjusted
for non-recurring items, which include (on an
after-tax basis) BCEs share of: net gains
(losses) on investments; the results of
discontinued operations; restructuring and
other charges; and goodwill expense. Each of
the items listed above was excluded because
they were considered to be of a
non-operational or non-recurring nature.

Net earnings applicable to common shares
before non-recurring items does not have a
standardized meaning prescribed by Canadian
GAAP and therefore may not be comparable to
similarly titled measures presented by other
publicly traded companies.

The following table outlines BCEs
non-recurring items and their impact on
BCEs GAAP-based net earnings applicable to
common shares.

|                                                                    |                                  |  |       |        |      |  |       |        |   |  |        |        |  
|------------------------------------------------------------------- | -------------------------------- |  | ----- | ------ | ---- |  | ----- | ------ | - |  | ------ | ------ | -
|                                                                    |                                  |  | 2002  |        | 2001 |  | 2000 
|                                                                    |                                  |  |       |        |      |  |      
|Net earnings applicable to common shares as reported                |                                  |  | 2,416 |        |      |  | 450   |        |   |  | 4,706  |       
|Non-recurring items:                                                |                                  |  |       |        |      |  |       |        |   |  |        |       
|                                                                    | Goodwill amortization            |  |       |       |      |  |       | 775    |   |  |        | 485    |  
|                                                                    | Restructuring and other charges  |  |       | 887    |      |  |       | 980    |   |  |        |       |  
|                                                                    | Other income                     |  |       | (2,390 | )    |  |       | (4,008 | ) |  |        |       |  
|                                                                    | Impairment charges               |  |       | 770    |      |  |       |       |   |  |        |       |  
|                                                                    | Income taxes                     |  |       | 319    |      |  |       | 343    |   |  |        |       |  
|                                                                    | Non-controlling interest         |  |       | 109    |      |  |       | (191   | ) |  |        | (125   | )
|                                                                    | Discontinued operations (Note 8) |  |       | (577   | )    |  |       | 3,057  |   |  |        | (3,812 | )
|                                                                    |                                  |  |       |        |      |  |       |        |   |  |        |        |  
|Effect on net earnings applicable to common shares                  |                                  |  | (882  | )      |      |  | 956   |        |   |  | (3,452 | )     
|                                                                    |                                  |  |       |        |      |  |       |        |   |  |        |        |  
|Net earnings applicable to common shares
before non-recurring items |                                  |  | 1,534 |        |      |  | 1,406 |        |   |  | 1,254  |       
|                                                                    |                                  |  |       |        |      |  |       |        |   |  |        |        |  

FINANCIAL RESULTS ANALYSIS

This section discusses the financial results
of BCE Inc. and of each of our four
operating segments.

Operating revenue and EBITDA are
analyzed on a segmented basis. All
below-EBITDA income and expenses are analyzed
on a consolidated basis.

OPERATING REVENUES

2002 Highlights

|                         |  |      |        |      |  |          |        |   |  |  |       |   
|------------------------ |  | ---- | ------ | ---- |  | -------- | ------ | - |  |  | ----- | --
|                         |  | 2002 |        | 2001 |  | % change
|                         |  |      |        |      |  |         
|Bell Canada segment      |  |      | 17,489 |      |  |          | 17,202 |   |  |  | 1.7   | % 
|Bell Globemedia          |  |      | 1,290  |      |  |          | 1,203  |   |  |  | 7.2   | % 
|BCE Emergis              |  |      | 540    |      |  |          | 656    |   |  |  | (17.7 | )%
|BCE Ventures             |  |      | 1,064  |      |  |          | 1,044  |   |  |  | 1.9   | % 
|Corporate and other      |  |      | (615   | )    |  |          | (765   | ) |  |  | 19.6  | % 
|                         |  |      |        |      |  |          |        |   |  |  |       |   
|Total operating revenues |  |      | 19,768 |      |  |          | 19,340 |   |  |  | 2.2   | % 
|                         |  |      |        |      |  |          |        |   |  |  |       |   

We generated overall revenue growth of 2.2%

In 2002, we continued to focus on growth in
the wireless, data and DTH segments to offset
declines in the local and access and long
distance segments, and to strive towards
outpacing industry
growth
expectations.

(REVENUES IN BILLIONS BAR CHART)

Our customer connections grew to 25
million this year. Most of the growth in these connections came
from wireless, data and DTH services.

In 2002, the Bell Canada segment
increased its subscriber base in these
services as follows:



| |  | cellular and PCS
subscribers
grew 13.5% to reach 3.9
million, representing a 33% market share on
a national level                                             
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | high-speed Internet
subscribers rose 47% to reach 1.1 million,
capturing 42% of the consumer high-speed
Internet market in Ontario and Québec                 
| 
| |  | DTH subscribers grew 22% to reach 1.3
million, representing a 62% share of
the national DTH market share or 13% of
the combined national DTH and cable
market.

Bell Canada Enterprises  32  2002 Annual Report



---



##### 



Managements Discussion and Analysis




Recent CRTC decisions on price caps and
contribution combined with continued economic
and competitive pressures have resulted in a
3.2% decrease in local and access revenues in
2002. The price cap decision and competitive
pressures have also led to a 2.7% decline in
long distance revenues in 2002.

Bell Globemedias revenue growth in
2002 reflected a stronger television
advertising market, growth in subscription
revenues and the positive impact of the
CFCF-TV, CKY-TV and ROB TV acquisitions made
in late 2001.

BCE Emergis experienced a significant
decline in non-recurring revenues in 2002. It
has implemented its revised business plan to
focus on key growth areas, drive recurring
revenue growth and streamline its service
offerings and operating costs.

Outlook for 2003

Revenues in 2003 will be negatively impacted
by the sale of our directories business, which
contributed approximately $500 million to our
total revenues in 2002.

Excluding the revenues of the directories
business in 2002, we are targeting modest
growth in total revenues for 2003, reflecting
continued regulatory impacts, competitive
pressures and a continuation of the current
economic climate.

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

BELL CANADA SEGMENT

Local and access revenues declined by 3%

Local and access revenues fell to $6.2
billion in 2002 compared to $6.4 billion in
2001. The decline was primarily the result of
recent regulatory decisions and a reduction
in the number of NAS in service.

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

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

NAS in service fell 1.1% because of:



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

Outlook for 2003

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

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

Long distance revenues declined by 3%

Long distance revenues fell 3% to $2.6
billion in 2002 from $2.7 billion in 2001,
reflecting the recent price cap decision and
competitive pressures. The price cap decision
led to a reduction in the rates charged to
competing long distance companies for
carrying originating and terminating long
distance traffic from and to our local
telephone service customers and accordingly
led to lower revenues from June to December
2002.

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

The average revenue per minute (ARPM)
stabilized in late 2002 at 12 cents, which
was one cent lower than it was in 2001. The
slight decline in total ARPM was partly
offset by a 5% increase in the volume of
conversation minutes. In 2002, long distance
market share in Ontario and Québec remained
relatively stable at 63%.

Outlook for 2003

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

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

Wireless revenues grew by 18%

In 2002, our customer base grew 13.5% to 3.9
million, the largest wireless customer base
in Canada, representing a 33% share of the
national market. This gain in subscribers led
to wireless service revenues of $2.2 billion,
an increase of 18% compared to the previous
year.

(WIRELESS REVENUE GROWTH BAR CHART)

More than 97% of the subscribers added
in 2002 were on post-paid rate plans. At December 31, 2002, 75% of our
subscribers were on post-paid plans, up from 72% in 2001. This
reflects our continued focus on acquiring and retaining higher value and
more profitable customers.

The monthly average revenue
per unit (ARPU) from post-paid
subscribers grew to $59 in 2002 from $58 in 2001, reflecting
additional revenues
from value-added services and minor price
increases in system access fees. Prepaid ARPU
declined to $12 in 2002 from $13 in 2001 due
to competitive pricing pressures on off-peak
rates.

The increase in post-paid subscribers as
a percentage of the total base and higher
post-paid ARPU offset the decline in prepaid
ARPU and left overall ARPU stable at $46.

Outlook for 2003

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

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

Bell Canada Enterprises  33  2002 Annual Report



---



##### 



Managements Discussion and Analysis




Data revenues grew by 8%

Data revenues grew to $3.8 billion in 2002,
an increase of 8% over 2001, reflecting
growth in high-speed Internet, IP broadband
and e-commerce services.

In 2002, the number of high-speed
Internet subscribers increased 47% to reach
1.1 million, reflecting customer preference
for higher speed alternatives to dial-up
Internet access. For the first time,
the number of high-speed Internet access
subscribers surpassed the
number of dial-up
subscribers.
The number of dial-up
subscribers declined to 957,000
from 2001 levels of over 1
million.

(DATA REVENUE GROWTH BAR CHART)

Residential represents the largest
segment of high-speed Internet subscribers
and comprises 924,000 customers. During
the year, we implemented several
initiatives to increase
revenues in this segment,
including raising the price of our main
service by $5 per month and the introduction
of bandwidth charges and several value-added
services. Our high-speed Internet market share
in Ontario and Québec remained stable at 42%,
despite the price increase. At year-end,
approximately 28% of households in Ontario and
Québec had high-speed Internet access.

Revenue
from business and wholesale customers grew by approximately 4% in 2002, a much slower rate
than in previous years, reflecting a general weakening in demand.
Competitive pressures on prices
also played a role, but by far,
slower growth in demand had the
greatest impact on revenue.
Demand from business customers was
soft as customers in the key sectors we
serve, mainly financial services, technology
and governments, have minimized their
investments, choosing to use existing
capacity instead of expanding. The wholesale
market was also weak. Our market share
remains stable, and growth continues to move
at or above market rates, reflecting that
slower growth is a market phenomenon.

(DSL HIGH-SPEED INTERNET SUBSCRIBERS BAR CHART)

Outlook for 2003

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

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

Given current residential high-speed
Internet penetration levels, the rate of
growth in subscribers is expected to lessen
as our target market shifts from early
adopters to the mass market where potential
new subscribers are likely to be more
price-sensitive. Customer demand for lower
speed offerings may lead to lower average
revenue per subscriber (ARPS). We will
strive to differentiate our offerings
in the marketplace with value-added
services, unique bundles and superior
customer service.

DTH revenues grew by 35%

In 2002, DTH revenues increased by 35% to
$638 million, driven by a 22% increase in
the number of customers. By year-end, Bell
ExpressVu had over 1.3 million customers,
reflecting a 38% share of the growing
market for digital TV service.

Bell ExpressVu acquired 70% of all new
Canadian DTH subscribers this year,
increasing its DTH market share to 62%. Bell
ExpressVu has steadily increased the number
of subscribers
in urban
areas, where cable has traditionally
dominated the market.
At December 31, 2002, 59% of Bell
ExpressVus customers were from urban areas, up from 56% in 2001.

(BELL EXPRESSVU REVENUE GROWTH BAR CHART)

ARPS was down slightly from $45
per month to $44, reflecting the netting
of programming credits against revenues.
This was offset by
the positive impact of
pricing initiatives such as the monthly
second
receiver charge for new customers,
increases in transfer and reconnect fees and
gains from program package upgrading by
customers

Outlook for 2003

In 2003, we expect consumer spending and the
growth in demand for digital TV services to
continue. However, as we focus on improving
profitability, we expect more modest, managed
DTH subscriber growth.

Accordingly, DTH revenues are expected to
grow at a slower rate than in 2002, reflecting
slower subscriber growth. We are expecting
revenue growth through the launch of new
programming and interactive services and a
number of other initiatives aimed at improving
revenues.

BELL GLOBEMEDIA

Bell Globemedia revenues grew by 7%

(BELL GLOBEMEDIA REVENUES BAR CHART)

Bell Globemedias revenues grew 7% to
$1.3 billion in 2002. This growth
reflects the positive effects of the
acquisitions of CFCF-TV, CKY-TV and
ROB TV during the latter part
of 2001.

Excluding these acquisitions,
revenues would have increased by 3%, primarily from:



| |  | strengthening in the television advertising market in the
second half of the year
|- |  | ---------------------------------------------------------------------------------
| 
| |  | higher subscription levels from specialty TV
channels                            
| 
| |  | subscription rate increases at The
Globe and Mail.                               

Outlook for 2003

In 2003, Bell Globemedia will rely on the
continued strengthening of the advertising
market and the ratings success of the fall
2002 CTV lineup to improve performance.

Bell Canada Enterprises  34  2002 Annual Report



---



##### 



Managements Discussion and Analysis




BCE EMERGIS

BCE Emergis revenues declined by 18%

(BCE EMERGIS REVENUES BAR CHART)

In 2002, revenues fell 18% to $540 million,
reflecting a decline in its non-recurring revenue stream, due to lower
demand for its solutions in soft
technology markets.

In April 2002, BCE Emergis announced
its revised business plan, which
focuses on key growth areas,
driving
recurring revenue growth and streamlining
its service offerings and operating costs.

As part of that plan, BCE Emergis made a
decision to exit a number of activities in
2002 that it no longer considered core. 26% of
BCE Emergis revenues in 2002 were from BCE
affiliates, compared to 31% in 2001.

Outlook for 2003

Despite a planned reduction of $34 million
from certain contracts with Bell Canada, BCE
Emergis expects its revenues to remain
relatively stable in 2003. In addition, BCE
Emergis is also pursuing its strategic review
of its various lines of products and
businesses to ensure that they continue to
meet BCE Emergis strategic objectives.

BCE VENTURES

|                         |  |      |       |      |  |  |       | 
|------------------------ |  | ---- | ----- | ---- |  |  | ----- | 
|                         |  | 2002 |       | 2001
|                         |  |      |       |     
|CGI                      |  |      | 709   |      |  |  | 657   | 
|Telesat                  |  |      | 327   |      |  |  | 321   | 
|Other                    |  |      | 28    |      |  |  | 66    | 
|                         |  |      |       |      |  |  |       | 
|Total operating revenues |  |      | 1,064 |      |  |  | 1,044 | 
|                         |  |      |       |      |  |  |       | 

BCE Ventures had an increase of 2% in total revenues in 2002.

Our proportionate share of CGIs
revenues grew 8% in 2002, which came
mainly from business acquisitions and new
outsourcing contracts.

Revenues increased by 2% at Telesat,
reflecting ongoing modest growth in its
operations.

Other revenues were lower, reflecting
the sale of the 1000 de la Gauchetière
headquarters building in early 2002.

EBITDA

2002 Highlights

|                    |  |      |       |      |  |          |       |   |  |  |       |   
|------------------- |  | ---- | ----- | ---- |  | -------- | ----- | - |  |  | ----- | --
|                    |  | 2002 |       | 2001 |  | % change
|                    |  |      |       |      |  |         
|Bell Canada segment |  |      | 7,289 |      |  |          | 6,876 |   |  |  | 6.0   | % 
|Bell Globemedia     |  |      | 180   |      |  |          | 108   |   |  |  | 66.7  | % 
|BCE Emergis         |  |      | 30    |      |  |          | 127   |   |  |  | (76.4 | )%
|BCE Ventures        |  |      | 289   |      |  |          | 290   |   |  |  | (0.3  | )%
|Corporate and other |  |      | (166  | )    |  |          | (159  | ) |  |  | (4.4  | )%
|                    |  |      |       |      |  |          |       |   |  |  |       |   
|Total EBITDA        |  |      | 7,622 |      |  |          | 7,242 |   |  |  | 5.2   | % 
|                    |  |      |       |      |  |          |       |   |  |  |       |   

Productivity improvements as a business discipline



| |  | EBITDA increased by 5.2% to $7.6
billion despite competitive, regulatory
and economic pressures
|- |  | -----------------------------------------------------------------------------------------------

(PRODUCTIVITY IMPROVEMENTS BAR CHART)



| |  | The main factor contributing
to higher EBITDA was our focus on
productivity improvements
within the Bell Canada segment
|- |  | -----------------------------------------------------------------------------------------------------------------------
| 
| |  | Productivity initiatives resulted in:                                                                                  



| |  |  | productivity improvements of
$655 million in 2002, including $630
million of gains at the Bell Canada
segment, compared to $470 million in
2001
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | an improvement in the
EBITDA margin from
37.4% in 2001 to 38.6% in 2002.                                                                       



| |  | Our EBITDA margin improvement is
significant considering that our mix of
traditional and growth services is
transitioning to an increasing level of
growth services, which tend to have lower
margins than traditional services. For
2002, 51% of our revenues came from
growth services compared to 49% in 2001.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Outlook for 2003

EBITDA in 2003 will be negatively impacted by
the sale of our directories business, which
contributed approximately $310 million to
EBITDA in 2002. Excluding the EBITDA of the
directories business in 2002, it is
anticipated that revenue growth combined with
continued productivity improvements at similar
levels to those achieved in 2002 will result
in modest EBITDA growth.

BELL CANADA SEGMENT

Bell Canada segments EBITDA grew 6% to
$7.3 billion in 2002 from the $6.9 billion
achieved in 2001 driven by productivity
gains of $630 million.

(PRODUCTIVITY GAINS PIE CHART)

These productivity gains
were achieved throughout the
Bell Canada segment and can be categorized
as either:



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

Our productivity improvements
program included numerous projects
reflecting both cross-enterprise initiatives and initiatives
at the local business unit level. However, the key
elements of the program included:



| |  | supply
chain sourcing and delivery process
improvements that have realized over $180
million in savings                                                                                                                                     
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | gaining operating
efficiencies in key functional areas such as
call centers and field services. Improvements
in these areas generated savings of $75
million and $30 million, respectively                                                  
| 
| |  | improving margins on newer services, such as
consumer high-speed Internet service and our
broadband/IP services, by improving the
processes around customer provisioning and
customer servicing. This area generated $50
million in savings.

Bell Canada Enterprises  35  2002 Annual Report



---



##### 



Managements Discussion and Analysis




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

Outlook for 2003

EBITDA in 2003 will be negatively impacted by
the sale of the directories business, which
contributed approximately $310 million to
EBITDA in 2002.

In 2003, the Bell Canada segment expects
to achieve a similar level of productivity
improvements as 2002 by achieving further
savings in many of the same areas targeted in
2002. Productivity gains will also reflect
the reduction of approximately 1,700
positions in our workforce and the
significant operating benefits that are
expected to result from the strategic network
alliance initiated by Bell Canada and Aliant.

Excluding the EBITDA of the directories
business in 2002, the Bell Canada segment is
targeting modest revenue growth in 2003.
Combined with continued productivity
improvements, the Bell Canada segments
objective is to achieve modest EBITDA growth
in 2003.

BELL GLOBEMEDIA

Bell Globemedia had EBITDA of $180 million in
2002, a 67% increase over 2001, reflecting
higher revenues against relatively fixed costs
and productivity gains of approximately $25
million.

This EBITDA growth included
approximately $12 million of start-up
losses related to the launch of new digital
television channels at the end of 2001.

Productivity improvements came from cost
efficiencies gained from the CFCF-TV, CKY-TV
and ROB TV acquisitions, cost savings on
newsprint and strict cost controls throughout
its businesses.

Outlook for 2003

In 2003, Bell Globemedias objective is to
deliver EBITDA growth based on an advertising
market that is expected to continue to
strengthen, the rationalization of the
interactive operations and an ongoing
disciplined approach to focusing on
performance and profitability.

BCE EMERGIS

BCE Emergis EBITDA declined to $30 million
in 2002 from $127 million in 2001 as a result
of a significant decline in non-recurring
revenues.

During the year, BCE Emergis
repositioned its business by:



| |  | streamlining its services                                   
|- |  | ------------------------------------------------------------
| 
| |  | aligning its operating costs with
its recurring revenue base
| 
| |  | focusing on cost control                                    
| 
| |  | reducing
its workforce by 20%.                              

These actions resulted in consecutive
quarter-over-quarter improvements in EBITDA
in the last three quarters of 2002.

Outlook for 2003

In 2003, BCE Emergis is targeting growth in
EBITDA based on improvements to its cost
structure and a focus on sustainable
recurring revenues.

BELOW-EBITDA INCOME AND EXPENSES

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

|                                            |  |      |        |      |  |          |        |   |  |  |       |   
|------------------------------------------- |  | ---- | ------ | ---- |  | -------- | ------ | - |  |  | ----- | --
|                                            |  | 2002 |        | 2001 |  | % change
|                                            |  |      |        |      |  |         
|EBITDA                                      |  |      | 7,622  |      |  |          | 7,242  |   |  |  | 5.2   | % 
|Amortization expense                        |  |      | 3,146  |      |  |          | 3,826  |   |  |  | (17.8 | )%
|Net benefit plans credit                    |  |      | (33    | )    |  |          | (121   | ) |  |  | 72.7  | % 
|Restructuring and other charges             |  |      | 887    |      |  |          | 980    |   |  |  | (9.5  | )%
|                                            |  |      |        |      |  |          |        |   |  |  |       |   
|Operating income                            |  |      | 3,622  |      |  |          | 2,557  |   |  |  | 41.7  | % 
|Other income                                |  |      | 2,468  |      |  |          | 4,015  |   |  |  | (38.5 | )%
|Impairment charge                           |  |      | (770   | )    |  |          |       |   |  |  | n.m.  |   
|Interest expense                            |  |      | (1,161 | )    |  |          | (1,056 | ) |  |  | (9.9  | )%
|                                            |  |      |        |      |  |          |        |   |  |  |       |   
|Pre-tax earnings from continuing operations |  |      | 4,159  |      |  |          | 5,516  |   |  |  | (24.6 | )%
|Income taxes                                |  |      | 1,593  |      |  |          | 1,759  |   |  |  | (9.4  | )%
|Non-controlling interest                    |  |      | 668    |      |  |          | 186    |   |  |  | n.m.  |   
|                                            |  |      |        |      |  |          |        |   |  |  |       |   
|Earnings from continuing operations         |  |      | 1,898  |      |  |          | 3,571  |   |  |  | (46.8 | )%
|Discontinued operations                     |  |      | 577    |      |  |          | (3,057 | ) |  |  | n.m.  |   
|                                            |  |      |        |      |  |          |        |   |  |  |       |   
|Net earnings                                |  |      | 2,475  |      |  |          | 514    |   |  |  | n.m.  |   
|Dividends on preferred shares               |  |      | (59    | )    |  |          | (64    | ) |  |  | (7.8  | )%
|                                            |  |      |        |      |  |          |        |   |  |  |       |   
|Net earnings applicable to common shares    |  |      | 2,416  |      |  |          | 450    |   |  |  | n.m.  |   
|                                            |  |      |        |      |  |          |        |   |  |  |       |   

Amortization expense

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



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

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

|                           |  |      |       |      |  |  |       | 
|-------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|                           |  | 2002 |       | 2001
|                           |  |      |       |     
|Capital and other assets   |  |      | 3,146 |      |  |  | 3,050 | 
|Goodwill                   |  |      |      |      |  |  | 776   | 
|                           |  |      |       |      |  |  |       | 
|Total amortization expense |  |      | 3,146 |      |  |  | 3,826 | 
|                           |  |      |       |      |  |  |       | 

Our total amortization expense fell by
$680 million or 18% in 2002. This was largely
a result of a new accounting rule that
required us to stop amortizing goodwill,
starting in 2002. Please see Our accounting
policies  Changes to accounting standardsin
this MD&A for more information.

Amortization of capital and other assets
increased slightly from 2001 to 2002 because
of the higher levels of investments in capital
assets in the last several years.

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

Outlook for 2003

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

Bell Canada Enterprises  36  2002 Annual Report



---



##### 



Managements Discussion and Analysis




Net benefit plans credit

We maintain plans that provide two types of benefits:



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

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



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

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

|                                                      |  |      |      |      |  |  |      |  
|----------------------------------------------------- |  | ---- | ---- | ---- |  |  | ---- | -
|                                                      |  | 2002 |      | 2001
|                                                      |  |      |      |     
|Pension benefits credit                               |  |      | (190 | )    |  |  | (275 | )
|Other retirement and post-employment benefits expense |  |      | 157  |      |  |  | 154  |  
|                                                      |  |      |      |      |  |  |      |  
|Total net benefit plans credit                        |  |      | (33  | )    |  |  | (121 | )
|                                                      |  |      |      |      |  |  |      |  

We had $12.5 billion of pension plan
assets at December 31, 2002. Our pension plan
surplus was $727 million, which is significant
in relation to plan assets.

Our total net benefit plans credit fell
by $88 million or 73% in 2002. About half of
the decrease was from weak fund performance in
2001. The rate of return was significantly
below our assumption of 8.8%, which created an
actuarial loss. As a result, the fair value of
plan assets at the beginning of the year,
which is used to calculate the pension credit,
was lower in 2002 than in 2001.

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

Outlook for 2003

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

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

RESTRUCTURING AND OTHER CHARGES

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

2002

Streamlining at Bell Canada and other charges

Bell Canada recorded a pre-tax charge of
$302 million in the fourth quarter of 2002
($190 million after-tax). This charge
represented restructuring charges of $232
million and other charges of $70 million.

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

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

At December 31, 2002, $111 million of
the restructuring provision remained unpaid.

Write-off of deferred costs

BCE Inc. recorded a pre-tax charge of $93
million ($61 million after-tax) in the
fourth quarter of 2002. This charge
represented a write-off of deferred costs
relating to various convergence initiatives
after an analysis indicated that it is
unlikely that these costs will 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 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 one-time charge of $79
million in the third quarter of 2002. BCEs
share was $37 million on an after-tax basis.
The one-time charge is equal to the $128
million cash payout, net of a previously
recorded provision. We are deferring and
amortizing the pension benefits into earnings
over the estimated average remaining service
life of active employees and the estimated
average remaining life of retired employees.

Write-down of Bell Canadas accounts receivable

Coincident with the development of a new
billing platform, Bell Canada has adopted a
new and more precise methodology to analyze
the amount of receivables by customer as well
as by service line and that permits a more
accurate determination of the validity of
customer balances owed to Bell Canada. This
analysis indicated that as at June 30, 2002, a
write-down of accounts receivable amounting to
$272 million (BCEs share is $142 million on
an after-tax basis) was appropriate.

As these amounts arose from legacy
billing systems and processes, Bell Canada
has carried out a detailed review of billings
and adjustments for the period from 1997 to
2002. This review determined that these
amounts arose as the cumulative result of a
series of individually immaterial events and
transactions pertaining to its legacy
accounts receivable systems dating back to
the early 1990s.

Bell Canada Enterprises  37  2002 Annual Report



---



##### 



Managements Discussion and Analysis




Streamlining at BCE Emergis

BCE Emergis recorded a pre-tax charge of $119
million in the second quarter of 2002. BCEs
share was $63 million on an after-tax basis.
This pre-tax charge represented restructuring
charges of $95 million and other charges of
$24 million that together were related to the
write-off of certain assets, employee
severance and other employee costs, contract
settlements and costs of leased properties no
longer in use, and was reduced by the proceeds
of disposition of certain exited activities.
All of these charges were primarily from
streamlining BCE Emergis services and
reducing its operating cost structure. At
December 31, 2002, $23 million of the
restructuring provision remained unpaid.

2001

Streamlining the Bell Canada segment

The Bell Canada segment recorded pre-tax
charges totalling $975 million in the first
and fourth quarters of 2001. BCEs share was
$461 million on an after-tax basis. These
charges represented restructuring charges of
$555 million and other charges of $420
million.

The restructuring charges were from the
Bell Canada segments streamlining initiatives
and included employee severance for
approximately 4,700 employees, enhanced
pension benefits and other employee costs. The
restructuring programs were completed in 2002.

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

OTHER INCOME

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



| |  | net gains on
investments, including gains or losses when
we dispose of, write-down and reduce our
ownership in investments                                                                                                                                                                                                   
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | foreign currency
gains (losses). We have debt denominated in
foreign currencies (mainly in U.S. dollars)
that is exposed to exchange fluctuations.
We recognize a foreign currency gain
when the Canadian dollar strengthens
compared to the U.S. dollar, and a loss when
the Canadian dollar weakens against the U.S.
dollar
| 
| |  | other items, including interest
income, equity in net earnings (losses) in
significantly influenced companies and
miscellaneous income.                                                                                                                                                                                      

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

|                                |  |      |       |      |  |  |       |  
|------------------------------- |  | ---- | ----- | ---- |  |  | ----- | -
|                                |  | 2002 |       | 2001
|                                |  |      |       |     
|Net gains on investments        |  |      | 2,427 |      |  |  | 4,044 |  
|Foreign currency gains (losses) |  |      | 36    |      |  |  | (83   | )
|Other                           |  |      | 5     |      |  |  | 54    |  
|                                |  |      |       |      |  |  |       |  
|Total other income              |  |      | 2,468 |      |  |  | 4,015 |  
|                                |  |      |       |      |  |  |       |  

Net gains on investments

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



| |  | selling the directories
business ($2.3 billion)                                                                                                                     
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | selling a 37% interest in each of
Télébec Limited Partnership and Northern
Telephone Limited Partnership when the
Bell Nordiq Income Fund was created ($222
million)
| 
| |  | writing down our remaining
portfolio investment in Nortel Networks
Corporation (Nortel Networks) ($98
million).                                                     

In 2001, our net gains on investments were primarily from:



| |  | settling short-term forward contracts on
approximately 47.9 million Nortel Networks
common shares and selling the same number of
Nortel Networks common shares ($3.7 billion)                     
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the reduction of our ownership interest in
CGI, Aliant and BCE Emergis, resulting from
them issuing shares to third parties relating
to business acquisitions and public offerings
($265 million).

Foreign currency gains (losses)

The Canadian dollar strengthened during
2002, resulting in a foreign currency gain.
It weakened during 2001, resulting in a
foreign currency loss.

IMPAIRMENT CHARGE

In the fourth quarter of 2002, BCE completed
its annual assessment of goodwill of all of
its reporting units, as required by the
provisions of CICA Handbook section 3062. It
recorded a charge to pre-tax earnings of $770
million ($530 million after non-controlling
interest) relating to impaired goodwill of
reporting units in Bell Globemedia ($715
million) and Aliant ($55 million).

In each case, the goodwill was written
down to its fair value, which was determined
based on estimates of
discounted future cash flows and
confirmed by market-related values.

The primary 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, as well as current
market conditions for the media business.

The write-down at Aliant was determined
to be appropriate in light of current market
conditions and the recent weak performance
of its information technology business.

INTEREST EXPENSE

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

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

|                             |  |      |        |      |  |  |        |  
|---------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|                             |  | 2002 |        | 2001
|                             |  |      |        |     
|Average annual interest rate |  |      | 7.7    | %    |  |  | 8.1    | %
|Average total debt (a)       |  |      | 15,168 |      |  |  | 13,080 |  
|                             |  |      |        |      |  |  |        |  
|Interest expense             |  |      | 1,161  |      |  |  | 1,056  |  
|                             |  |      |        |      |  |  |        |  



---

|(a) |  | excludes total debt of discontinued operations of Teleglobe and BCI
|--- |  | -------------------------------------------------------------------

Total interest expense grew by 9.9%,
primarily due to increased debt levels.

Average total debt increased 16% in 2002 from
2001 because of debt financings to fund:



| |  | $3.1 billion of the repurchase price of SBCs
20% interest in BCH
|- |  | -----------------------------------------------------------------
| 
| |  | $670 million of negative free cash flows.                        

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

Some of the outstanding debt was repaid
from the proceeds from the sale of the
directories business.

Bell Canada Enterprises  38  2002 Annual Report



---



##### 



Managements Discussion and Analysis




Outlook for 2003

We do not expect net debt in 2003 to increase
if we achieve our objective of being modestly
free cash flow positive. We expect some of our
debt to be repaid in 2003 using tax refunds
that we expect to receive. These refunds
relate mainly to the use of some of the
capital losses that were triggered on the sale
of our interest in Teleglobe. However, due to
the debt financing of the repurchase of SBCs
20% interest in BCH in late 2002, we are
expecting a modest increase in our interest
expense in 2003.

INCOME TAXES

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

|                                                    |  |      |       |      |  |  |       |   
|--------------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | --
|                                                    |  | 2002 |       | 2001
|                                                    |  |      |       |     
|Canadian statutory income tax rate                  |  |      | 37.4  | %    |  |  | 40.1  | % 
|Items reconciling statutory rate to effective rate: |  |      |       |      |  |  |       |   
|Goodwill amortization (not tax affected)            |  |      | 0.0   | %    |  |  | 5.4   | % 
|Goodwill impairment charge (not tax affected)       |  |      | 6.9   | %    |  |  | 0.0   | % 
|Net gains on investments (taxed at different rates) |  |      | (8.0  | )%   |  |  | (16.5 | )%
|Various other items                                 |  |      | 2.0   | %    |  |  | 2.9   | % 
|                                                    |  |      |       |      |  |  |       |   
|Effective income tax rate                           |  |      | 38.3  | %    |  |  | 31.9  | % 
|Earnings before income taxes                        |  |      | 4,159 |      |  |  | 5,516 |   
|                                                    |  |      |       |      |  |  |       |   
|Income tax expense                                  |  |      | 1,593 |      |  |  | 1,759 |   
|                                                    |  |      |       |      |  |  |       |   

The statutory income tax rate was reduced
to 37.4% in 2002 from 40.1% in 2001. However,
the non-tax deductibility of the goodwill
impairment charge, lower gains on investments
in 2002 and greater other items led to an
increase in the effective tax rate to 38.3%
for the year.

In 2001, we used non-capital loss
carryforwards and offset a portion of the
taxes on the gains incurred on the
transactions relating to the disposition of
Nortel Networks shares in 2001. The carryback
of a portion of the 2002 capital loss on the
sale of our Teleglobe shares will result in a
recovery of the 2001 taxes paid and release
the non-capital losses for utilization against
future business income.

Outlook for 2003

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

NON-CONTROLLING INTEREST

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



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

In 2002, the $482 million increase in
non-controlling interest arose primarily
because of:



| |  | a $2.3 billion pre-tax gain on
the sale of the directories business by Bell
Canada in November, before we repurchased
SBCs interest in BCH                
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | a $680 million
decrease in amortization expense, mainly from
the new accounting requirement to no longer
amortize goodwill                                 
| 
| |  | a $380 million improvement
in EBITDA, resulting primarily from
productivity initiatives and cost reductions
at the Bell Canada segment and Bell
Globemedia.

Outlook for 2003

Non-controlling interest will be impacted in
2003 by the repurchase of the 20% interest in
BCH that we did not already own.

DISCONTINUED OPERATIONS

The table below is a summary of net gains
(losses) on discontinued operations for the
past two years.

|                              |  |      |      |      |  |  |        |  
|----------------------------- |  | ---- | ---- | ---- |  |  | ------ | -
|                              |  | 2002 |      | 2001
|                              |  |      |      |     
|Teleglobe                     |  |      | 893  |      |  |  | (2,810 | )
|BCI                           |  |      | (316 | )    |  |  | (247   | )
|                              |  |      |      |      |  |  |        |  
|Total discontinued operations |  |      | 577  |      |  |  | (3,057 | )
|                              |  |      |      |      |  |  |        |  

Teleglobe

Our exit from Teleglobe

On April 24, 2002, BCE Inc. announced that it
would stop providing long-term funding to
Teleglobe. This decision was based on a number
of factors, including:



| |  | a revised business
plan and outlook for the principal operating
segment of Teleglobe and associated funding
requirements
|- |  | ------------------------------------------------------------------------------------------------------------------------
| 
| |  | a revised assessment of its
prospects                                                                                   
| 
| |  | a comprehensive analysis of the
state of its industry.                                                                  

In light of this decision, Teleglobe
announced that it would explore a range of
financial restructuring alternatives,
potential partnerships and business
combinations. Also on April 24, 2002, all of
the Teleglobe board members who were
affiliated with BCE Inc. resigned from the
Teleglobe board.

In effect, these events resulted in BCE
Inc. exiting the Teleglobe business and the
eventual material reduction in our approximate
96% economic and voting interest in Teleglobe
as a result of the ongoing restructuring of
Teleglobe. As a result, effective April 24,
2002 we reclassified Teleglobes financial
results as a discontinued operation.

Our management completed its assessment
of the net realizable value of our interest in
the net assets of Teleglobe and determined it
to be zero. This resulted in a loss from
discontinued operations of $73 million in the
second quarter of 2002. This loss is in
addition to the transitional impairment charge
of $7,516 million to opening retained earnings
as of January 1, 2002, which was required by
the transitional provisions of the new CICA
Handbook section 3062. Please see
Changes to accounting standards  Goodwill
and other intangible assetsin this MD&A for
more information about the transitional
provisions.

Teleglobes results of operations include
an impairment charge of $2,049 million that
was recorded in the first quarter of 2001
after Teleglobe completed an assessment of the
carrying value of its investment in the Excel
Communications group.

Significant developments

On May 15, 2002 and later in the year,
Teleglobe and certain of its subsidiaries
filed for court protection under insolvency
statutes in various countries, including
Canada and the United States. On September 19,
2002, Teleglobe announced the execution of
agreements for the sale of its core
telecommunications business. Effective
November 30, 2002, BCE Inc.s
debtor-in-possession and employee severance
and retention facilities were fully repaid by
Teleglobe and terminated.

Bell Canada Enterprises  39  2002 Annual Report



---



##### 



Managements Discussion and Analysis




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
primarily to the tax benefit from:



| |  | reinstating non-capital losses that were
previously used to offset gains incurred on
the transaction relating to the
disposition of Nortel Networks shares in
2001
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | applying a portion of the capital
losses against the gain on the sale of the
directories business in 2002.                                                        

The tax benefit associated with the
unused capital losses has not been
reflected in the financial statements.

Please see Financial and capital
management  Contingencies  Litigationin
this MD&A for information about the lending
syndicate lawsuit filed against BCE Inc.

Change in how we account for Teleglobe

Effective May 15, 2002, we stopped
consolidating Teleglobes financial results
and started accounting for the investment at
cost. We made this change because:



| |  | our
management did not expect to realize any
future economic benefits from our approximate
96% economic and voting interest in Teleglobe
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | we had not guaranteed any of Teleglobes
obligations                                                                                    
| 
| |  | we stopped providing long-term
funding to Teleglobe.                                                                                    

BCI

BCIs plan of arrangement

BCI completed the sale of its interest in
Telecom Américas Ltd. in July 2002. BCI
held most of its investments through
Telecom Américas Ltd.

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.

Change in how we account for BCI

Effective June 30, 2002, we stopped
consolidating BCIs financial results and
started accounting for the investment at cost.
We recorded a charge of $316 million in 2002
($191 million in the second quarter and $125
million in the fourth quarter). This
represents a write-down of our investment in
BCI to our estimate of its net realizable
value at that time.

DIVIDENDS ON PREFERRED SHARES

In March 2002, we issued $510 million of
Series AA preferred shares and redeemed
the $300 million Series W preferred
shares, for a net increase of $210 million
in our preferred shares issued. More
dividends were declared as a result of
this increase.

For some time now, we have had agreements
in place that swap the fixed dividend rates on
some of our preferred shares with variable
ones. The average variable rate in 2002 was
lower than in 2001, which led to a decrease in
the amount of dividends on preferred shares
charged to retained earnings.

The net result was an overall reduction
of $5 million in the amount of dividends on
preferred shares to $59 million in 2002.

FINANCIAL AND CAPITAL MANAGEMENT

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

2002 HIGHLIGHTS AND OUTLOOK FOR 2003

In 2002, our efforts for managing
liquidity and cash flow were directed at:



| |  | reducing financial risk to the company
|- |  | --------------------------------------
| 
| |  | focusing on our core business         

(FREE CASH FLOW BAR CHART)



| |  | improving capital
efficiency and productivity through
disciplined financial
management.
|- |  | ---------------------------------------------------------------------------------------

We reduced financial risk by:



| |  | ending our long-term funding of
Teleglobe
|- |  | -----------------------------------------
| 
| |  | implementing a
wind-down of BCI.         

We focused on our core
business by regaining a 100% interest in
our core asset, Bell Canada.

We improved our fundamentals by:



| |  | reducing our capital intensity ratio to
19% in 2002 from 26% in 2001                   
|- |  | ---------------------------------------------------------------------------------------
| 
| |  | improving
free cash flow after common dividends by
76% or $2.1 billion compared to 2001

...while maintaining our common share dividend of $1.20 per share.

We are targeting modestly positive
free cash flow in 2003, after payment of
capital expenditures and dividends on
common and preferred shares.

Free cash flow

Free cash flow is a key financial
measure we use to assess our
performance.

Free cash flow is derived
directly from the statement of cash
flows. Please see the calculations in
tabular form on the next page.

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

In the
past several years, we have had significantly negative free cash flow, after common dividends,
primarily from high capital
spending, which we describe below. We
funded this shortfall through a combination
of increased debt and cash
generated from various divestitures.

(CAPITAL EXPENDITURES BAR CHART)

In 2002, we
improved our free
cash flow shortfall
position by 76%,
mainly as a result of
productivity improvements and reduced
capital expenditures.

We reduced our capital intensity ratio to 19%.

Bell Canada Enterprises  40  2002 Annual Report



---



##### 



Managements Discussion and Analysis




Capital intensity

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

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

Our capital intensity ratio for 2002 was
19%, a significant improvement over the 2001
ratio of 26%.

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



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

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

BCES CAPITAL STRUCTURE

|                                 |  |      |        |      |  |  |        |  
|-------------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|                                 |  | 2002 |        | 2001
|                                 |  |      |        |     
|Cash                             |  |      | (306   | )    |  |  | (569   | )
|Debt due within one year         |  |      | 2,026  |      |  |  | 5,263  |  
|Long-term debt                   |  |      | 13,395 |      |  |  | 14,861 |  
|Retractable preferred shares     |  |      | 355    |      |  |  | 400    |  
|                                 |  |      |        |      |  |  |        |  
|Total net debt                   |  |      | 15,470 |      |  |  | 19,955 |  
|Non-controlling interest         |  |      | 3,596  |      |  |  | 5,625  |  
|Total shareholders equity       |  |      | 12,871 |      |  |  | 16,799 |  
|                                 |  |      |        |      |  |  |        |  
|Total capitalization             |  |      | 31,937 |      |  |  | 42,379 |  
|                                 |  |      |        |      |  |  |        |  
|Net debt to total capitalization |  |      | 48.4   | %    |  |  | 47.1   | %
|                                 |  |      |        |      |  |  |        |  

Capital structure

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

Net debt to capitalization ratio

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

During the year, we repurchased SBCs 20%
interest in BCH for $6.3 billion. We financed
the repurchase through
various transactions that gave us
flexibility:



| |  | $2.5 billion from equity issues                                         
|- |  | ------------------------------------------------------------------------
| 
| |  | $2 billion from a public debt issue                                     
| 
| |  | $1.1
billion drawn from two-year bank facilities                        
| 
| |  | $0.7 billion financed by Bell Canadas sale of
its directories business.

We completed the repurchase while
preserving our credit quality and the
strength of our balance sheet:



| |  | we maintained investment grade credit ratings                    
|- |  | -----------------------------------------------------------------
| 
| |  | we ended the year with a net debt to
capitalization ratio of 48%.

SUMMARY OF CASH FLOWS

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

|                                                        |  |      |        |      |  |  |        |  
|------------------------------------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|                                                        |  | 2002 |        | 2001
|                                                        |  |      |        |     
|Cash from operating activities                          |  |      | 4,531  |      |  |  | 4,234  |  
|Capital expenditures                                    |  |      | (3,771 | )    |  |  | (4,999 | )
|Dividends                                               |  |      | (1,510 | )    |  |  | (1,390 | )
|Investments                                             |  |      | (6,604 | )    |  |  | (535   | )
|Other investing activities                              |  |      | 10     |      |  |  | (122   | )
|                                                        |  |      |        |      |  |  |        |  
|                                                        |  |      | (7,344 | )    |  |  | (2,812 | )
|                                                        |  |      |        |      |  |  |        |  
|Repurchase of 20% interest in Bell Canada               |  |      | 6,386  |      |  |  |       |  
|Taxes paid on divestitures                              |  |      | 288    |      |  |  |       |  
|                                                        |  |      |        |      |  |  |        |  
|Free cash flow, after common dividends                  |  |      | (670   | )    |  |  | (2,812 | )
|Common dividends                                        |  |      | 999    |      |  |  | 969    |  
|                                                        |  |      |        |      |  |  |        |  
|Free cash flow, before common dividends                 |  |      | 329    |      |  |  | (1,843 | )
|                                                        |  |      |        |      |  |  |        |  
|Divestitures                                            |  |      | 3,230  |      |  |  | 4,749  |  
|Net issuance (repayment) of equity instruments          |  |      | 2,819  |      |  |  | (120   | )
|Net issuance (repayment) of debt instruments            |  |      | 1,805  |      |  |  | (1,522 | )
|Financing activities of subsidiaries with third parties |  |      | 206    |      |  |  | 1,112  |  
|Cash used by discontinued operations                    |  |      | (936   | )    |  |  | (1,168 | )
|Other                                                   |  |      | (43    | )    |  |  | 70     |  
|                                                        |  |      |        |      |  |  |        |  
|Net increase (decrease) in cash                         |  |      | (263   | )    |  |  | 309    |  
|                                                        |  |      |        |      |  |  |        |  

Cash from operating activities

We generated a significant amount of
productivity improvements during the year
($655 million pre-tax, compared to $470
million in 2001). Please see Financial results
analysisin this MD&A for more details. These
cost savings translated into additional cash
from our operations.

Excluding the impact of $288 million of
taxes paid on divestitures in 2002, cash
from operating activities was 14% higher in
2002 than in 2001.

Capital expenditures

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

Having much of the significant capital
expenditures relating to the build-out of our
growth infrastructures behind us, we were able
to reduce our capital expenditures by 25% in
2002 compared to 2001. This reduction in
capital spending lowered our capital intensity
ratio to 19% in 2002 from 26% in 2001.

The Bell Canada segments capital
intensity ratio fell to 20% in 2002 from 27%
in 2001. The Bell Canada segment accounted
for 91% of our total capital expenditures in
2002.

Bell Canada Enterprises  41  2002 Annual Report



---



##### 



Managements Discussion and Analysis




Dividends

We paid out $120 million or 9% more in dividends in 2002 than in 2001.

We paid a common share dividend of $1.20
per share in 2002 and 2001. However, total
dividends paid on common shares increased in
2002 because the average number of common
shares outstanding increased from 810 million
to 850 million mainly as a result of equity
offerings. Please see Equity instrumentson
this page for more information.

Dividends paid by subsidiaries to
non-controlling interest increased in 2002
because Bell Canada paid larger dividends,
which included a portion to SBC.

Investments

Our most significant investment in 2002 was
the repurchase of SBCs 20% interest in BCH
for $6.3 billion.

Other investments in 2002 included Bell
Globemedias purchase of a 40% interest in a
newly created company that holds a 99%
interest in the TQS network and other
television stations for $72 million.

Investments in 2001 included Bell
Globemedias acquisition of CFCF-TV and
CKY-TV and of a 30% interest in The Comedy
Network for $219 million.

Divestitures

Our most significant divestiture in 2002 was
the sale of the print and electronic
directories business for approximately $3
billion in cash. Some of the proceeds were
used to finance part of our repurchase of
SBCs 20% interest in BCH. The balance was
used for repaying debt at Bell Canada.

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

In 2001, our most significant
divestiture was the sale of 47.9 million
Nortel Networks common shares and the
settlement of short-term forward contracts on
those shares for net proceeds of $4.4
billion.

Equity instruments

In 2002, we publicly issued 85 million common
shares for $2 billion and issued
approximately 18 million common shares to SBC
for $500 million. The proceeds were used to
finance part of our repurchase of SBCs 20%
interest in BCH.

We also issued 20 million Series AA
preferred shares for $510 million and
redeemed 12 million Series W preferred
shares for $306 million.

Under our stock option and employee
savings plans, we issued approximately 3
million common shares for $61 million in 2002
and approximately 3 million common shares for
$71 million in 2001.

In 2001, we bought for cancellation
approximately 5 million common shares for
$191 million under a normal course issuer
bid.

Debt instruments

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

The combined debt of BCE Inc. and Bell
Canada makes up 90% of our total debt
portfolio. The average annual interest rate
on our total debt was approximately 7.7% and
8.1% in 2002 and 2001.

The interest rates we pay are mostly
based on the quality of our credit ratings.
The table below lists our credit ratings, all
of which are investment grade. This usually
means that we qualify for better interest
rates when we borrow money. The BCE Inc.
ratings were confirmed in October 2002. The
Bell Canada ratings were confirmed in February
2003.

Financing activities of subsidiaries with third parties

In 2002, we generated $206 million of
cash, primarily from common equity issues
by Bell West and subsidiaries of Aliant.

In 2001, we generated $1.1 billion of cash from:



| |  | Bell Globemedias common share issue of $385 million when it was created
|- |  | ------------------------------------------------------------------------
| 
| |  | Bell Canadas preferred share issues of $540 million                    
| 
| |  | BCE Emergis common share issue of $100 million to the public.          

|                            |  |                    |  |                    |  |               |  |                     |  |                      |  |            
|--------------------------- |  | ------------------ |  | ------------------ |  | ------------- |  | ------------------- |  | -------------------- |  | -----------
|                            |  | BCE Inc.           |  | Bell Canada       
|                            |  |                    |  |                   
|                            |  | S&P                |  | DBRS               |  | Moody's       |  | S&P                 |  | DBRS                 |  | Moody's    
|                            |  |                    |  |                    |  |               |  |                     |  |                      |  |            
|Commercial paper            |  | A-1 (mid) / stable |  | R-1 (low)/ stable  |  | P-2 / (neg)   |  | A-1 (mid) / stable  |  | R-1 (mid) /stable    |  | P-2 / (neg)
|Extendable commercial notes |  | A-1 (mid) / stable |  | R-1 (low) / stable |  |              |  | A-1 (mid) / stable  |  | R-1 (mid) / stable   |  |           
|Long-term debt              |  | A- / stable        |  | A / (neg)          |  | Baa-1 / (neg) |  | A / stable          |  | A (high) / stable    |  | A-3 / (neg)
|Preferred shares            |  | P-2 / stable       |  | Pfd-2 / (neg)      |  |              |  | P-2 (high) / stable |  | Pfd-2 (high) /stable |  |           

CONTRACTUAL OBLIGATIONS

|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |       |  |  |  |       |  |  |  |        | 
|----------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---------- |  | ----- | ----- |  |  |  | ----- |  |  |  | ----- |  |  |  | ------ | 
|At December 31,
2002 (in millions)        |  | 2003 |       | 2004 |  | 2005 |       | 2006 |  | 2007 |       | Thereafter |  | Total
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |      
|Long-term debt (excluding capital leases) |  |      | 1,593 |      |  |      | 978   |      |  |      | 1,197 |            |  |       | 1,131 |  |  |  | 1,818 |  |  |  | 7,907 |  |  |  | 14,624 | 
|Capital leases                            |  |      | 102   |      |  |      | 96    |      |  |      | 61    |            |  |       | 48    |  |  |  | 37    |  |  |  | 123   |  |  |  | 467    | 
|Notes payable and bank advances           |  |      | 330   |      |  |      |      |      |  |      |      |            |  |       |      |  |  |  |      |  |  |  |      |  |  |  | 330    | 
|Operating leases                          |  |      | 486   |      |  |      | 414   |      |  |      | 384   |            |  |       | 352   |  |  |  | 301   |  |  |  | 1,758 |  |  |  | 3,695  | 
|Purchase obligations                      |  |      | 545   |      |  |      | 227   |      |  |      | 120   |            |  |       | 112   |  |  |  | 48    |  |  |  | 173   |  |  |  | 1,225  | 
|Other contractual obligations             |  |      | 124   |      |  |      | 10    |      |  |      | 7     |            |  |       | 6     |  |  |  | 5     |  |  |  | 11    |  |  |  | 163    | 
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |       |  |  |  |       |  |  |  |        | 
|Total                                     |  |      | 3,180 |      |  |      | 1,725 |      |  |      | 1,769 |            |  |       | 1,649 |  |  |  | 2,209 |  |  |  | 9,972 |  |  |  | 20,504 | 
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |       |  |  |  |       |  |  |  |        | 

Bell Canada Enterprises  42  2002 Annual Report



---



##### 



Managements Discussion and Analysis




COMMERCIAL COMMITMENTS

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



| |  | $4,866 million in total credit and other
bank facilities, of which $767 million
was drawn
|- |  | -----------------------------------------------------------------------------------------
| 
| |  | $196 million in standby
letters of credit                                                
| 
| |  | $279 million in various other commitments, including capital expenditures.               

Of the $4.9 billion in total credit and
other bank facilities, $1.3 billion is used to
support our commercial paper program,
excluding extendable Class E notes. No amount
has been drawn on our commercial paper
program.

Also included in total credit and
other bank facilities is a bridge facility of
$1.1 billion, which was not drawn at December
31, 2002.

In addition, at December 31, 2002, Bell
Canada had $50 million of Class E Notes
outstanding. BCE Inc. had no Class E Notes
outstanding at December 31, 2002. The maximum
principal amount that can be issued is $360
million for BCE Inc. and $400 million for Bell
Canada. Although these notes
are not supported by committed lines of
credit, we may extend them in certain
circumstances.

ACCESS TO CAPITAL

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

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

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

USE OF FINANCIAL INSTRUMENTS

We periodically use derivative instruments
to manage our exposure to interest rate,
foreign currency and share price movements.
We do not use derivative instruments to
speculate.

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

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



| |  | interest
rate swaps that, in effect, convert the
fixed-rate dividends on some of our preferred
shares to floating-rate dividends. We pay less
when the variable rates are below the fixed
rates, which has been the case for the past
several years
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | currency forward contracts
relating mainly to a net investment in a
foreign subsidiary                                                                                                                                                             
| 
| |  | forward contracts on BCE
Inc. common shares to hedge the fair value
exposure related to stock compensation
payments.                                                                                                                               

At December 31, 2002, the carrying value
of these derivative instruments was a net
liability of $14 million. Their fair value
amounted to a net asset of $82 million.

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

USE OF OFF-BALANCE SHEET ARRANGEMENTS

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

About off-balance sheet
arrangements

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

Sale of accounts receivable

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

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

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

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

Shared services agreement

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

In 2004, Bell Canada may:



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

Sale leaseback transactions

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

Bell Canada Enterprises  43  2002 Annual Report



---



##### 



Managements Discussion and Analysis




CONTINGENCIES

Agreement with MTS

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

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



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

If MTS does not exercise its put
option, Bell Canada can exercise its call
option. Under the terms of the call option,
Bell Canada has the option to buy MTS
interest:



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

Bell Canada has not received any
formal notice from MTS that it plans to
exercise the put option.

Agreement with CGI

We entered into an agreement on July 1, 1998
with CGIs three majority individual
shareholders. The agreement includes put and
call options, and rights of first refusal, on
the CGI shares that these shareholders hold.

The put options give these CGI
shareholders the right to gradually sell a
portion of their shares to BCE Inc. until
January 4, 2004. The call option gives BCE
Inc. the one-time right to buy all of their
CGI shares that BCE Inc. has not already
bought, during the period from January 5,
2004 to January 4, 2006.

The exercise price per share of any put
or call option is 115% of the 20-day average
market price of CGI shares prior to the
exercise date, payable in BCE Inc. common
shares. If the options were fully exercised,
our equity ownership interest in CGI would
increase to approximately 40%.

In December 2002, we informed CGI that
our prior publicly stated intention to
dispose of the control block in CGI
following the exercise of the put and call
options in 2003 and 2004 is no longer our
preferred course of action.

We began discussions with CGI about the
future of our investment in CGI. No final
decisions have been made, but we have started
discussions to develop a plan to:



| |  | realize
the maximum value of our investment in CGI                                                                                                             
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | enhance the value of CGI by taking steps
to retain CGIs management and to ensure
that the company continues to deliver
high-quality services to its customers.

To allow enough time for these
discussions, CGIs three majority individual
shareholders have agreed to defer the
exercise date of the put options until April
15, 2003.

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.

The plaintiffs claim damages of US$1.19
billion, plus interest and costs, which they
allege is equal to the amount they advanced.
This represents approximately 95.2% 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.

Other litigation

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

RISK ASSESSMENT

The following section describes general risks
that could affect the BCE group of companies
and specific risks that could affect BCE Inc.
and each of our segments.

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

Risk

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 companies.

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

BCE GROUP OF COMPANIES

Our dependence on the Bell Canada segment

The Bell Canada segment is our largest
segment, which means our financial
performance depends in large part on how
well the Bell Canada segment performs
financially.

For the year ended December 31, 2002, the
Bell Canada segment accounted for 88% of our
operating revenues, 96% of our EBITDA and 100%
of net earnings applicable to common shares on
a consolidated basis.

Bell Canada Enterprises  44  2002 Annual Report



---



##### 



Managements Discussion and Analysis




Economic and market conditions

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

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



| |  | lower than expected growth in data
revenue for the Bell Canada segment, because
of softer demand from enterprises and
wholesale customers
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | some reductions in the
number of network access lines due to business
failures or contractions                                           
| 
| |  | lower advertising
spending from Bell Globemedias customers in
the first half of 2002                                                    
| 
| |  | lower spending on IT
services, resulting in lower non-recurring
revenue from BCE Emergis.                                                

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

Improving productivity and reducing capital intensity

We implemented several cost reduction
initiatives in 2002. We intend to continue
implementing more productivity initiatives in
2003, including the streamlining of
approximately 1,700 positions in our workforce
and further reducing our capital intensity.

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

Increasing competition

We face intense competition from traditional
competitors, as well as from new entrants to
the markets we operate in. We compete not only
with other telecommunications, media,
satellite television and e-commerce companies
but also with other businesses and industries,
such as cable, software and Internet
companies, systems integrators and a variety
of companies that offer network services.

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

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

Anticipating technological change

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

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

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

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

Strategies and plans for revenue growth

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



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

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

Financing our operations

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

We finance our
capital needs in three
ways:



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

Equity financings would dilute the
holdings of existing equity investors.
Increased debt financings could increase our
borrowing costs, lower our credit ratings and
give us less flexibility to take
advantage of business opportunities.

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



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

Bell Canada Enterprises  45  2002 Annual Report



---



##### 



Managements Discussion and Analysis




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



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

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

Monetizing

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

Litigation, regulatory proceedings and changes in laws

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

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

BCE Inc.s Annual Information Form for
the year ended December 31, 2002 contains a
detailed description of:



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

Please
see Bell Canada segment 
Changing wireline regulationsfor a
description of certain regulatory
initiatives and proceedings that could
affect the Bell Canada segment.

Pension fund contributions

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

Surplus

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

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

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

Funding subsidiaries

BCE Inc. is currently funding and may continue
to fund the operating losses of certain of its
subsidiaries in the future, but is not
obligated to do so. If BCE Inc. 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.

The
subsidiary might not be able to meet its
financial obligations, which would require it
to assess its alternatives, including
refinancing, renegotiating or restructuring
its debt, selling assets, changing its
business plan or seeking other options
available under applicable laws, including
bankruptcy laws. The ability of a subsidiary
to access capital on its own depends on a
number of things, including its ability to
meet the targets in its business plan.

If BCE Inc. stopped funding a subsidiary,
stakeholders of the subsidiary might decide to
take legal action against BCE Inc. While BCE
Inc. believes that this type of claim would
have no legal foundation, it could negatively
affect the market price of BCE Inc.s common
shares. BCE Inc. would have to devote
considerable management time and resources in
responding to any claim.

Attracting and retaining skilled people

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

Protecting our networks

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

Renegotiating labour agreements

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

Several of our collective bargaining
agreements expire in 2003 or have already
expired. These agreements, which cover
approximately 15,650 employees, are the
following:



| |  | the collective agreements between
Bell Canada and the Energy and Paperworkers
Union of Canada (CEP) representing
approximately 400 operator services employees
and approximately 7,000 craft and services
employees which expire at the end of November
2003
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the collective agreements between Bell
Canada and the CTEA representing approximately
1,100 communications sales employees which
expires on December 31, 2003                                                                                               
| 
| |  | several
collective agreements between certain other
companies of the Bell Canada segment
(including Aliant, Expertech Network
Installation Inc. and Connexim L.P.) and their
respective employees, representing
approximately 6,400 employees               
| 
| |  | several
collective agreements between certain
companies of the Bell Globemedia segment,
including CTV, and their respective employees,
representing approximately 750 employees.                                                                            

Bell Canada Enterprises  46  2002 Annual Report



---



##### 



Managements Discussion and Analysis




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

BCE INC.

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. BCE Inc.s
cash flow and its ability to service its debts
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.

BCE Inc.s subsidiaries, joint ventures
and significantly influenced companies are
separate legal entities. They do not have to
pay dividends or make any other distributions
to BCE Inc. If any of these subsidiaries,
joint ventures or significantly influenced
companies are liquidated or reorganized, the
rights of their creditors will rank ahead of
any rights BCE Inc. has to receive assets.

Stock market volatility

In the past, the common shares of BCE Inc.
have generally experienced price volatility
when certain announcements concerning BCE have
been made. Differences between BCE Inc.s
actual or anticipated financial results and
the published expectations of financial
analysts may also contribute to this
volatility. All of these factors, as well as
general economic and political conditions,
could have a material and negative effect on
the market price of BCE Inc.s common shares.

BELL CANADA SEGMENT

Changing wireline regulations

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

CRTC price cap decision

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

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

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

CRTC decision on incumbent affiliates

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

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



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

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

Licences and changing wireless regulations

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

Spectrum licences

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

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

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

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

Bell Canada Enterprises  47  2002 Annual Report



---



##### 



Managements Discussion and Analysis


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

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

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

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

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

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

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

Bell ExpressVu currently uses two satellites for its DTH services, Nimiq 1
and Nimiq 2, which are operated by Telesat. Please see BCE
Ventures  Telesat
for a description of certain risks affecting satellites and, in particular,
Nimiq 2.

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

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

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

BELL GLOBEMEDIA

Dependence on advertising
Bell Globemedias revenue from its television and print businesses depends in
large part on advertising revenues. Bell Globemedias advertising revenues are
affected by competitive pressures. In addition, the amount companies spend on
advertising is directly related to economic growth. An economic downturn
therefore tends to make it more difficult for Bell Globemedia to maintain or
increase revenues.

Increasing fragmentation in television markets
Television advertising revenue 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 because of the introduction of
additional television services, the extended reach of existing signals and the
launch of new digital broadcasting services in the fall of 2001.

We expect fragmentation to continue as new Web-based and other services
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 viewers with attractive programming.

Revenues from distributing television services
A significant portion of revenues generated by CTVs specialty television
operations comes from contractual arrangements with distributors, primarily
cable and DTH operators. Many of these contracts have expired. There is no
assurance that the contracts will be renewed on equally favourable terms.

New print competitors
The launch of a competing national newspaper and several commuter papers in the
Toronto area in the past few years has increased competition in the print
sector. While some of the commuter papers have recently stopped operating, the
increased competition has resulted in higher circulation and other costs, more
competition in advertising rates and lower profit margins at The Globe and
Mail.

Broadcast licences
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 the Broadcasting Act, the policies and decisions
of the CRTC and the conditions of each licensing or renewal decision, all of
which may change.

There is no assurance that any of CTVs licences will be renewed. Any
renewals, changes or amendments may have a material and negative effect on Bell
Globemedia.

BCE EMERGIS

Adoption of eBusiness
The success of BCE Emergis depends on widespread use of the Internet as well as
other electronic networks as a way to do business. Because eBusiness and its
related online transactions are relatively new and evolving, it is difficult to
predict the size of this market and its sustainable rate of growth. Businesses
and customers have not adopted eBusiness as quickly as originally expected.

Bell Canada Enterprises  48  2002 Annual Report



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##### 



Managements Discussion and Analysis


BCE Emergis must increase the number of transactions it processes to build
recurring revenue. This depends on how quickly its customers and its
distributors customers adopt its services. It will also depend on BCE Emergis
ability to build an effective sales force as well as stimulate its
distributors sales and influence their marketing plans for its solutions.

Security and privacy breaches
If BCE Emergis is unable to protect the physical and electronic security and
privacy of its applications, databases and transactions, its business,
including customer relationships, could be materially and negatively affected.

Operating results
BCE Emergis has announced plans to focus on key growth areas, drive recurring
revenue growth, streamline its service offering and operating costs and add new
services.

If these plans are unsuccessful, BCE Emergis results of operations could
be materially and negatively affected.

BCE Emergis has incurred losses in the past. Its revenue depends largely
on the amount of services that its customers purchase. In addition, a large
portion of BCE Emergis revenue comes from a small number of clients. If BCE
Emergis loses a contract with a major client and cannot replace it, it could
have a material and negative effect on its results.

The operating results of BCE Emergis have fluctuated in the past, mainly
because of variability in non-recurring revenue and the effect of acquisitions
and exited activities. BCE Emergis expects fluctuations to continue in the
future. It would also be affected by changes in currency exchange rates between
the Canadian and U.S. dollars.

Success of U.S. operations
To be successful in the United States involves significant management and
financial resources. If it is unsuccessful in the United States, its business
and operating results could be materially and negatively affected.

Control by BCE Inc.
BCE Inc., which owns approximately 65% of the outstanding common shares of BCE
Emergis, can, subject to applicable law, exercise significant control and
influence over the affairs of BCE Emergis, including virtually all matters
submitted to a shareholder vote.

BCE Inc. has no obligation to remain the majority shareholder of, or to
maintain its current level of ownership in, BCE Emergis. The announcement of a
decision by BCE Inc. to change the treatment of its investment in BCE Emergis,
to sell all or a portion of its common shares of BCE Emergis, or any other
decision to the same effect could materially and negatively affect BCE Emergis,
its prospects and the market price of its common shares.

Defects in software and failures in the processing of transactions
Defects in BCE Emergis owned or licenced software products and delays in
delivery, as well as failures or mistakes in its processing of electronic
transactions, could materially harm its business, including its customer
relationships and operating results.

Making acquisitions
BCE Emergis growth strategy includes making strategic internally funded
acquisitions. There could be difficulties with integrating the operations of
recently acquired companies with its existing operations. There is no assurance
that it will find suitable companies to acquire or that it will have enough
resources to complete any acquisition.

Reliance on strategic relationships
BCE Emergis relies on strategic relationships to increase its client base,
including its relationships with Bell Canada, VISA and Freddie Mac. If these
relationships fail, its business and operating results could be materially and
negatively affected.

Dependence on contracting medical service providers
The growth of BCE Emergis eHealth business unit depends on its ability to:



| |  | retain contracts with existing providers           
|- |  | ---------------------------------------------------
| 
| |  | attract new providers                              
| 
| |  | retain or improve the discounts given by providers.

In addition, the results of BCE Emergis could be adversely affected if:



| |  | it loses a significant number of contracts with providers that have a large number
of customers and is unable to replace them with contracts with other providers
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | contracts with its providers are renegotiated with reduced discounts.                                                                                            

Exposure to professional liability
BCE Emergis uses medical treatment guidelines in its utilization review and
case management services. That means it could be subject to claims relating to:



| |  | adverse medical consequences because services were denied
|- |  | ---------------------------------------------------------
| 
| |  | the cost of services that were denied                    
| 
| |  | errors or omissions of healthcare professionals.         

These claims could have a material and negative effect on the business and
operating results of BCE Emergis.

Protection of intellectual property
BCE Emergis depends on its ability to develop and maintain the proprietary
aspects of its technology. It may not be able to enforce its rights or prevent
other parties from developing similar technology, duplicating its intellectual
property or designing around its intellectual property.

Integrity of cryptography technology
BCE Emergis security solutions depend on key public cryptography technology.
Any major advance in ways to attack cryptographic systems could make some or
all of its Internet security solutions obsolete or unmarketable. This could
reduce revenues from its security solutions and could materially hurt its
business and operating results.

BCE VENTURES

Telesat
On February 20, 2003, Telesats Nimiq 2 satellite experienced a malfunction
affecting available power on the satellite. Telesat is working with the Nimiq 2
satellite manufacturer, Lockheed Martin, to understand the cause of the anomaly
and determine the next steps to be taken.

In August 2001, Boeing Satellite Systems, the manufacturer of the Anik F1
satellite, advised Telesat of a gradual decline in available power on the
satellite. It recently indicated that power levels on the Anik F1 satellite
will continue to degrade at the rates observed to date. Telesat believes that
this will result in some core services on the satellite being affected in
mid-2005.

Telesat has a satellite under construction, Anik F1R, which will
replace Anik F1 in a timeframe that will ensure continuity of service for its
customers. Telesat has insurance in place to cover the power loss on Anik F1,
and in December 2002 it filed a claim with its insurers. Although Telesat
believes that the claim will be approved, there is no assurance that it will
be. If the claim is approved, there is no assurance of how much Telesat will
receive in the settlement or when it will receive it.

Bell Canada Enterprises  49  2002 Annual Report



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##### 



Managements Discussion and Analysis


Telesat also has another satellite under construction, Anik F2. There is a
risk that this or other satellites built in the future may not be launched
successfully. Telesat already has part of the insurance coverage for Anik F2,
but there is no assurance that it will be able to get launch coverage for the
full value of the satellite at a favorable rate.

Once Telesats satellites are
in orbit, there is a risk that a failure could prevent them from completing
their commercial mission. Telesat has put a number of measures in place to
protect itself against this risk. These include engineering satellites with
on-board redundancies by including spare equipment on the satellite and buying
in-orbit insurance. There is no assurance that Telesat will be able to renew
its in-orbit insurance coverage in sufficient amount at favorable terms.

OUR ACCOUNTING POLICIES

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

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

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

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

KEY ESTIMATES AND ASSUMPTIONS

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

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

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

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

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

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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



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

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

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

Bell Canada Enterprises  50  2002 Annual Report



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##### 



Managements Discussion and Analysis


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

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

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

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

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

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

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

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

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

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

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

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

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

CHANGES TO ACCOUNTING STANDARDS

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

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



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

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

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

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

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



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

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

Under the transitional provisions, we charged an impairment of $8,180
million to opening retained earnings as of January 1, 2002. This related to
impaired goodwill of reporting units in Teleglobe ($7,516 million), Bell
Globemedia ($545 million) and BCE Emergis ($119 million).

Bell Canada Enterprises  51  2002 Annual Report



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##### 



Managements Discussion and Analysis


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

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



| |  | a decrease of $288 million in other long-term assets 
|- |  | -----------------------------------------------------
| 
| |  | an increase of $27 million in future income taxes    
| 
| |  | a decrease of $70 million in non-controlling interest
| 
| |  | a decrease of $191 million in retained earnings.     

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

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



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

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

Awards that are settled in stock are recorded as equity. Awards that are
required to be, or are usually, settled in cash are recorded as liabilities.

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

In December 2002, we announced that effective January 1, 2003, we will
account for employee stock options by measuring the compensation cost for
options granted on or after January 1, 2002 under the fair value-based method
of accounting using a Black-Scholes option pricing model. As a result of
applying this new accounting policy, we expect to record additional operating
expenses of approximately $40 million to $55 million in 2003, which represent
an impact of approximately $0.04 to $0.05 on net earnings per share.

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

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

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

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

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

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

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

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

Consolidation of special purpose entities
In August 2002, the CICA issued a draft accounting guideline titled
Consolidation of special purpose entities.The final guideline is expected to
be consistent, in all material respects, with the recently issued U.S. standard
(see Note 23 to the consolidated financial statements), although the
implementation date has not yet been determined. We are currently evaluating
the impact of this draft guideline on our financial statements.

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

Bell Canada Enterprises  52  2002 Annual Report



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##### 



Managements Discussion and Analysis


SUPPLEMENTARY FINANCIAL INFORMATION

ANNUAL FINANCIAL INFORMATION

The table below presents selected consolidated financial data for each of the
years between 1997 and 2002.

|                                                |                       |      |        |      |  |      |        |      |  |      |        |      |  |  |        |      |  |  |        |      |  |  |        |       |  
|----------------------------------------------- | --------------------- | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  |  | ------ | ---- |  |  | ------ | ---- |  |  | ------ | ----- | -
|For
the year ended December 31                  |                       | 2002 |        | 2001 |  | 2000 |        | 1999 |  | 1998 |        | 1997
|                                                |                       |      |        |      |  |      |        |      |  |      |        |     
|Statements of operations data ($ millions)      |                       |      |        |      |  |      |        |      |  |      |        |      |  |  |        |      |  |  |        |      |  |  |        |      
|Operating revenues                              |                       |      | 19,768 |      |  |      | 19,340 |      |  |      | 16,668 |      |  |  | 13,407 |      |  |  | 12,182 |      |  |  | 12,353 |      
|Earnings from continuing operations             |                       |      | 1,898  |      |  |      | 3,571  |      |  |      | 973    |      |  |  | 5,479  |      |  |  | 1,421  |      |  |  | 812    |      
|Discontinued operations/Extraordinary item      |                       |      | 577    |      |  |      | (3,057 | )    |  |      | 3,812  |      |  |  | (83    | )    |  |  | 3,153  |      |  |  | (2,365 | )    
|Net earnings (loss)                             |                       |      | 2,475  |      |  |      | 514    |      |  |      | 4,785  |      |  |  | 5,396  |      |  |  | 4,574  |      |  |  | (1,553 | )    
|Net earnings (loss) applicable to common shares |                       |      | 2,416  |      |  |      | 450    |      |  |      | 4,706  |      |  |  | 5,303  |      |  |  | 4,481  |      |  |  | (1,627 | )    
|                                                |                       |      |        |      |  |      |        |      |  |      |        |      |  |  |        |      |  |  |        |      |  |  |        |      
|Balance sheets data ($ millions)                |                       |      |        |      |  |      |        |      |  |      |        |      |  |  |        |      |  |  |        |      |  |  |        |      
|Total assets                                    |                       |      | 39,563 |      |  |      | 54,074 |      |  |      | 51,147 |      |  |  | 36,571 |      |  |  | 31,997 |      |  |  | 40,157 |      
|Long-term debt (including current portion)      |                       |      | 15,091 |      |  |      | 16,537 |      |  |      | 14,615 |      |  |  | 9,862  |      |  |  | 10,349 |      |  |  | 12,784 |      
|Preferred shares                                |                       |      | 1,510  |      |  |      | 1,300  |      |  |      | 1,300  |      |  |  | 1,700  |      |  |  | 1,700  |      |  |  | 1,700  |      
|Common shareholders equity                     |                       |      | 11,361 |      |  |      | 15,499 |      |  |      | 15,979 |      |  |  | 16,086 |      |  |  | 11,902 |      |  |  | 8,090  |      
|Capital expenditures                            |                       |      | (3,771 | )    |  |      | (4,999 | )    |  |      | (3,652 | )    |  |  | (2,862 | )    |  |  | (3,477 | )    |  |  | (3,259 | )    
|                                                |                       |      |        |      |  |      |        |      |  |      |        |      |  |  |        |      |  |  |        |      |  |  |        |      
|Common share data(a)                            |                       |      |        |      |  |      |        |      |  |      |        |      |  |  |        |      |  |  |        |      |  |  |        |      
|Earnings (loss) per common share                |                       |      |        |      |  |      |        |      |  |      |        |      |  |  |        |      |  |  |        |      |  |  |        |      
|                                                | Continuing operations |      |        | 2.15 |  |      |        | 4.34 |  |      |        | 1.33 |  |  |        | 8.38 |  |  |        | 2.08 |  |  |        | 1.16  |  
|                                                | Net earnings (loss)   |      |        | 2.74 |  |      |        | 0.56 |  |      |        | 7.32 |  |  |        | 8.25 |  |  |        | 7.03 |  |  |        | (2.56 | )
|Dividends declared per common share             |                       |      | 1.20   |      |  |      | 1.20   |      |  |      | 1.24   |      |  |  | 1.36   |      |  |  | 1.36   |      |  |  | 1.36   |      
|                                                |                       |      |        |      |  |      |        |      |  |      |        |      |  |  |        |      |  |  |        |      |  |  |        |      
|Other data                                      |                       |      |        |      |  |      |        |      |  |      |        |      |  |  |        |      |  |  |        |      |  |  |        |      
|Number of employees (thousands) (b)             |                       |      | 66     |      |  |      | 75     |      |  |      | 75     |      |  |  | 55     |      |  |  | 53     |      |  |  | 122    |      



|(a) |  | Adjusted to reflect the BCE Inc. two-for-one stock split effective May 14, 1997.
|--- |  | --------------------------------------------------------------------------------
|   
|(b) |  | Unaudited.                                                                      

QUARTERLY FINANCIAL INFORMATION

The table below presents selected consolidated financial data for each quarter
of 2002 and 2001. This quarterly information has been prepared on the same
basis as the annual consolidated financial statements, but is unaudited.

|                                                       |                                 |  |             |      |             |  |             |      |             |  |       |      |  |  |       |      | 
|------------------------------------------------------ | ------------------------------- |  | ----------- | ---- | ----------- |  | ----------- | ---- | ----------- |  | ----- | ---- |  |  | ----- | ---- | 
|                                                       |                                 |  | 2002       
|                                                       |                                 |  |            
|                                                       |                                 |  | 4th quarter |      | 3rd quarter |  | 2nd quarter |      | 1st quarter
|                                                       |                                 |  |             |      |             |  |             |      |            
|Operating revenues                                     |                                 |  | 5,172       |      |             |  | 4,822       |      |             |  | 4,940 |      |  |  | 4,834 |     
|Earnings (loss) from continuing operations             |                                 |  | 835         |      |             |  | 384         |      |             |  | 320   |      |  |  | 359   |     
|Discontinued operations                                |                                 |  | 917         |      |             |  |            |      |             |  | (295  | )    |  |  | (45   | )   
|Net earnings                                           |                                 |  | 1,752       |      |             |  | 384         |      |             |  | 25    |      |  |  | 314   |     
|Net earnings applicable to common shares               |                                 |  | 1,736       |      |             |  | 368         |      |             |  | 11    |      |  |  | 301   |     
|Net earnings per common share                          |                                 |  |             |      |             |  |             |      |             |  |       |      |  |  |       |     
|                                                       | Continuing operations  basic   |  |             | 0.92 |             |  |             | 0.43 |             |  |       | 0.38 |  |  |       | 0.43 | 
|                                                       | Continuing operations  diluted |  |             | 0.91 |             |  |             | 0.42 |             |  |       | 0.38 |  |  |       | 0.42 | 
|                                                       | Net earnings  basic            |  |             | 1.92 |             |  |             | 0.43 |             |  |       | 0.01 |  |  |       | 0.37 | 
|                                                       | Net earnings  diluted          |  |             | 1.89 |             |  |             | 0.42 |             |  |       | 0.01 |  |  |       | 0.37 | 
|Average number of common shares outstanding (millions) |                                 |  | 909.1       |      |             |  | 864.1       |      |             |  | 808.7 |      |  |  | 808.6 |     

|                                                       |                                 |  |             |       |             |  |             |       |             |  |       |      |  |  |        |      | 
|------------------------------------------------------ | ------------------------------- |  | ----------- | ----- | ----------- |  | ----------- | ----- | ----------- |  | ----- | ---- |  |  | ------ | ---- | 
|                                                       |                                 |  | 2001       
|                                                       |                                 |  |            
|                                                       |                                 |  | 4th quarter |       | 3rd quarter |  | 2nd quarter |       | 1st quarter
|                                                       |                                 |  |             |       |             |  |             |       |            
|Operating revenues                                     |                                 |  | 5,113       |       |             |  | 4,818       |       |             |  | 4,767 |      |  |  | 4,642  |     
|Earnings (loss) from continuing operations             |                                 |  | (90         | )     |             |  | 337         |       |             |  | 275   |      |  |  | 3,049  |     
|Discontinued operations                                |                                 |  | (195        | )     |             |  | (465        | )     |             |  | (253  | )    |  |  | (2,144 | )   
|Net earnings (loss)                                    |                                 |  | (285        | )     |             |  | (128        | )     |             |  | 22    |      |  |  | 905    |     
|Net earnings (loss) applicable to common shares        |                                 |  | (299        | )     |             |  | (144        | )     |             |  | 6     |      |  |  | 887    |     
|Net earnings (loss) per common share                   |                                 |  |             |       |             |  |             |       |             |  |       |      |  |  |        |     
|                                                       | Continuing operations  basic   |  |             | (0.13 | )           |  |             | 0.40  |             |  |       | 0.32 |  |  |        | 3.75 | 
|                                                       | Continuing operations  diluted |  |             | (0.13 | )           |  |             | 0.39  |             |  |       | 0.32 |  |  |        | 3.71 | 
|                                                       | Net earnings (loss)  basic     |  |             | (0.37 | )           |  |             | (0.18 | )           |  |       | 0.01 |  |  |        | 1.10 | 
|                                                       | Net earnings (loss)  diluted   |  |             | (0.37 | )           |  |             | (0.18 | )           |  |       | 0.01 |  |  |        | 1.08 | 
|Average number of common shares outstanding (millions) |                                 |  | 808.5       |       |             |  | 807.9       |       |             |  | 807.4 |      |  |  | 808.1  |     

Bell Canada Enterprises  53  2002 Annual Report



---



##### 



Consolidated Financial Statements


This section of our annual report includes our audited financial statements and
detailed notes with explanations and additional information.

The financial statements present a recent financial history of our
financial condition, results of operations and cash flows.

The notes are an important part of understanding our performance. 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
financial results that are not shown in the financial statements.

FINANCIAL STATEMENTS AT A GLANCE

|                                           |  |  |    | 
|------------------------------------------ |  |  | -- | 
|Managements report                        |  |  | 54 | 
|Auditors report                           |  |  | 54 | 
|Statements of operations                   |  |  | 55 | 
|Statements of retained earnings (deficit)  |  |  | 55 | 
|Balance sheets                             |  |  | 56 | 
|Statements of cash flows                   |  |  | 57 | 
|Notes to consolidated financial statements |  |  | 58 | 

Except in the auditors report, we, us, ourand BCEmean BCE Inc., its
subsidiaries, joint ventures and investments in significantly influenced
companies.

Because BCE consists of many businesses, we present the financial
information for all of our holdings as one consolidated company.



Managements Report


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

These financial statements form the basis 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 and have been approved
by the Board of Directors. Deloitte & Touche LLP, Chartered Accountants, the
shareholders auditors, have audited the financial statements.

Management has prepared the financial statements in accordance with
Canadian generally accepted accounting principles. 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.

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

The Board of Directors has appointed an Audit Committee, made up
of outside, unrelated directors. The Audit Committees responsibilities include
reviewing the financial statements and other information in this 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 84. The
internal auditors and the shareholders auditors have free and independent
access to the Audit Committee.

|                                      |  |                         |  |                                               
|------------------------------------- |  | ----------------------- |  | ----------------------------------------------
|-s- MICHAEL J. SABIA                  |  | -s- SIIM A. VAMASELJA   |  | -s- STEPHEN P. SKINNER                        
|Michael J. Sabia                      |  | Siim A. Vanaselja       |  | Stephen P. Skinner                            
|President and Chief
Executive Officer |  | Chief Financial Officer |  | Senior
Vice-President and
Corporate
Controller

February 26, 2003 
Auditors Report

To the shareholders of BCE Inc.:

We have audited the consolidated balance sheets of BCE Inc. as at December 31,
2002 and 2001, and the consolidated statements of operations, retained earnings
(deficit) and cash flows for each of the years in the three-year period ended
December 31, 2002. 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 consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation.

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

-s- DELOITTE & TOUCHE LLP

Deloitte & Touche LLP
Chartered Accountants

Montréal, Canada
February 26, 2003

Bell Canada Enterprises  54  2002 Annual Report



---



##### 



Consolidated Statements of Operations


|                                                                                                                                                                                               |         |      |        |      |  |      |        |      |  |  |        |      | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | ---- | ------ | ---- |  | ---- | ------ | ---- |  |  | ------ | ---- | 
|For the
year ended December 31 ($ millions, except share amounts)                                                                                                                              |         | 2002 |        | 2001 |  | 2000
|                                                                                                                                                                                               |         |      |        |      |  |     
|Operating revenues                                                                                                                                                                             |         |      | 19,768 |      |  |      | 19,340 |      |  |  | 16,668 |     
|                                                                                                                                                                                               |         |      |        |      |  |      |        |      |  |  |        |     
|Operating expenses                                                                                                                                                                             |         |      | 12,146 |      |  |      | 12,098 |      |  |  | 9,953  |     
|Amortization expense                                                                                                                                                                           |         |      | 3,146  |      |  |      | 3,826  |      |  |  | 3,352  |     
|Net benefit plans credit (Note 20)                                                                                                                                                             |         |      | (33    | )    |  |      | (121   | )    |  |  | (109   | )   
|Restructuring and other charges (Note 4)                                                                                                                                                       |         |      | 887    |      |  |      | 980    |      |  |  |       |     
|                                                                                                                                                                                               |         |      |        |      |  |      |        |      |  |  |        |     
|Total operating expenses                                                                                                                                                                       |         |      | 16,146 |      |  |      | 16,783 |      |  |  | 13,196 |     
|                                                                                                                                                                                               |         |      |        |      |  |      |        |      |  |  |        |     
|Operating income                                                                                                                                                                               |         |      | 3,622  |      |  |      | 2,557  |      |  |  | 3,472  |     
|Other income (Note 5)                                                                                                                                                                          |         |      | (2,468 | )    |  |      | (4,015 | )    |  |  | (97    | )   
|Impairment charge (Note 13)                                                                                                                                                                    |         |      | 770    |      |  |      |       |      |  |  |       |     
|Interest expense (Note 6)                                                                                                                                                                      |         |      | 1,161  |      |  |      | 1,056  |      |  |  | 935    |     
|                                                                                                                                                                                               |         |      |        |      |  |      |        |      |  |  |        |     
|Earnings from continuing operations before income taxes and non-controlling
interest                                                                                                           |         |      | 4,159  |      |  |      | 5,516  |      |  |  | 2,634  |     
|Income taxes (Note 7)                                                                                                                                                                          |         |      | 1,593  |      |  |      | 1,759  |      |  |  | 1,338  |     
|Non-controlling interest                                                                                                                                                                       |         |      | 668    |      |  |      | 186    |      |  |  | 323    |     
|                                                                                                                                                                                               |         |      |        |      |  |      |        |      |  |  |        |     
|Earnings from continuing operations                                                                                                                                                            |         |      | 1,898  |      |  |      | 3,571  |      |  |  | 973    |     
|Discontinued operations (Note 8)                                                                                                                                                               |         |      | 577    |      |  |      | (3,057 | )    |  |  | 3,812  |     
|                                                                                                                                                                                               |         |      |        |      |  |      |        |      |  |  |        |     
|Net earnings                                                                                                                                                                                   |         |      | 2,475  |      |  |      | 514    |      |  |  | 4,785  |     
|Dividends on preferred shares                                                                                                                                                                  |         |      | (59    | )    |  |      | (64    | )    |  |  | (79    | )   
|                                                                                                                                                                                               |         |      |        |      |  |      |        |      |  |  |        |     
|Net earnings applicable to common shares                                                                                                                                                       |         |      | 2,416  |      |  |      | 450    |      |  |  | 4,706  |     
|                                                                                                                                                                                               |         |      |        |      |  |      |        |      |  |  |        |     
|Net earnings per common share  basic(Note 9)                                                                                                                                                  |         |      |        |      |  |      |        |      |  |  |        |     
|Continuing operations                                                                                                                                                                          |         |      | 2.15   |      |  |      | 4.34   |      |  |  | 1.33   |     
|Net earnings                                                                                                                                                                                   |         |      | 2.74   |      |  |      | 0.56   |      |  |  | 7.32   |     
|Net earnings per common share  diluted(Note 9)                                                                                                                                                |         |      |        |      |  |      |        |      |  |  |        |     
|Continuing operations                                                                                                                                                                          |         |      | 2.13   |      |  |      | 4.29   |      |  |  | 1.29   |     
|Net earnings                                                                                                                                                                                   |         |      | 2.71   |      |  |      | 0.55   |      |  |  | 6.93   |     
|Dividends per common share                                                                                                                                                                     |         |      | 1.20   |      |  |      | 1.20   |      |  |  | 1.24   |     
|Average number of common shares outstanding (millions)                                                                                                                                         |         |      | 847.9  |      |  |      | 807.9  |      |  |  | 670.0  |     
|                                                                                                                                                                                               |         |      |        |      |  |      |        |      |  |  |        |     
|The following is a reconciliation of net earnings to reflect the comparative
impact of no longer amortizing goodwill and indefinite-life intangible assets
effective January 1, 2002 (Note 1): |         |      |        |      |  |      |        |      |  |  |        |     
|Adjusted net earnings                                                                                                                                                                          |         |      |        |      |  |      |        |      |  |  |        |     
|Net earnings, as reported                                                                                                                                                                      |         |      | 2,475  |      |  |      | 514    |      |  |  | 4,785  |     
|Amortization expense on goodwill and indefinite-life intangible assets                                                                                                                         |         |      |       |      |  |      | 971    |      |  |  | 485    |     
|                                                                                                                                                                                               |         |      |        |      |  |      |        |      |  |  |        |     
|Net earnings, adjusted                                                                                                                                                                         |         |      | 2,475  |      |  |      | 1,485  |      |  |  | 5,270  |     
|                                                                                                                                                                                               |         |      |        |      |  |      |        |      |  |  |        |     
|Adjusted net earnings per common share:                                                                                                                                                        |         |      |        |      |  |      |        |      |  |  |        |     
|                                                                                                                                                                                               | Basic   |      |        | 2.74 |  |      |        | 1.76 |  |  |        | 8.04 | 
|                                                                                                                                                                                               | Diluted |      |        | 2.71 |  |      |        | 1.74 |  |  |        | 7.65 | 
|                                                                                                                                                                                               |         |      |        |      |  |      |        |      |  |  |        |     



Consolidated Statements of Retained Earnings (Deficit)


|                                                                                           |                                                                      |      |        |        |   |      |        |      |   |  |         |         |  
|------------------------------------------------------------------------------------------ | -------------------------------------------------------------------- | ---- | ------ | ------ | - | ---- | ------ | ---- | - |  | ------- | ------- | -
|For the
year ended December 31 ($ millions)                                                |                                                                      | 2002 |        | 2001   |   | 2000
|                                                                                           |                                                                      |      |        |        |   |     
|Balance at beginning of year, as previously reported                                       |                                                                      |      | 712    |        |   |      | 1,339  |      |   |  | 7,788   |        
|Adjustment for change in accounting policy (Note 1)                                        |                                                                      |      | (8,180 | )      |   |      |       |      |   |  |        |        
|                                                                                           |                                                                      |      |        |        |   |      |        |      |   |  |         |        
|Balance at beginning of year, as restated                                                  |                                                                      |      | (7,468 | )      |   |      | 1,339  |      |   |  | 7,788   |        
|Net earnings                                                                               |                                                                      |      | 2,475  |        |   |      | 514    |      |   |  | 4,785   |        
|Dividends  Preferred shares                                                               |                                                                      |      | (59    | )      |   |      | (64    | )    |   |  | (79     | )      
|                                                                                           |  Common shares                                                      |      |        | (1,031 | ) |      |        | (969 | ) |  |         | (849    | )
|                                                                                           |  Distribution of Nortel Networks Corporation common shares (Note 8) |      |        |       |   |      |        |     |   |  |         | (10,114 | )
|                                                                                           |                                                                      |      |        |        |   |      |        |      |   |  |         |        
|                                                                                           |                                                                      |      | (1,090 | )      |   |      | (1,033 | )    |   |  | (11,042 | )      
|Costs relating to the issuance of common and preferred shares, net of $22
million of taxes |                                                                      |      | (62    | )      |   |      |       |      |   |  |        |        
|Premium on redemption of common and preferred shares (Note 18)                             |                                                                      |      | (6     | )      |   |      | (108   | )    |   |  | (216    | )      
|Other                                                                                      |                                                                      |      | 2      |        |   |      |       |      |   |  | 24      |        
|                                                                                           |                                                                      |      |        |        |   |      |        |      |   |  |         |        
|Balance at end of year                                                                     |                                                                      |      | (6,149 | )      |   |      | 712    |      |   |  | 1,339   |        
|                                                                                           |                                                                      |      |        |        |   |      |        |      |   |  |         |        

Please read the notes starting on page 58. They are an important part of these consolidated financial statements.

Bell Canada Enterprises  55  2002 Annual Report



---



##### 





Consolidated Balance Sheets


|                                                                                                                              |  |      |        |      |  |  |        |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|At December 31 ($
millions)                                                                                                   |  | 2002 |        | 2001
|                                                                                                                              |  |      |        |     
|ASSETS                                                                                                                        |  |      |        |      |  |  |        |  
|Current assets                                                                                                                |  |      |        |      |  |  |        |  
|Cash and cash equivalents                                                                                                     |  |      | 306    |      |  |  | 569    |  
|Accounts receivable (net of allowance for doubtful accounts of
$207 million and $333 million for 2002 and 2001, respectively) |  |      | 2,343  |      |  |  | 4,118  |  
|Other current assets                                                                                                          |  |      | 916    |      |  |  | 1,213  |  
|                                                                                                                              |  |      |        |      |  |  |        |  
|Total current assets                                                                                                          |  |      | 3,565  |      |  |  | 5,900  |  
|Capital assets(Note 10)                                                                                                       |  |      | 20,640 |      |  |  | 25,962 |  
|Other long-term assets(Note 11)                                                                                               |  |      | 4,355  |      |  |  | 5,381  |  
|Indefinite-life intangible assets(Note 12)                                                                                    |  |      | 900    |      |  |  | 884    |  
|Goodwill(Note 13)                                                                                                             |  |      | 10,103 |      |  |  | 15,947 |  
|                                                                                                                              |  |      |        |      |  |  |        |  
|Total assets                                                                                                                  |  |      | 39,563 |      |  |  | 54,074 |  
|                                                                                                                              |  |      |        |      |  |  |        |  
|LIABILITIES                                                                                                                   |  |      |        |      |  |  |        |  
|Current liabilities                                                                                                           |  |      |        |      |  |  |        |  
|Accounts payable and accrued liabilities                                                                                      |  |      | 3,834  |      |  |  | 6,473  |  
|Debt due within one year (Note 14)                                                                                            |  |      | 2,026  |      |  |  | 5,263  |  
|                                                                                                                              |  |      |        |      |  |  |        |  
|Total current liabilities                                                                                                     |  |      | 5,860  |      |  |  | 11,736 |  
|Long-term debt(Note 15)                                                                                                       |  |      | 13,395 |      |  |  | 14,861 |  
|Other long-term liabilities(Note 16)                                                                                          |  |      | 3,841  |      |  |  | 5,053  |  
|                                                                                                                              |  |      |        |      |  |  |        |  
|Total liabilities                                                                                                             |  |      | 23,096 |      |  |  | 31,650 |  
|                                                                                                                              |  |      |        |      |  |  |        |  
|Non-controlling interest                                                                                                      |  |      | 3,596  |      |  |  | 5,625  |  
|                                                                                                                              |  |      |        |      |  |  |        |  
|Commitments and contingencies(Note 21)                                                                                        |  |      |        |      |  |  |        |  
|SHAREHOLDERS EQUITY                                                                                                          |  |      |        |      |  |  |        |  
|Preferred shares(Note 18)                                                                                                     |  |      | 1,510  |      |  |  | 1,300  |  
|                                                                                                                              |  |      |        |      |  |  |        |  
|Common shareholders equity                                                                                                  
|Common shares (Note 18)                                                                                                       |  |      | 16,520 |      |  |  | 13,827 |  
|Contributed surplus                                                                                                           |  |      | 980    |      |  |  | 980    |  
|Retained earnings (deficit)                                                                                                   |  |      | (6,149 | )    |  |  | 712    |  
|Currency translation adjustment                                                                                               |  |      | 10     |      |  |  | (20    | )
|                                                                                                                              |  |      |        |      |  |  |        |  
|Total common shareholders equity                                                                                             |  |      | 11,361 |      |  |  | 15,499 |  
|                                                                                                                              |  |      |        |      |  |  |        |  
|Total shareholders equity                                                                                                    |  |      | 12,871 |      |  |  | 16,799 |  
|                                                                                                                              |  |      |        |      |  |  |        |  
|Total liabilities and shareholders equity                                                                                    |  |      | 39,563 |      |  |  | 54,074 |  
|                                                                                                                              |  |      |        |      |  |  |        |  

|                                     |  |         
|------------------------------------ |  | --------
|On behalf of the Board of Directors: |  |         
|                                     |  |         
|-s-                                  |  | -s-     
|Director                             |  | Director

Please read the notes starting on page 58. They are an important part of these consolidated financial statements.

Bell Canada Enterprises  56  2002 Annual Report



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##### 





Consolidated Statements of Cash Flows


|                                                                                                      |                                     |      |        |        |   |      |        |        |   |  |        |        |  
|----------------------------------------------------------------------------------------------------- | ----------------------------------- | ---- | ------ | ------ | - | ---- | ------ | ------ | - |  | ------ | ------ | -
|For the
year ended December 31 ($ millions)                                                           |                                     | 2002 |        | 2001   |   | 2000
|                                                                                                      |                                     |      |        |        |   |     
|Cash flows from operating activities                                                                  |                                     |      |        |        |   |      |        |        |   |  |        |       
|Earnings from continuing operations                                                                   |                                     |      | 1,898  |        |   |      | 3,571  |        |   |  | 973    |       
|Adjustments to reconcile earnings from continuing operations to
cash flows from operating activities: |                                     |      |        |        |   |      |        |        |   |  |        |       
|                                                                                                      | Amortization expense                |      |        | 3,146  |   |      |        | 3,826  |   |  |        | 3,352  |  
|                                                                                                      | Net benefit plans credit            |      |        | (33    | ) |      |        | (121   | ) |  |        | (109   | )
|                                                                                                      | Restructuring and other charges     |      |        | 805    |   |      |        | 915    |   |  |        |       |  
|                                                                                                      | Impairment charge                   |      |        | 770    |   |      |        |       |   |  |        |       |  
|                                                                                                      | Net gains on investments            |      |        | (2,435 | ) |      |        | (4,088 | ) |  |        | (45    | )
|                                                                                                      | Future income taxes                 |      |        | 602    |   |      |        | 682    |   |  |        | (130   | )
|                                                                                                      | Non-controlling interest            |      |        | 668    |   |      |        | 186    |   |  |        | 323    |  
|                                                                                                      | Other items                         |      |        | (298   | ) |      |        | (894   | ) |  |        | (545   | )
|                                                                                                      | Changes in non-cash working capital |      |        | (592   | ) |      |        | 157    |   |  |        | (1,613 | )
|                                                                                                      |                                     |      |        |        |   |      |        |        |   |  |        |       
|                                                                                                      |                                     |      | 4,531  |        |   |      | 4,234  |        |   |  | 2,206  |       
|                                                                                                      |                                     |      |        |        |   |      |        |        |   |  |        |       
|Cash flows from investing activities                                                                  |                                     |      |        |        |   |      |        |        |   |  |        |       
|Capital expenditures                                                                                  |                                     |      | (3,771 | )      |   |      | (4,999 | )      |   |  | (3,652 | )     
|Investments                                                                                           |                                     |      | (6,604 | )      |   |      | (535   | )      |   |  | (4,729 | )     
|Divestitures                                                                                          |                                     |      | 3,230  |        |   |      | 4,749  |        |   |  | 654    |       
|Other items                                                                                           |                                     |      | 10     |        |   |      | (122   | )      |   |  | (120   | )     
|                                                                                                      |                                     |      |        |        |   |      |        |        |   |  |        |       
|                                                                                                      |                                     |      | (7,135 | )      |   |      | (907   | )      |   |  | (7,847 | )     
|                                                                                                      |                                     |      |        |        |   |      |        |        |   |  |        |       
|Cash flows from financing activities                                                                  |                                     |      |        |        |   |      |        |        |   |  |        |       
|Increase (decrease) in notes payable and bank advances                                                |                                     |      | (210   | )      |   |      | (2,744 | )      |   |  | 3,730  |       
|Issue of long-term debt                                                                               |                                     |      | 4,908  |        |   |      | 2,443  |        |   |  | 2,447  |       
|Repayment of long-term debt                                                                           |                                     |      | (2,893 | )      |   |      | (1,221 | )      |   |  | (1,431 | )     
|Issue of common shares                                                                                |                                     |      | 2,693  |        |   |      | 71     |        |   |  | 36     |       
|Costs relating to the issuance of common and preferred shares                                         |                                     |      | (78    | )      |   |      |       |        |   |  |       |       
|Purchase of common shares for cancellation                                                            |                                     |      |       |        |   |      | (191   | )      |   |  | (384   | )     
|Issue of preferred shares                                                                             |                                     |      | 510    |        |   |      |       |        |   |  |       |       
|Redemption of preferred shares                                                                        |                                     |      | (306   | )      |   |      |       |        |   |  |       |       
|Issue of equity securities and convertible debentures
by subsidiaries to non-controlling interest     |                                     |      | 206    |        |   |      | 1,459  |        |   |  | 540    |       
|Redemption of preferred shares by subsidiaries                                                        |                                     |      |       |        |   |      | (347   | )      |   |  | (295   | )     
|Dividends paid on common and preferred shares                                                         |                                     |      | (1,042 | )      |   |      | (1,033 | )      |   |  | (928   | )     
|Dividends paid by subsidiaries to non-controlling interest                                            |                                     |      | (468   | )      |   |      | (357   | )      |   |  | (240   | )     
|Other items                                                                                           |                                     |      | (46    | )      |   |      | 72     |        |   |  | 110    |       
|                                                                                                      |                                     |      |        |        |   |      |        |        |   |  |        |       
|                                                                                                      |                                     |      | 3,274  |        |   |      | (1,848 | )      |   |  | 3,585  |       
|                                                                                                      |                                     |      |        |        |   |      |        |        |   |  |        |       
|Effect of exchange rate changes on cash and cash equivalents                                          |                                     |      | 3      |        |   |      | (2     | )      |   |  | (19    | )     
|                                                                                                      |                                     |      |        |        |   |      |        |        |   |  |        |       
|Cash provided by (used in) continuing operations                                                      |                                     |      | 673    |        |   |      | 1,477  |        |   |  | (2,075 | )     
|Cash used in discontinued operations                                                                  |                                     |      | (936   | )      |   |      | (1,168 | )      |   |  | (60    | )     
|                                                                                                      |                                     |      |        |        |   |      |        |        |   |  |        |       
|Net increase (decrease) in cash and cash equivalents                                                  |                                     |      | (263   | )      |   |      | 309    |        |   |  | (2,135 | )     
|Cash and cash equivalents at beginning of year                                                        |                                     |      | 569    |        |   |      | 260    |        |   |  | 2,395  |       
|                                                                                                      |                                     |      |        |        |   |      |        |        |   |  |        |       
|Cash and cash equivalents at end of year                                                              |                                     |      | 306    |        |   |      | 569    |        |   |  | 260    |       
|                                                                                                      |                                     |      |        |        |   |      |        |        |   |  |        |       

Please read the notes starting on page 58. They are an important part of these consolidated financial statements.

Bell Canada Enterprises  57  2002 Annual Report



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##### 





Notes to Consolidated Financial Statements  All amounts are in millions of Canadian dollars, except where noted.


Note 1 SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING PRINCIPLES

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

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

Please see Note 23, 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 relate to our financial statements.

PRESENTATION OF FINANCIAL INFORMATION

We have restated all financial information for 2002 and previous years to
reflect:



| |  | the accounting treatment of BCEs investments in Teleglobe Inc. (Teleglobe)
and Bell Canada International Inc. (BCI) as discontinued operations        
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | our adoption of the revised standards in section 1650 of the Canadian
Institute of Chartered Accountants (CICA) Handbook, Foreign currency
translation.

Effective the second quarter of 2002, we stopped consolidating the
financial results of Teleglobe and BCI. Since then, these investments were held
at cost.

Please see Note 8, Discontinued operations,for more information about
Teleglobe and BCI. Please see Note 1, Significant accounting policies  Recent
changes to accounting standards,for more information about the accounting
treatment of foreign currency translation.

ACCOUNTING FOR INVESTMENTS

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



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

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

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

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

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

USING ESTIMATES

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



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

Actual results could be different from these estimates.

RECOGNIZING REVENUE

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



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

In particular, we recognize:



| |  | fees for long distance and wireless services, and other fees, such as network
access fees, licence fees, 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                                                                                                                                          
| 
| |  | revenues from the sale of equipment when the equipment is delivered to
customers and accepted.                                                                                                                         

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

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

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

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

CASH AND CASH EQUIVALENTS

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

SALES OF ACCOUNTS RECEIVABLE

Effective July 1, 2001, we adopted CICA Accounting Guideline 12, Transfers of
Receivables.This guideline covers the requirements for transferring and
servicing receivables. Please see Note 17, Financial instruments,for more
information.

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

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

Bell Canada Enterprises  58  2002 Annual Report



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##### 





Notes to Consolidated Financial Statements


Note 1 SIGNIFICANT ACCOUNTING POLICIEScontinued

We determine fair value based on the present value of future expected cash
flows. Cash flows are projected using managements best estimates of key
assumptions, such as discount rates, weighted-average life of accounts
receivable and credit loss ratios. The accounts receivable are transferred on a
fully serviced basis. As a result, we:



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

CAPITAL ASSETS

We carry capital assets at cost less accumulated amortization. In general, we
use the straight-line method to amortize capital assets. We base the rates on
the estimated useful life of the asset.

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

Most of our capital assets are amortized using composite group
depreciation methodology. When we retire a portion of these assets in the
ordinary course of business, we charge their original cost to accumulated
amortization. Each year, we review the estimate of the useful life of the
assets.

Software is our only significant finite-life intangible asset.

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

SUBSCRIBER ACQUISITION COSTS

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



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

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

ISSUING DEBT

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

INDEFINITE-LIFE INTANGIBLE ASSETS

Effective January 1, 2002, we no longer amortize indefinite-life intangible
assets.

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

GOODWILL

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

We assess impairment of goodwill in two steps:



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

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

TRANSLATION OF FOREIGN CURRENCIES

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

Self-sustaining foreign operations
For self-sustaining foreign operations, we use:



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

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

Bell Canada Enterprises  59  2002 Annual Report



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##### 





Notes to Consolidated Financial Statements


Note 1 SIGNIFICANT ACCOUNTING POLICIEScontinued

Integrated foreign operations
For integrated foreign operations, we use:



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

Translation exchange gains and losses are reflected in earnings.

Domestic transactions and balances in foreign currencies
For domestic transactions made in foreign currencies, we use:



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

Translation exchange gains and losses are reflected in earnings.

DERIVATIVE FINANCIAL INSTRUMENTS

We use various derivative financial instruments to hedge against:



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

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

We describe the derivatives we use and how we account for them below.
Please see Note 17, Financial instruments,for more information about
derivatives. Please see Note 19, Stock-based compensation plans,for more
information about SCPs.

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



| |  | specific assets and liabilities on the balance sheet, or          
|- |  | ------------------------------------------------------------------
| 
| |  | specific net investments in self-sustaining foreign operations, or
| 
| |  | specific firm commitments, or                                     
| 
| |  | forecasted transactions.                                          

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

We follow these policies when accounting for derivatives:



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

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

Interest rate swap agreements
We use interest rate swap agreements to help manage the fixed and floating
interest rate mix of:



| |  | our total debt portfolio
|- |  | ------------------------
| 
| |  | preferred shares.       

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

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

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

Forward contracts
We use forward contracts to:



| |  | hedge net investments in self-sustaining foreign operations. We defer gains
and losses on these instruments in other assets or liabilities and report them
as part of the currency translation adjustment in shareholders equity             
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | manage equity price risk exposure related to SCPs. We recognize gains and
losses on these contracts the same way we recognize the gains and losses on the
hedged item. Unrealized gains or losses are included in other assets or
liabilities.

EMPLOYEE BENEFIT PLANS

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

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



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

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



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

We use a market-related value approach to:



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

Bell Canada Enterprises  60  2002 Annual Report



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##### 





Notes to Consolidated Financial Statements


Note 1 SIGNIFICANT ACCOUNTING POLICIEScontinued

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

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

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

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



| |  | a reduction 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.

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

INCOME TAXES

We use the asset and liability method on all transactions recorded in the
consolidated financial statements. Future income taxes reflect the temporary
differences between the carrying amounts of assets and liabilities for
accounting purposes and the amounts used for tax purposes. We calculate future
income taxes using the rates and provisions in enacted and substantively
enacted tax law.

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

STOCK-BASED COMPENSATION PLANS

BCE Inc.s stock-based compensation plans primarily include employee savings
plans (ESPs) and long-term incentive programs. Before 2000, these plans
sometimes included SCPs. Please see Note 19, Stock-based compensation plans,
for more information.

We credit to share capital any amount employees pay when they exercise
their stock options or buy shares. We recognize the contributions BCE Inc.
makes under the ESPs as a compensation expense. We also recognize a
compensation expense relating to SCPs.

RECENT CHANGES TO ACCOUNTING STANDARDS

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

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



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

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

Under the transitional provisions, we charged an impairment of $8,180
million to opening retained earnings as of January 1, 2002. This related to
impaired goodwill of reporting units in Teleglobe ($7,516 million), Bell
Globemedia ($545 million) and BCE Emergis ($119 million).

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

We applied these amendments retroactively and restated prior periods.

On
January 1, 2002, this resulted in:



| |  | a decrease of $288 million in long-term assets       
|- |  | -----------------------------------------------------
| 
| |  | an increase of $27 million in future income taxes    
| 
| |  | a decrease of $70 million in non-controlling interest
| 
| |  | a decrease of $191 million in retained earnings.     

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

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



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

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

Awards that are settled in stock are recorded as equity. Awards that are
required to be, or are usually, settled in cash are recorded as liabilities.

Bell Canada Enterprises  61  2002 Annual Report



---



##### 





Notes to Consolidated Financial Statements


Note 1 SIGNIFICANT ACCOUNTING POLICIEScontinued

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



|(1) |  | In December 2002, we announced that effective January 1, 2003, we will
account for employee stock options by measuring the compensation cost for
options granted on or after January 1, 2002 under the fair value-based method
of accounting using a Black-Scholes option pricing model. As a result of
applying this new accounting policy, we
expect to record additional operating expenses of approximately $40 million to
$55 million in 2003, which represent an impact of approximately $0.04 to $0.05
on net earnings per share.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

FUTURE CHANGES TO ACCOUNTING STANDARDS

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

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

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

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

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

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

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

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

Consolidation of special purpose entities
In August 2002, the CICA issued a draft accounting guideline titled
Consolidation of special purpose entities.The final guideline is expected to
be consistent, in all material respects, with the recently issued U.S. guidance
(see Note 23), although the implementation date has not yet been determined. We
are currently evaluating the impact of this draft guideline on our financial
statements.

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

Note 2 SEGMENTED INFORMATION

We operate under four segments, the Bell Canada segment, Bell Globemedia, BCE
Emergis and BCE Ventures. Our segments are organized by products and services,
and reflect how we classify our operations for planning and measuring
performance.

Bell Canada Segment provides communications services to residential and
business customers. It is Canadas leading provider of wireline and wireless
voice and data communications, high-speed and wireless Internet access, DTH
satellite television services and Internet Protocol (IP)/broadband services. It
also provided print and electronic directory services until it sold this
business in November 2002. Please see Note 3, Business acquisitions and
dispositions  Sale of directories business,for more information.

Bell Canada Enterprises  62  2002 Annual Report



---



##### 





Notes to Consolidated Financial Statements


Note 2 SEGMENTED INFORMATIONcontinued

This segment represents the consolidation of Bell Canada Holdings Inc.
(BCH) with Bell Canada and its consolidated subsidiaries and other entities.
These include Bell Mobility Inc., BCE Nexxia Inc. (which carries on business
under the name Bell Nexxia), Bell ActiMedia Inc., Bell Distribution Inc.,
Certen Inc., a 53% interest in Aliant Inc. (Aliant), a 60% interest in Bell
West Inc. (Bell West) and Bell ExpressVu Limited Partnership (Bell ExpressVu).

BCE Inc. now owns 100% of BCH, which owns 100% of Bell Canada. Please see
Note 3, Business acquisitions and dispositions  Repurchase of SBCs 20%
interest in BCH,for details about BCE Inc.s repurchase of SBC Communications
Inc.s (SBC) 20% interest in BCH in 2002.

Bell Globemedia Inc. (Bell Globemedia) provides information and entertainment
services to Canadian customers, as well as access to distinctive Canadian
content.

This segment represents the consolidation of CTV Inc. (CTV), The Globe and
Mail, Bell Globemedia Interactive and other media interests. BCE Inc. owns
70.1% of Bell Globemedia. The Thomson Corporation owns 20%, and The Woodbridge
Company Limited owns 9.9%.

BCE Emergis Inc. (BCE Emergis) provides eBusiness services that automate
transactions between companies and allows them to interact and transact in
real-time. It focuses on claims processing, electronic bill presentment and
payment services for the finance services and health industries. BCE Inc. owns
approximately 65% of BCE Emergis. The remaining common shares are publicly
held.

BCE Ventures consists of our interests in Telesat Canada (Telesat), CGI Group
Inc. (CGI) and other investments.

The accounting policies of the segments are the same as those we describe
in Note 1, Significant accounting policies.Segments negotiate sales between
each other as if they were unrelated parties.

We measure the profitability of each segment based on its contribution to
consolidated net earnings.

GEOGRAPHIC INFORMATION

The table below shows financial information by geographic area. The geographic
areas are based on where the selling organization, capital assets and goodwill
are located.

|                               |  |           |        |          |  |           |        |          |  |           |        |          |  |  |        |  |  |  |        |  |  |  |        | 
|------------------------------ |  | --------- | ------ | -------- |  | --------- | ------ | -------- |  | --------- | ------ | -------- |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|For the year ended
December 31 |  | 2002      |        | 2001     |  | 2000     
|                               |  |           |        |          |  |          
|                               |  | Revenues  |        | Capital  |  | Revenues  |        | Capital  |  | Revenues  |        | Capital 
|                               |  | from      |        | assets   |  | from      |        | assets   |  | from      |        | assets  
|                               |  | external  |        | and      |  | external  |        | and      |  | external  |        | and     
|                               |  | customers |        | goodwill |  | customers |        | goodwill |  | customers |        | goodwill
|                               |  |           |        |          |  |           |        |          |  |           |        |         
|Canada                         |  |           | 18,766 |          |  |           | 29,403 |          |  |           | 18,402 |          |  |  | 29,527 |  |  |  | 16,039 |  |  |  | 25,218 | 
|United States                  |  |           | 771    |          |  |           | 964    |          |  |           | 684    |          |  |  | 6,201  |  |  |  | 493    |  |  |  | 10,169 | 
|Other foreign countries        |  |           | 231    |          |  |           | 376    |          |  |           | 254    |          |  |  | 6,181  |  |  |  | 136    |  |  |  | 3,218  | 
|                               |  |           |        |          |  |           |        |          |  |           |        |          |  |  |        |  |  |  |        |  |  |  |        | 
|Total                          |  |           | 19,768 |          |  |           | 30,743 |          |  |           | 19,340 |          |  |  | 41,909 |  |  |  | 16,668 |  |  |  | 38,605 | 
|                               |  |           |        |          |  |           |        |          |  |           |        |          |  |  |        |  |  |  |        |  |  |  |        | 

BUSINESS SEGMENTS

The table below is a summary of financial information by segment.

|                                                                      |                          |  |        |        |        |  |         |       |          |  |           |     |          |  |       |       |        |  |        |      |   |  |        |        | 
|--------------------------------------------------------------------- | ------------------------ |  | ------ | ------ | ------ |  | ------- | ----- | -------- |  | --------- | --- | -------- |  | ----- | ----- | ------ |  | ------ | ---- | - |  | ------ | ------ | 
|                                                                      |                          |  |        |        |        |  | Bell    |       |          |  |           |     |          |  |       |       | Corpo- |  | BCE   
|                                                                      |                          |  | Bell   |        | Globe- |  | BCE     |       | BCE      |  | rate and  |     | Consoli-
|                                                                      |                          |  | Canada |        | media  |  | Emergis |       | Ventures |  | other
(a) |     | dated   
|                                                                      |                          |  |        |        |        |  |         |       |          |  |           |     |         
|For the year ended December 31, 2002                                  |                          |  |        |        |        |  |         |       |          |  |           |     |          |  |       |       |        |  |        |      |   |  |        |       
|Operating revenues                                                    |                          |  |        |        |        |  |         |       |          |  |           |     |          |  |       |       |        |  |        |      |   |  |        |       
|                                                                      | External customers       |  |        | 17,318 |        |  |         | 1,246 |          |  |           | 399 |          |  |       | 796   |        |  |        | 9    |   |  |        | 19,768 | 
|                                                                      | Inter-segment            |  |        | 171    |        |  |         | 44    |          |  |           | 141 |          |  |       | 268   |        |  |        | (624 | ) |  |        |       | 
|                                                                      |                          |  |        |        |        |  |         |       |          |  |           |     |          |  |       |       |        |  |        |      |   |  |        |       
|                                                                      | Total operating revenues |  |        | 17,489 |        |  |         | 1,290 |          |  |           | 540 |          |  |       | 1,064 |        |  |        | (615 | ) |  |        | 19,768 | 
|Operating expenses                                                    |                          |  | 10,200 |        |        |  | 1,110   |       |          |  | 510       |     |          |  | 775   |       |        |  | (449   | )    |   |  | 12,146 |       
|Amortization expense                                                  |                          |  | 2,935  |        |        |  | 67      |       |          |  | 66        |     |          |  | 122   |       |        |  | (44    | )    |   |  | 3,146  |       
|Net benefit plans
(credit) expense                                    |                          |  | (38    | )      |        |  | 3       |       |          |  | 2         |     |          |  |      |       |        |  |       |      |   |  | (33    | )     
|Restructuring and
other charges                                       |                          |  | 675    |        |        |  |        |       |          |  | 119       |     |          |  |      |       |        |  | 93     |      |   |  | 887    |       
|                                                                      |                          |  |        |        |        |  |         |       |          |  |           |     |          |  |       |       |        |  |        |      |   |  |        |       
|Operating income (loss)                                               |                          |  | 3,717  |        |        |  | 110     |       |          |  | (157      | )   |          |  | 167   |       |        |  | (215   | )    |   |  | 3,622  |       
|Interest income                                                       |                          |  | 42     |        |        |  |        |       |          |  | 3         |     |          |  | 2     |       |        |  | 18     |      |   |  | 65     |       
|Interest expense                                                      |                          |  | 1,145  |        |        |  | 39      |       |          |  | 4         |     |          |  | 35    |       |        |  | (62    | )    |   |  | 1,161  |       
|Equity in net earnings
(losses) of significantly
influenced companies |                          |  | (3     | )      |        |  | 1       |       |          |  |          |     |          |  |      |       |        |  | 16     |      |   |  | 14     |       
|Goodwill impairment charge                                            |                          |  | 55     |        |        |  | 715     |       |          |  |          |     |          |  |      |       |        |  |       |      |   |  | 770    |       
|Income tax recovery
(expense)                                         |                          |  | (1,637 | )      |        |  | (34     | )     |          |  | 44        |     |          |  | (65   | )     |        |  | 99     |      |   |  | (1,593 | )     
|Earnings (loss) from
continuing operations (b)                        |                          |  | 2,423  |        |        |  | (492    | )     |          |  | (51       | )   |          |  | 131   |       |        |  | (113   | )    |   |  | 1,898  |       
|                                                                      |                          |  |        |        |        |  |         |       |          |  |           |     |          |  |       |       |        |  |        |      |   |  |        |       
|Segment assets                                                        |                          |  | 33,817 |        |        |  | 3,238   |       |          |  | 926       |     |          |  | 2,554 |       |        |  | (972   | )    |   |  | 39,563 |       
|Capital expenditures                                                  |                          |  | 3,428  |        |        |  | 47      |       |          |  | 24        |     |          |  | 232   |       |        |  | 40     |      |   |  | 3,771  |       
|Transitional goodwill
impairment charge                               |                          |  |       |        |        |  | 953     |       |          |  | 183       |     |          |  |      |       |        |  | 7,516  |      |   |  | 8,652  |       
|Goodwill acquired through
business combinations                       |                          |  | 5,458  |        |        |  |        |       |          |  |          |     |          |  | 14    |       |        |  |       |      |   |  | 5,472  |       
|                                                                      |                          |  |        |        |        |  |         |       |          |  |           |     |          |  |       |       |        |  |        |      |   |  |        |       
|For the year ended
December 31, 2001                                  |                          |  |        |        |        |  |         |       |          |  |           |     |          |  |       |       |        |  |        |      |   |  |        |       
|Operating revenues                                                    |                          |  |        |        |        |  |         |       |          |  |           |     |          |  |       |       |        |  |        |      |   |  |        |       
|                                                                      | External customers       |  |        | 17,038 |        |  |         | 1,175 |          |  |           | 451 |          |  |       | 670   |        |  |        | 6    |   |  |        | 19,340 | 
|                                                                      | Inter-segment            |  |        | 164    |        |  |         | 28    |          |  |           | 205 |          |  |       | 374   |        |  |        | (771 | ) |  |        |       | 
|                                                                      |                          |  |        |        |        |  |         |       |          |  |           |     |          |  |       |       |        |  |        |      |   |  |        |       
|                                                                      | Total operating revenues |  |        | 17,202 |        |  |         | 1,203 |          |  |           | 656 |          |  |       | 1,044 |        |  |        | (765 | ) |  |        | 19,340 | 
|Operating expenses                                                    |                          |  | 10,326 |        |        |  | 1,095   |       |          |  | 529       |     |          |  | 754   |       |        |  | (606   | )    |   |  | 12,098 |       
|Amortization expense                                                  |                          |  | 2,934  |        |        |  | 265     |       |          |  | 452       |     |          |  | 152   |       |        |  | 23     |      |   |  | 3,826  |       
|Net benefit plans
(credit) expense                                    |                          |  | (128   | )      |        |  | 1       |       |          |  |          |     |          |  |      |       |        |  | 6      |      |   |  | (121   | )     
|Restructuring and
other charges                                       |                          |  | 975    |        |        |  | 5       |       |          |  |          |     |          |  |      |       |        |  |       |      |   |  | 980    |       
|                                                                      |                          |  |        |        |        |  |         |       |          |  |           |     |          |  |       |       |        |  |        |      |   |  |        |       
|Operating income (loss)                                               |                          |  | 3,095  |        |        |  | (163    | )     |          |  | (325      | )   |          |  | 138   |       |        |  | (188   | )    |   |  | 2,557  |       
|Interest income                                                       |                          |  | 11     |        |        |  | 2       |       |          |  | 5         |     |          |  | 5     |       |        |  | 90     |      |   |  | 113    |       
|Interest expense                                                      |                          |  | 1,118  |        |        |  | 35      |       |          |  | 33        |     |          |  | 64    |       |        |  | (194   | )    |   |  | 1,056  |       
|Equity in net losses
of significantly
influenced companies            |                          |  | (26    | )      |        |  | (4      | )     |          |  |          |     |          |  |      |       |        |  | 11     |      |   |  | (19    | )     
|Income tax expense                                                    |                          |  | (866   | )      |        |  | (15     | )     |          |  | (21       | )   |          |  | (27   | )     |        |  | (830   | )    |   |  | (1,759 | )     
|Earnings (loss) from
continuing operations (b)                        |                          |  | 663    |        |        |  | (150    | )     |          |  | (281      | )   |          |  | 270   |       |        |  | 3,069  |      |   |  | 3,571  |       
|                                                                      |                          |  |        |        |        |  |         |       |          |  |           |     |          |  |       |       |        |  |        |      |   |  |        |       
|Segment assets                                                        |                          |  | 26,859 |        |        |  | 5,139   |       |          |  | 1,107     |     |          |  | 8,232 |       |        |  | 12,737 |      |   |  | 54,074 |       
|Capital expenditures                                                  |                          |  | 4,632  |        |        |  | 114     |       |          |  | 58        |     |          |  | 120   |       |        |  | 75     |      |   |  | 4,999  |       
|                                                                      |                          |  |        |        |        |  |         |       |          |  |           |     |          |  |       |       |        |  |        |      |   |  |        |       

Bell Canada Enterprises  63  2002 Annual Report



---



##### 





Notes to Consolidated Financial Statements


Note 2 SEGMENTED INFORMATIONcontinued

Business segmentscontinued

|                                                                      |  |        |        |        |  |         |     |          |  |           |      |          |  |  |     |        |  |     |      |   |  |  |        |  
|--------------------------------------------------------------------- |  | ------ | ------ | ------ |  | ------- | --- | -------- |  | --------- | ---- | -------- |  |  | --- | ------ |  | --- | ---- | - |  |  | ------ | -
|                                                                      |  |        |        |        |  | Bell    |     |          |  |           |      |          |  |  |     | Corpo- |  | BCE
|                                                                      |  | Bell   |        | Globe- |  | BCE     |     | BCE      |  | rate and  |      | Consoli-
|                                                                      |  | Canada |        | media  |  | Emergis |     | Ventures |  | other
(a) |      | dated   
|                                                                      |  |        |        |        |  |         |     |          |  |           |      |         
|For the year ended
December 31, 2000                                  |  |        |        |        |  |         |     |          |  |           |      |          |  |  |     |        |  |     |      |   |  |  |        |  
|Operating revenues                                                    |  |        | 15,800 |        |  |         | 98  |          |  |           | 468  |          |  |  | 939 |        |  |     | (637 | ) |  |  | 16,668 |  
|Operating expenses                                                    |  |        | 9,280  |        |  |         | 106 |          |  |           | 393  |          |  |  | 742 |        |  |     | (568 | ) |  |  | 9,953  |  
|Amortization expense                                                  |  |        | 2,829  |        |  |         | 7   |          |  |           | 346  |          |  |  | 160 |        |  |     | 10   |   |  |  | 3,352  |  
|Net benefit plans credit                                              |  |        | (109   | )      |  |         |    |          |  |           |     |          |  |  |    |        |  |     |     |   |  |  | (109   | )
|                                                                      |  |        |        |        |  |         |     |          |  |           |      |          |  |  |     |        |  |     |      |   |  |  |        |  
|Operating income (loss)                                               |  |        | 3,800  |        |  |         | (15 | )        |  |           | (271 | )        |  |  | 37  |        |  |     | (79  | ) |  |  | 3,472  |  
|Interest income                                                       |  |        | 14     |        |  |         | 1   |          |  |           | 6    |          |  |  | 7   |        |  |     | 124  |   |  |  | 152    |  
|Interest expense                                                      |  |        | 1,028  |        |  |         | 4   |          |  |           | 36   |          |  |  | 80  |        |  |     | (213 | ) |  |  | 935    |  
|Equity in net earnings
(losses) of significantly
influenced companies |  |        | 3      |        |  |         | 15  |          |  |           |     |          |  |  | (9  | )      |  |     |     |   |  |  | 9      |  
|Income tax recovery
(expense)                                         |  |        | (1,238 | )      |  |         | (7  | )        |  |           | 6    |          |  |  | 10  |        |  |     | (109 | ) |  |  | (1,338 | )
|Earnings (loss) from
continuing operations (b)                        |  |        | 987    |        |  |         | (78 | )        |  |           | (209 | )        |  |  | 66  |        |  |     | 207  |   |  |  | 973    |  
|                                                                      |  |        |        |        |  |         |     |          |  |           |      |          |  |  |     |        |  |     |      |   |  |  |        |  



|(a) |  | This includes eliminations of revenues between segments and discontinued operations.
|--- |  | ------------------------------------------------------------------------------------
|   
|(b) |  | This represents each segments contribution to consolidated net earnings.           

Note 3 BUSINESS ACQUISITIONS AND DISPOSITIONS

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

2002

Repurchase of SBCs 20% interest in BCH
On June 28, 2002, BCE Inc., BCH and entities controlled by SBC entered into
agreements that ultimately led to BCE Inc.s repurchase of SBCs 20% interest
in BCH for $6.32 billion. Under these agreements, BCH bought for cancellation a
portion of its outstanding shares from SBC on June 28, 2002 for $1.33 billion
in cash. This increased BCE Inc.s ownership in BCH to 83.5%. BCE Inc.
completed the repurchase of SBCs remaining 16.5% interest in BCH on December
2, 2002 for $4.99 billion in cash.

We have preliminarily allocated $5.4 billion to goodwill, which is the
amount of the purchase price that exceeds the carrying value of the 20%
interest in BCH. The purchase price allocation will be completed in 2003, and
this amount will be reallocated to BCHs individual net assets, including
intangibles, based on a valuation of those assets. Any excess will remain in
goodwill.

Sale of directories business
On November 29, 2002, Bell Canada and certain affiliates completed the sale of
their print and electronic directories business for approximately $3 billion in
cash. As a result, we recorded a pre-tax gain on the sale of $2.3 billion. The
buyers own an approximate 90% equity interest of an acquisition vehicle that
holds the directories business. Bell Canada indirectly acquired an approximate
10% interest in the acquisition vehicle for approximately $91 million, which is
accounted for under the cost method.

Creation of Bell West Inc.
In April 2002, Bell Canada and Manitoba Telecom Services Inc. (MTS) created
Bell West by combining Bell Canadas interests in the wireline assets of BCE
Nexxia Inc. in Alberta and British Columbia with Bell Canadas and MTS
investment in Bell Intrigna Inc. Bell West provides telecommunications services
in those two provinces and operates under the Bell brand.

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

MTS is approximately 22% owned by Bell Canada and is a related party.

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

2001

Creation of Bell Globemedia
On January 9, 2001, BCE created Bell Globemedia by transferring its interests
in CTV, Sympatico-Lycos and other media interests to Bell Globemedia. Other
parties contributed $385 million in cash and The Globe and Mail. We accounted
for this transaction at fair value and recognized a $33 million gain on
reduction of ownership in subsidiary companies. We allocated the purchase price
to tangible assets ($172 million), liabilities ($63 million) and goodwill ($668
million).

Acquisition of CFCF-TV, CKY-TV and The Comedy Network
In December 2001, Bell Globemedia acquired 29.9% of The Comedy Network for
approximately $36 million, bringing its total interest to 95.0%.

In November 2001, Bell Globemedia completed the acquisition of Report on
Business Tv from affiliates of The Thomson Corporation, under a previous
agreement, whereby Bell Globemedia had recorded an amount receivable of $60
million on its balance sheet, with an effective purchase price of $61 million.

Effective September 1, 2001, Bell Globemedia completed the acquisitions of
two CTV-affiliated television stations, CFCF-TV in Montreal and CKY-TV in
Winnipeg, for a total of approximately $183 million in cash.

We allocated the
total purchase price to tangible assets ($45 million), liabilities ($42
million, including $34 million of benefits and other costs payable on the
acquisition), and goodwill and other intangible assets ($277 million).

Bell Canada Enterprises  64  2002 Annual Report



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##### 





Notes to Consolidated Financial Statements


Note 3 BUSINESS ACQUISITIONS AND DISPOSITIONScontinued

Sale of Sportsnet
In November 2001, Bell Globemedia completed the sale of its 40% interest in
Sportsnet for a total of approximately $138 million in cash. No gain or loss
was recognized on the sale.

Acquisition of Telet and Americel
On March 13, 2001, Telecom Américas Ltd. (Telecom Américas), a joint venture of
BCI, announced agreements to acquire an additional economic interest of
approximately 65% in each of the Brazilian cellular companies, Telet S.A.
(Telet) and Americel S.A. (Americel), for a total of approximately US$580
million. This acquisition was intended to increase Telecom Américas economic
interest to approximately 81% in both companies. In 2001, Telecom Américas
bought an additional 60% interest in Telet and Americel for approximately
US$545 million.

Investment in Algar Telecom Leste
On March 27, 2001, Telecom Américas invested $470 million in Algar Telecom
Leste S.A (ATL), increasing its economic interest in ATL to 59% from 50%. As a
result of this transaction, BCI indirectly invested $208 million in ATL and
increased its economic interest to 24.6% from 22.1%. We allocated BCIs
proportionate interest of the purchase price to tangible assets ($483 million),
liabilities ($360 million) and goodwill ($85 million). Effective March 27,
2001, we changed how we account for ATL from proportionate consolidation to
full consolidation.

Acquisition of Tess S.A
On April 9, 2001, Telecom Américas closed its agreement to acquire a 100%
interest in Tess S.A. for a total of approximately US$950 million or $1,480
million. The purchase price included US$319 million in cash and US$631 million
in notes payable, which had a fair value of US$571 million. The effective
purchase price was US$890 million. We allocated BCIs proportionate interest of
the purchase price of $617 million to tangible assets ($793 million),
liabilities ($638 million) and goodwill ($462 million).

Acquisition of IMRglobal
On July 27, 2001, CGI acquired all of the outstanding common shares of
IMRglobal Corp. for a total of $553 million, based on 1.5974 Class A
subordinate shares of CGI for each IMRglobal Corp. common share. We allocated
the total purchase price to tangible assets ($165 million), liabilities ($191
million) and goodwill ($579 million).

Acquisition of Techtel
On August 31, 2001, Telecom Américas acquired a 60% economic interest in
Techtel-LMDS Comunicaciones Interativas, S.A. (Techtel), for a total of US$210
million. América Móvil S.A. de C.V. (América Móvil) contributed its investment
in Techtel to Telecom Américas in exchange for shares, based on the September
25, 2000 joint venture agreement.

As a result of this transaction, BCI effectively acquired a 25% economic
interest in Techtel for $135 million (US$88 million). We allocated BCIs
proportionate interest of the purchase price to tangible assets ($112 million),
liabilities ($72 million) and goodwill ($95 million). Please see in Note 3,
Business acquisitions and dispositions  Creation of Telecom Américas,for more
information about the September 25, 2000 agreement.

2000

Investment in Aliant
In January 2000, we increased our ownership in Aliant to approximately 53% from
approximately 41% for $435 million in cash. Aliant is a provider of
telecommunications services, as well as information technology, remote
communications services and Internet-based solutions. We allocated the purchase
price to tangible assets ($2,885 million), liabilities ($2,757 million) and
goodwill ($307 million).

Acquisition of CTV
In April 2000, we completed the acquisition of all of the outstanding common
shares of CTV, including those held by Electrohome Broadcasting Inc., for
approximately $2.3 billion in cash. CTV, including its subsidiary NetStar
Communications Inc., is a conventional and specialty broadcaster with a local
presence across Canada.

The CTV shares were transferred to a trustee until the Canadian
Radio-television and Telecommunications Commission (CRTC) and other regulatory
bodies approved the acquisition on December 7, 2000. During this period, we
accounted for the investment in CTV using the equity method. Starting in
December 2000, our results reflect the consolidation of CTV.

As part of the CRTC approval process, by 2007 we are required to spend 10%
of the value of the transaction  or approximately $230 million  on
initiatives that will benefit the Canadian broadcasting industry. We have
included these initiatives in the purchase price of the acquisition of CTV,
bringing the total purchase price to approximately $2.5 billion. We allocated
the purchase price to tangible assets ($1.7 billion), liabilities ($1.1
billion) and goodwill ($1.9 billion).

Acquisition of Teleglobe
On November 1, 2000, we completed the acquisition of all of the outstanding
common shares of Teleglobe that we did not already own. The total purchase
price of $7.4 billion consisted of $240 million in cash and $7.2 billion in BCE
Inc. common shares. Approximately 174 million BCE Inc. common shares were
issued at $41.20 per common share. This price was the average of the high and
low market value of the shares on November 1, 2000.

We allocated the purchase price to tangible assets ($3.7 billion),
liabilities ($4.4 billion) and goodwill ($8.1 billion). As a result of
finalizing the purchase price allocation and Teleglobes 2000 year-end
financial statements, we recorded a charge of $60 million relating to our share
of asset write-downs and one-time charges that Teleglobe recorded in the fourth
quarter of 2000.

We sold our interest in Teleglobe in 2002. Please see Note 8, Discontinued
operations,for more information.

Acquisition of UP&UP
On March 24, 2000, BCE Emergis completed the acquisition of all of the
outstanding shares of United Payors & United Providers, Inc. (UP&UP). UP&UP
provides health claims processing services in the United States. The total
purchase price was approximately $824 million in cash, subject to adjustments.
We allocated the purchase price to tangible assets ($183 million), liabilities
($23 million) and goodwill ($664 million).

Bell Canada Enterprises  65  2002 Annual Report



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##### 





Notes to Consolidated Financial Statements


Note 3 BUSINESS ACQUISITIONS AND DISPOSITIONScontinued

Creation of Telecom Américas
On November 16, 2000, BCI, América Móvil and SBC International, Inc. announced
that they were closing their September 25, 2000 joint venture agreement and
forming Telecom Américas.

Telefonos de Mexico S.A. de C.V., one of the parties to the September 25,
2000 agreement, later assigned its rights to América Móvil. América Móvil now
holds the cellular operations and most of the international investments of
Telefonos de Mexico S.A. de C.V.

BCI and América Móvil each initially held a 44.3% interest in Telecom
Américas. SBC International held an 11.4% interest.

Telecom Américas initial capitalization was approximately US$4 billion
and included:



| |  | the Latin American assets of BCI (not including Vésper S.A., Vésper São
Paulo S.A. and the Internet service provider, Vento Ltda. (collectively, the
Vésper companies) and Axtel S.A. de C.V. of Mexico)
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | América Móvils and SBC Internationals investments in the Brazilian
wireless company ATL-Algar Telecom Leste S.A (ATL).                                                                                

BCI sold its interest in Telecom Américas in 2002. Please see Note 8,
Discontinued operations,for more information.

Note 4 RESTRUCTURING AND OTHER CHARGES

2002

Streamlining at Bell Canada and other charges
Bell Canada recorded a pre-tax charge of $302 million in the fourth quarter of
2002 ($190 million after-tax). This charge represented restructuring charges of
$232 million and other charges of $70 million.

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

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

At December 31, 2002, $111 million of the restructuring provision remained
unpaid.

Write-off of deferred costs
BCE Inc. recorded a pre-tax charge of $93 million ($61 million after-tax) in
the fourth quarter of 2002. This charge represented a write-off of deferred
costs relating to various convergence initiatives after an analysis indicated
that it is unlikely that these costs will 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 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 one-time charge of
$79 million in the third quarter of 2002. BCEs share was $37 million on an
after-tax basis. The one-time charge is equal to the $128 million cash payout,
net of a previously recorded provision. We are deferring and amortizing the
pension benefits into earnings over the estimated average remaining service
life of active employees and the estimated average remaining life of retired
employees.

Write-down of Bell Canadas accounts receivable
Coincident with the development of a new billing platform, Bell Canada has
adopted a new and more precise methodology to analyze the amount of receivables
by customer as well as by service line and that permits a more accurate
determination of the validity of customer balances owed to Bell Canada. This
analysis indicated that as at June 30, 2002 a write-down of accounts receivable
amounting to $272 million (BCEs share is $142 million on an after-tax basis)
was appropriate.

As these amounts arose from legacy billing systems and processes, Bell
Canada has carried out a detailed review of billings and adjustments for the
period from 1997 to 2002. This review determined that these amounts arose as
the cumulative result of a series of individually immaterial events and
transactions pertaining to its legacy accounts receivable systems dating back
to the early 1990s.

Streamlining at BCE Emergis
BCE Emergis recorded a pre-tax charge of $119 million in the second quarter of
2002. BCEs share was $63 million on an after-tax basis. This pre-tax charge
represented restructuring charges of $95 million and other charges of $24
million that were related to the write-off of certain assets, severance and
other employee costs, contract settlements and costs of leased properties no
longer in use, and was reduced by the proceeds of disposition of certain exited
activities. All of these charges were primarily from streamlining BCE Emergis
services and reducing its operating cost structure. At December 31, 2002, $23
million of the restructuring provision remained unpaid.

2001

Streamlining the Bell Canada segment
The Bell Canada segment recorded pre-tax charges totalling $975 million in the
first and fourth quarters of 2001. BCEs share was $461 million on an after-tax
basis. These charges represented restructuring charges of $555 million and
other charges of $420 million.

The restructuring charges were from the Bell Canada segments streamlining
initiatives and included employee severance for approximately 4,700 employees,
enhanced pension benefits and other employee costs. The restructuring programs
were completed in 2002.

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

Note 5 OTHER INCOME

|                                |  |      |       |      |  |      |       |   |  |  |     |  
|------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | --- | -
|For the year ended
December 31  |  | 2002 |       | 2001 |  | 2000
|                                |  |      |       |      |  |     
|Net gains on investments        |  |      | 2,427 |      |  |      | 4,044 |   |  |  |    |  
|Foreign currency gains (losses) |  |      | 36    |      |  |      | (83   | ) |  |  | (34 | )
|Other                           |  |      | 5     |      |  |      | 54    |   |  |  | 131 |  
|                                |  |      |       |      |  |      |       |   |  |  |     |  
|Total other income              |  |      | 2,468 |      |  |      | 4,015 |   |  |  | 97  |  
|                                |  |      |       |      |  |      |       |   |  |  |     |  

Bell Canada Enterprises  66  2002 Annual Report



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##### 





Notes to Consolidated Financial Statements


Note 5 OTHER INCOMEcontinued

2002

Net gains on investments were primarily from:



| |  | selling the directories business ($2.3 billion)                                                                                                                     
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | selling a 37% interest in each of Télébec Limited Partnership and Northern
Telephone Limited Partnership when the Bell Nordiq Income Fund was created
($222 million)
| 
| |  | writing down our portfolio investment in Nortel Networks Corporation (Nortel
Networks) ($98 million).                                                               

Included in Otheris a $30 million write-down of deferred debt issuance
costs relating to the early retirement of credit facilities.

2001

Net gains on investments were primarily from:



| |  | settling short-term forward contracts on approximately 47.9 million Nortel
Networks common shares and selling the same number of Nortel Networks common
shares ($3.7 billion)
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the issuance of shares by CGI, Aliant and BCE Emergis to third parties
relating to business acquisitions and public offerings ($265 million).                                

Note 6 INTEREST EXPENSE

|                                   |  |      |       |      |  |      |       |  |  |  |     | 
|---------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | --- | 
|For the year ended
December 31     |  | 2002 |       | 2001 |  | 2000
|                                   |  |      |       |      |  |     
|Interest expense on long-term debt |  |      | 1,041 |      |  |      | 952   |  |  |  | 737 | 
|Interest expense on other debt     |  |      | 120   |      |  |      | 104   |  |  |  | 198 | 
|                                   |  |      |       |      |  |      |       |  |  |  |     | 
|Total interest expense             |  |      | 1,161 |      |  |      | 1,056 |  |  |  | 935 | 
|                                   |  |      |       |      |  |      |       |  |  |  |     | 

Note 7 INCOME TAXES

The table below is a reconciliation of income taxes at Canadian statutory rates
of 37.4% in 2002, 40.1% in 2001 and 41.9% in 2000, and the amount of reported
income taxes.

|                                         |                                                                                  |      |       |      |   |      |       |      |   |  |       |      |  
|---------------------------------------- | -------------------------------------------------------------------------------- | ---- | ----- | ---- | - | ---- | ----- | ---- | - |  | ----- | ---- | -
|For the year ended December 31           |                                                                                  | 2002 |       | 2001 |   | 2000
|                                         |                                                                                  |      |       |      |   |     
|Income taxes computed at statutory rates |                                                                                  |      | 1,555 |      |   |      | 2,206 |      |   |  | 1,072 |     
|                                         | Gains on reduction of ownership in subsidiaries
and joint ventures               |      |       | (18  | ) |      |       | (144 | ) |  |       | (2   | )
|                                         | Losses not tax affected                                                          |      |       | 15   |   |      |       | 23   |   |  |       | 15   |  
|                                         | Equity in net losses (earnings) of significantly
influenced companies            |      |       | (22  | ) |      |       | 4    |   |  |       | (40  | )
|                                         | Net gains on disposal of investments                                             |      |       | (294 | ) |      |       | (766 | ) |  |       | (210 | )
|                                         | Difference between Canadian statutory rates
and those applicable to subsidiaries |      |       | 37   |   |      |       | 12   |   |  |       | 222  |  
|                                         | Large corporations tax                                                           |      |       | 31   |   |      |       | 33   |   |  |       | 17   |  
|                                         | Reduction in Canadian statutory rate                                             |      |       | (3   | ) |      |       | 48   |   |  |       | 48   |  
|                                         | Goodwill amortization                                                            |      |       |     |   |      |       | 297  |   |  |       | 208  |  
|                                         | Goodwill impairment                                                              |      |       | 289  |   |      |       |     |   |  |       |     |  
|                                         | Other                                                                            |      |       | 3    |   |      |       | 46   |   |  |       | 8    |  
|                                         |                                                                                  |      |       |      |   |      |       |      |   |  |       |     
|Total income tax expense                 |                                                                                  |      | 1,593 |      |   |      | 1,759 |      |   |  | 1,338 |     
|                                         |                                                                                  |      |       |      |   |      |       |      |   |  |       |     

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

|                               |                                           |      |       |      |   |      |       |      |   |  |       |      |  
|------------------------------ | ----------------------------------------- | ---- | ----- | ---- | - | ---- | ----- | ---- | - |  | ----- | ---- | -
|For the year ended December 31 |                                           | 2002 |       | 2001 |   | 2000
|                               |                                           |      |       |      |   |     
|Current income taxes           |                                           |      | 991   |      |   |      | 1,590 |      |   |  | 1,390 |     
|Future income taxes            |                                           |      |       |      |   |      |       |      |   |  |       |     
|                               | Recognition of loss carryforwards         |      |       | (303 | ) |      |       | 333  |   |  |       | (229 | )
|                               | Tax rate changes                          |      |       | (9   | ) |      |       | 59   |   |  |       | 59   |  
|                               | Change in temporary differences and other |      |       | 914  |   |      |       | (223 | ) |  |       | 118  |  
|                               |                                           |      |       |      |   |      |       |      |   |  |       |     
|Total income tax expense       |                                           |      | 1,593 |      |   |      | 1,759 |      |   |  | 1,338 |     
|                               |                                           |      |       |      |   |      |       |      |   |  |       |     

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.

|                                     |                                             |      |      |      |   |  |      |       |  
|------------------------------------ | ------------------------------------------- | ---- | ---- | ---- | - |  | ---- | ----- | -
|At December 31                       |                                             | 2002 |      | 2001
|                                     |                                             |      |      |     
|Non-capital loss carryforwards       |                                             |      | 873  |      |   |  | 813  |      
|Capital loss carryforwards           |                                             |      | 25   |      |   |  | 32   |      
|Capital assets                       |                                             |      | (51  | )    |   |  | 62   |      
|Employee benefit plans               |                                             |      | (257 | )    |   |  | (275 | )    
|Investment tax credits               |                                             |      | (40  | )    |   |  | (63  | )    
|Investments                          |                                             |      | 42   |      |   |  | 71   |      
|Other                                |                                             |      | (608 | )    |   |  | (434 | )    
|                                     |                                             |      |      |      |   |  |      |      
|Net future income taxes              |                                             |      | (16  | )    |   |  | 206  |      
|                                     |                                             |      |      |      |   |  |      |      
|Future income taxes are composed of: |                                             |      |      |      |   |  |      |      
|                                     | Future income tax asset  current portion   |      |      | 124  |   |  |      | 99    |  
|                                     | Future income tax asset  long-term portion |      |      | 675  |   |  |      | 1,031 |  
|                                     | Future income tax liability  long-term     |      |      | (815 | ) |  |      | (924  | )
|                                     |                                             |      |      |      |   |  |      |      
|Net future income taxes              |                                             |      | (16  | )    |   |  | 206  |      
|                                     |                                             |      |      |      |   |  |      |      

At December 31, 2002, BCE Inc. had the following non-capital loss
carryforwards:



| |  | approximately $2,593 million for which we recognized a future tax asset of
$873 million for financial reporting purposes. $2,404 million expires in
varying annual amounts through 2009. $189 million expires in varying annual
amounts between 2010 and 2022
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | approximately $164 million for which no future tax asset has been recognized
for financial reporting purposes. $61 million expires in varying annual amounts
through 2009. $103 million expires in varying annual amounts between 2010 and
2022.             

At December 31, 2002, BCE Inc. had the following capital loss carryforwards:



| |  | approximately $147 million that can be carried forward indefinitely, for
which we recognized a future tax asset of $25 million for financial reporting
purposes
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | approximately $4,098 million that can be carried forward indefinitely, for
which no future tax asset has been recognized for financial reporting purposes.     

Bell Canada Enterprises  67  2002 Annual Report



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##### 





Notes to Consolidated Financial Statements


Note 8 DISCONTINUED OPERATIONS

|                                                 |  |      |      |      |  |      |        |   |  |  |       |  
|------------------------------------------------ |  | ---- | ---- | ---- |  | ---- | ------ | - |  |  | ----- | -
|For the year ended December 31                   |  | 2002 |      | 2001 |  | 2000
|                                                 |  |      |      |      |  |     
|Teleglobe                                        |  |      | 893  |      |  |      | (2,810 | ) |  |  | (359  | )
|BCI                                              |  |      | (316 | )    |  |      | (247   | ) |  |  | 116   |  
|Nortel Networks                                  |  |      |     |      |  |      |       |   |  |  | 4,055 |  
|                                                 |  |      |      |      |  |      |        |   |  |  |       |  
|Net earnings (loss) from discontinued operations |  |      | 577  |      |  |      | (3,057 | ) |  |  | 3,812 |  
|                                                 |  |      |      |      |  |      |        |   |  |  |       |  

TELEGLOBE

Teleglobe provided international voice and data telecommunications services.
Until the second quarter of 2002, it also provided retail telecommunications
services through its investment in the Excel Communications group (Excel).
These services included long distance, paging and Internet services to
residential and business customers in North America.

Teleglobes results of operations include an impairment charge of $2,049
million that was recorded in the first quarter of 2001 after it completed an
assessment of the carrying value of its investment in Excel.

Our exit from Teleglobe
On April 24, 2002, BCE Inc. announced that it would stop providing long-term
funding to Teleglobe. This decision was based on a number of factors,
including:



| |  | a revised business plan and outlook for the principal operating segment of
Teleglobe and associated funding requirements
|- |  | ------------------------------------------------------------------------------------------------------------------------
| 
| |  | a revised assessment of its prospects                                                                                   
| 
| |  | a comprehensive analysis of the state of its industry.                                                                  

In light of this decision, Teleglobe announced that it would explore a
range of financial restructuring alternatives, potential partnerships and
business combinations. Also on April 24, 2002, all of the Teleglobe board
members who were affiliated with BCE Inc. resigned from the Teleglobe board.

In effect, these events resulted in BCE Inc. exiting the Teleglobe
business and the eventual material reduction in our approximate 96% economic
and voting interest in Teleglobe as a result of the ongoing restructuring of
Teleglobe. As a result, effective April 24, 2002 we reclassified Teleglobes
financial results as a discontinued operation.

Our management completed its assessment of the net realizable value of our
interest in the net assets of Teleglobe and determined it to be zero. This
resulted in a loss from discontinued operations of $73 million in the second
quarter of 2002. This loss is in addition to the transitional goodwill
impairment charge of $7,516 million to opening retained earnings as of January
1, 2002, which was required by the transitional provisions of the new CICA
Handbook section 3062. Please see Note 1, Significant accounting policies,for
more information about the transitional provisions.

Significant developments
On May 15, 2002 and later in the year, Teleglobe and certain of its
subsidiaries filed for court protection under insolvency statutes in various
countries, including Canada and the United States. On September 19, 2002,
Teleglobe announced the execution of agreements for the sale of its core
telecommunications business. Effective November 30, 2002, BCE Inc.s
debtor-in-possession and employee severance and retention facilities were fully
repaid by Teleglobe and terminated.

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 primarily 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
Networks shares in 2001
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | applying a portion of the capital losses against the gain on the sale of the
directories business in 2002.                                                                    

The tax benefit associated with the unused capital losses has not been
reflected in these financial statements.

Change in how we account for Teleglobe
Effective May 15, 2002, we stopped consolidating Teleglobes financial results
and started accounting for the investment at cost. We made this change because:



| |  | our management did not expect to realize any future economic benefits from
our approximate 96% economic and voting interest in Teleglobe
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | we had not guaranteed any of Teleglobes obligations                                                                                    
| 
| |  | we stopped providing long-term funding to Teleglobe.                                                                                    

Our interest in Teleglobes net assets on May 15, 2002 included:



| |  | current assets of $1.4 billion          
|- |  | ----------------------------------------
| 
| |  | non-current assets of $4.3 billion      
| 
| |  | current liabilities of $3.6 billion     
| 
| |  | non-current liabilities of $2.1 billion.

Please see Note 21, Contractual obligations, commercial commitments and
contingencies,for information about the lending syndicate lawsuit filed
against BCE Inc.

BCI

Before selling its interest in Telecom Américas, BCI developed and operated
communications companies in markets outside Canada, with a focus on Latin
America. Effective January 1, 2002, we adopted a formal plan to dispose of our
operations in BCI. As a result, we have reported BCIs results as a
discontinued operation.

BCIs plan of arrangement
BCI completed the sale of its interest in Telecom Américas in July 2002. BCI
held most of its investments through Telecom Américas.

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.

Change in how we account for BCI
Effective June 30, 2002, we stopped consolidating BCIs financial results and
started accounting for the investment at cost. We recorded a charge of $316
million in 2002 ($191 million in the second quarter and $125 million in the
fourth quarter). This represents a write-down of our investment in BCI to our
estimate of its net realizable value at that time.

NORTEL NETWORKS

Discontinued operations in 2000 include our share of Nortel Networks net
earnings and gains on the reduction of our ownership in Nortel Networks ($4.2
billion).

In May 2000, we distributed an approximate 35% interest in Nortel Networks
to BCE Inc. common shareholders. BCE Inc. common shareholders received
approximately 1.57 post-split common shares of Nortel Networks for each common
share

Bell Canada Enterprises  68  2002 Annual Report



---



##### 





Notes to Consolidated Financial Statements


Note 8 DISCONTINUED OPERATIONScontinued

of BCE Inc. they held. We recorded this transaction as a distribution
(dividend) to shareholders at the pro-rata carrying value of BCE Inc.s
approximate 37% interest in Nortel Networks before the distribution. This
resulted in:



| |  | a decrease of $10 billion in our equity investment in Nortel Networks                        
|- |  | ---------------------------------------------------------------------------------------------
| 
| |  | a decrease of $10.1 billion, including transaction costs of $70 million, in
retained earnings
| 
| |  | an increase of $150 million in currency translation adjustment.                              

Since May 2000, we have recorded our remaining interest in Nortel Networks
as an investment at cost.

The table below shows amounts included in the consolidated balance sheets
that relate to discontinued operations.

|                                      |  |      |    |      |  |  |        |  
|------------------------------------- |  | ---- | -- | ---- |  |  | ------ | -
|At December 31                        |  | 2002 |    | 2001
|                                      |  |      |    |     
|Current assets                        |  |      |   |      |  |  | 1,957  |  
|Non-current assets                    |  |      | 50 |      |  |  | 16,576 |  
|Current liabilities                   |  |      |   |      |  |  | (5,855 | )
|Non-current liabilities               |  |      |   |      |  |  | (5,250 | )
|                                      |  |      |    |      |  |  |        |  
|Net assets of discontinued operations |  |      | 50 |      |  |  | 7,428  |  
|                                      |  |      |    |      |  |  |        |  

The table below is a summarized statement of operations for the
discontinued operations.

|                                                                   |  |      |       |      |  |      |        |   |  |  |       |  
|------------------------------------------------------------------ |  | ---- | ----- | ---- |  | ---- | ------ | - |  |  | ----- | -
|For the year ended December 31                                     |  | 2002 |       | 2001 |  | 2000
|                                                                   |  |      |       |      |  |     
|Revenue                                                            |  |      | 681   |      |  |      | 3,695  |   |  |  | 1,426 |  
|Operating earnings (loss) from discontinued
operations, before tax |  |      | (123  | )    |  |      | (3,407 | ) |  |  | 2,776 |  
|Gain (loss) on discontinued operations, before tax                 |  |      | (407  | )    |  |      | 461    |   |  |  | 1,158 |  
|Income tax recovery on operating earnings (loss)                   |  |      | 40    |      |  |      | 209    |   |  |  | 16    |  
|Income tax recovery (expense) on loss (gain)                       |  |      | 1,060 |      |  |      | (45    | ) |  |  | (82   | )
|Non-controlling interest                                           |  |      | 7     |      |  |      | (275   | ) |  |  | (56   | )
|                                                                   |  |      |       |      |  |      |        |   |  |  |       |  
|Net earnings (loss) from discontinued operations                   |  |      | 577   |      |  |      | (3,057 | ) |  |  | 3,812 |  
|                                                                   |  |      |       |      |  |      |        |   |  |  |       |  

Note 9 EARNINGS PER SHARE DISCLOSURES

The table below is a reconciliation of the data used to determine basic and
diluted earnings per common share.

|                                                                             |  |      |       |      |  |      |       |   |  |  |       |  
|---------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|For the year ended December 31                                               |  | 2002 |       | 2001 |  | 2000
|                                                                             |  |      |       |      |  |     
|Earnings from continuing operations
(numerator)($ millions)                  |  |      |       |      |  |      |       |   |  |  |       |  
|Earnings from continuing operations                                          |  |      | 1,898 |      |  |      | 3,571 |   |  |  | 973   |  
|Dividends on preferred shares                                                |  |      | (59   | )    |  |      | (64   | ) |  |  | (79   | )
|                                                                             |  |      |       |      |  |      |       |   |  |  |       |  
|Earnings from continuing operations  basic                                  |  |      | 1,839 |      |  |      | 3,507 |   |  |  | 894   |  
|Exercise of put options by CGI shareholders                                  |  |      | 12    |      |  |      | 2     |   |  |  | (19   | )
|                                                                             |  |      |       |      |  |      |       |   |  |  |       |  
|Earnings from continuing operations  diluted                                |  |      | 1,851 |      |  |      | 3,509 |   |  |  | 875   |  
|                                                                             |  |      |       |      |  |      |       |   |  |  |       |  
|Weighted-average number of common shares
outstanding (denominator)(millions) |  |      |       |      |  |      |       |   |  |  |       |  
|Weighted-average number of common shares
outstanding  basic                 |  |      | 847.9 |      |  |      | 807.9 |   |  |  | 670.0 |  
|Exercise of stock options                                                    |  |      | 2.0   |      |  |      | 4.4   |   |  |  | 2.3   |  
|Exercise of put options by CGI shareholders                                  |  |      | 13.0  |      |  |      | 5.6   |   |  |  | 3.8   |  
|                                                                             |  |      |       |      |  |      |       |   |  |  |       |  
|Weighted-average number of common shares
outstanding  diluted               |  |      | 862.9 |      |  |      | 817.9 |   |  |  | 676.1 |  
|                                                                             |  |      |       |      |  |      |       |   |  |  |       |  

Note 10 CAPITAL ASSETS

|                                    |  |      |        |              |  |             |        |          |  |          |        |  |  |  |        | 
|----------------------------------- |  | ---- | ------ | ------------ |  | ----------- | ------ | -------- |  | -------- | ------ |  |  |  | ------ | 
|At December 31                      |  | 2002 |        | 2001        
|                                    |  |      |        |             
|                                    |  |      |        |              |  | Accumulated |        | Net book |  | Net book
|                                    |  | Cost |        | Amortization |  | value       |        | value   
|                                    |  |      |        |              |  |             |        |         
|Telecommunications assets           |  |      | 34,573 |              |  |             | 21,848 |          |  |          | 12,725 |  |  |  | 13,799 | 
|Machinery and equipment             |  |      | 6,144  |              |  |             | 3,253  |          |  |          | 2,891  |  |  |  | 3,348  | 
|Buildings                           |  |      | 2,585  |              |  |             | 1,307  |          |  |          | 1,278  |  |  |  | 1,561  | 
|Plant under construction            |  |      | 1,743  |              |  |             |       |          |  |          | 1,743  |  |  |  | 3,832  | 
|Land                                |  |      | 99     |              |  |             |       |          |  |          | 99     |  |  |  | 124    | 
|Other                               |  |      | 357    |              |  |             | 139    |          |  |          | 218    |  |  |  | 513    | 
|                                    |  |      |        |              |  |             |        |          |  |          |        |  |  |  |        | 
|Total property, plant and equipment |  |      | 45,501 |              |  |             | 26,547 |          |  |          | 18,954 |  |  |  | 23,177 | 
|Finite-life intangible assets       |  |      | 3,021  |              |  |             | 1,335  |          |  |          | 1,686  |  |  |  | 2,785  | 
|                                    |  |      |        |              |  |             |        |          |  |          |        |  |  |  |        | 
|Total capital assets                |  |      | 48,522 |              |  |             | 27,882 |          |  |          | 20,640 |  |  |  | 25,962 | 
|                                    |  |      |        |              |  |             |        |          |  |          |        |  |  |  |        | 

Amortization of capital assets was $3,127 million in 2002, $3,331 million
in 2001 and $3,084 million in 2000. We capitalized total interest cost of $25
million in 2002, $47 million in 2001 and $21 million in 2000 as capital assets.

Note 11 OTHER LONG-TERM ASSETS

|                                      |  |      |       |      |  |  |       | 
|------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|At December 31                        |  | 2002 |       | 2001
|                                      |  |      |       |     
|Investments
at equity (a)             |  |      | 495   |      |  |  | 521   | 
|Investments at cost                   |  |      | 282   |      |  |  | 585   | 
|Future income taxes (Note 7)          |  |      | 675   |      |  |  | 1,031 | 
|Accrued benefit asset (Note 20)       |  |      | 2,070 |      |  |  | 1,988 | 
|Long-term notes and other receivables |  |      | 211   |      |  |  | 253   | 
|Customer acquisition costs            |  |      | 371   |      |  |  | 336   | 
|Deferred development costs            |  |      | 34    |      |  |  | 159   | 
|Deferred debt issuance costs          |  |      | 95    |      |  |  | 110   | 
|Other                                 |  |      | 122   |      |  |  | 398   | 
|                                      |  |      |       |      |  |  |       | 
|Total other long-term assets          |  |      | 4,355 |      |  |  | 5,381 | 
|                                      |  |      |       |      |  |  |       | 



|(a) |  | This includes implicit goodwill of $207 million at December 31, 2002 and
$171 million at December 31, 2001.
|--- |  | -----------------------------------------------------------------------------------------------------------

Amortization of deferred charges was $39 million in 2002, $62 million in
2001 and $118 million in 2000.

Note 12 INDEFINITE-LIFE INTANGIBLE ASSETS

|                                           |                     |      |     |      |  |  |     |     | 
|------------------------------------------ | ------------------- | ---- | --- | ---- |  |  | --- | --- | 
|At December 31                             |                     | 2002 |     | 2001
|                                           |                     |      |     |     
|Intangible assets, January 1               |                     |      | 884 |      |  |  |    |    
|Intangible assets acquired during the year |                     |      |    |      |  |  | 861 |    
|Capitalized interest on spectrum licences  |                     |      | 16  |      |  |  | 23  |    
|                                           |                     |      |     |      |  |  |     |    
|Intangible assets, December 31             |                     |      | 900 |      |  |  | 884 |    
|                                           |                     |      |     |      |  |  |     |    
|Consisting of:                             |                     |      |     |      |  |  |     |    
|                                           | Spectrum licences   |      |     | 754  |  |  |     | 738 | 
|                                           | Television licences |      |     | 128  |  |  |     | 128 | 
|                                           | Cable licences      |      |     | 18   |  |  |     | 18  | 
|                                           |                     |      |     |      |  |  |     |    
|Total                                      |                     |      | 900 |      |  |  | 884 |    
|                                           |                     |      |     |      |  |  |     |    

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

Bell Canada Enterprises  69  2002 Annual Report



---



##### 



Notes to Consolidated Financial Statements


Note 13 GOODWILL

|                                           |  |      |        |  
|------------------------------------------ |  | ---- | ------ | -
|                                           |  | 2002
|                                           |  |     
|Goodwill, January 1                        |  |      | 15,947 |  
|                                           |  |      |        |  
|Transitional goodwill impairment charge(a) |  |      | (8,652 | )
|Goodwill acquired during the year(b)       |  |      | 5,472  |  
|Goodwill disposed during the year(c)       |  |      | (218   | )
|Deconsolidation of Teleglobe and BCI(d)    |  |      | (1,754 | )
|Impairment charge(e)                       |  |      | (770   | )
|Other                                      |  |      | 78     |  
|                                           |  |      |        |  
|Goodwill, December 31                      |  |      | 10,103 |  
|                                           |  |      |        |  



|(a) |  | An impairment of $8,652 million was applied to goodwill as of January 1,
2002, as required by the transitional provisions of the new CICA Handbook
section 3062. Please see Note 1, Significant accounting policies,for more
information.                                                                                                                                                                                                                                                                                                                                               
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | The goodwill acquired in 2002 relates primarily to the acquisition of SBCs
20% interest in BCH. Please see Note 3, Business acquisitions and dispositions,
for more information.                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(c) |  | The goodwill disposed of in 2002 relates primarily to the sale of the
directories business. Please see Note 3, Business acquisitions and
dispositions,for more information.                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(d) |  | Effective in the second quarter of 2002, BCE stopped consolidating the
financial results of Teleglobe and BCI. Please see Note 8, Discontinued
operations,for more information.                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(e) |  | In the fourth quarter of 2002, BCE completed its annual assessment of
goodwill of all of its reporting units, as required by the provisions of CICA
Handbook section 3062. It recorded a charge to pre-tax earnings of $770 million
($530 million after non-controlling interest), relating to impaired goodwill of
reporting units in Bell Globemedia ($715 million) and Aliant ($55 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 primary factor contributing to the impairment at Bell Globemedia was
a revised estimate of future cash flows, which reflects managements decision
to scale back its trials in convergence products and other non-core
businesses, as well as current market conditions for the media business. The
write-down at Aliant was determined to be appropriate in light of current
market conditions and the recent weak performance of its information
technology business.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note 14 DEBT DUE WITHIN ONE YEAR

|                                             |                  |             |      |      |  |         |     |  |    |  |       |  |     |  |       | 
|-------------------------------------------- | ---------------- | ----------- | ---- | ---- |  | ------- | --- |  | -- |  | ----- |  | --- |  | ----- | 
|At December 31                               | Interest rate(1) | Maturity(1) | 2002 | 2001
|                                             |                  |             |      |     
|Bank advances                                |                  |             | 4.54 | %    |  |         | N/A |  |    |  | 267   |  |     |  | 2,589 | 
|Notes payable                                |                  |             | 3.48 | %    |  | 30 days |     |  | 63 |  |       |  | 998 | 
|Long-term debt due within one year (Note 15) |                  |             |      |      |  |         |     |  |    |  | 1,696 |  |     |  | 1,676 | 
|                                             |                  |             |      |      |  |         |     |  |    |  |       |  |     |  |       | 
|Total debt due within one year               |                  |             |      |      |  |         |     |  |    |  | 2,026 |  |     |  | 5,263 | 
|                                             |                  |             |      |      |  |         |     |  |    |  |       |  |     |  |       | 
|(1)
  Weighted-average                       |                  |             |      |      |  |         |     |  |    |  |       |  |     |  |       | 

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

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

Please see Note 21, Contractual obligations, commercial commitments and
contingencies,for more details on our credit and other bank facilities.

Note 15 LONG-TERM DEBT

|                                              |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |        |  
|--------------------------------------------- | ------------------------------------------ | ------------- | ---- | -------- | ---- | ---- | --------- | ---- | --- |  | ------ | ------ | --- |  | ------ | ------ | -
|At December 31                                |                                            | Interest rate |      | Maturity |      | 2002 |           | 2001
|                                              |                                            |               |      |          |      |      |           |     
|BCE Inc.                                      |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|Notes (a)                                     |                                            |               | 6.86 | %(1)     |      |      | 2006-2009 |      |     |  | 2,000  |        |     |  |       |       
|Notes payable to SBC                          |                                            |               | 6.00 | %        |      |      | 2004      |      |     |  | 314    |        |     |  |       |       
|                                              |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|Total  BCE Inc.                              |                                            |               |      |          |      |      |           |      |     |  | 2,314  |        |     |  |       |       
|                                              |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|Bell Canada                                   |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|Debentures and notes (b)                      |                                            |               | 7.43 | %(1)     |      |      | 2003-2054 |      |     |  | 9,609  |        |     |  | 9,057  |       
|Subordinated debentures                       |                                            |               | 8.21 | %(1)     |      |      | 2026-2031 |      |     |  | 275    |        |     |  | 275    |       
|Capital leases (c)                            |                                            |               |      |          |      |      |           |      |     |  | 427    |        |     |  | 152    |       
|Other                                         |                                            |               |      |          |      |      |           |      |     |  | 219    |        |     |  | 415    |       
|                                              |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|Total  Bell Canada                           |                                            |               |      |          |      |      |           |      |     |  | 10,530 |        |     |  | 9,899  |       
|                                              |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|Aliant                                        |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|Debentures and notes (d)                      |                                            |               | 7.80 | %(1)     |      |      | 2003-2025 |      |     |  | 1,058  |        |     |  | 1,013  |       
|Acquisition facility (US $28 million)(e)      |                                            | LIBOR + 2.50% |      |          | 2004 |      |           |      | 44  |  |        |        | 318 | 
|Term debt (US $185 million) (f)               |                                            | LIBOR + 2.50% |      |          | 2005 |      |           |      | 292 |  |        |        | 199 | 
|Other                                         |                                            |               |      |          |      |      |           |      |     |  | 15     |        |     |  | 16     |       
|                                              |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|Total  Aliant                                |                                            |               |      |          |      |      |           |      |     |  | 1,409  |        |     |  | 1,546  |       
|                                              |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|Bell Globemedia                               |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|Revolving reducing term
credit agreements (g) |                                            |               | 3.85 | %(1)     |      |      | 2006-2007 |      |     |  | 300    |        |     |  | 325    |       
|Notes and other                               |                                            |               | 7.15 | %        |      |      | 2009      |      |     |  | 150    |        |     |  | 160    |       
|                                              |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |       
|Total  Bell Globemedia                       |                                            |               |      |          |      |      |           |      |     |  | 450    |        |     |  | 485    |       
|                                              |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|Telesat  Notes and other                     |                                            |               | 7.84 | %(1)     |      |      | 2003-2009 |      |     |  | 295    |        |     |  | 371    |       
|                                              |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|Teleglobe and BCI (h)                         |                                            |               |      |          |      |      |           |      |     |  |       |        |     |  | 4,134  |       
|                                              |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|Other                                         |                                            |               |      |          |      |      |           |      |     |  | 93     |        |     |  | 102    |       
|                                              |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|Total debt                                    |                                            |               |      |          |      |      |           |      |     |  | 15,091 |        |     |  | 16,537 |       
|                                              | Less: Amount due within one year (Note 14) |               |      |          |      |      |           |      |     |  |        | (1,696 | )   |  |        | (1,676 | )
|                                              |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|Long-term debt                                |                                            |               |      |          |      |      |           |      |     |  | 13,395 |        |     |  | 14,861 |       
|                                              |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       
|(1)
  Weighted-average interest rate          |                                            |               |      |          |      |      |           |      |     |  |        |        |     |  |        |       

BCE Inc.



|(a) |  | All notes are unsecured. BCE Inc. has the option to redeem $1.7 billion in
notes at any time.
|--- |  | ---------------------------------------------------------------------------------------------

Bell Canada



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



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



| |  | In addition, $375 million of long-term debt contains call options that
allow for early repayment of the principal amounts when certain premiums are
paid.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) |  | Includes capital leases of $71 million in 2002 and $66 million in 2001, net
of loans receivable of $319 million in 2002 and $335 million in 2001. These
obligations were from agreements that Bell Canada entered into in 1999 and 2001
to sell and lease back telecommunication equipment for total proceeds of $399
million. Some of the proceeds were invested in interest-bearing loans
receivable. These capital leases, net of loans receivable, were originally
issued for US$39 million and have been swapped into Canadian dollar
obligations.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Bell Canada Enterprises  70  2002 Annual Report



---



##### 





Notes to Consolidated Financial Statements


Note 15 LONG-TERM DEBTcontinued

Aliant



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



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



|(e) |  | Stratos Global Corporation, a subsidiary of Aliant, has provided a
first priority interest over all of its assets as collateral for the
acquisition facility and term debt.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

Bell Globemedia



|(g) |  | Assets of CTV and one of its subsidiaries, CTV Specialty Television, are
collateral for these agreements. CTV Specialty Television has fixed interest
rates through swap agreements on $95 million of bank indebtedness.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Teleglobe and BCI



|(h) |  | Effective the second quarter of 2002, we stopped consolidating the
financial results of Teleglobe and BCI.
|--- |  | ----------------------------------------------------------------------------------------------------------

Long-term debt maturities

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

Restrictions

Certain debt agreements:



| |  | require us to meet specific financial ratios        
|- |  | ----------------------------------------------------
| 
| |  | impose covenants, maintenance and new issuance tests
| 
| |  | restrict the payment of dividends                   
| 
| |  | restrict our disposal of Bell Canada voting shares. 

Note 16 OTHER LONG-TERM LIABILITIES

|                                                                     |  |      |       |      |  |  |       | 
|-------------------------------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|At December 31                                                       |  | 2002 |       | 2001
|                                                                     |  |      |       |     
|Accrued benefit liability (Note 20)                                  |  |      | 1,377 |      |  |  | 1,217 | 
|Future income taxes (Note 7)                                         |  |      | 815   |      |  |  | 924   | 
|CRTC benefits packages                                               |  |      | 187   |      |  |  | 225   | 
|BCE Inc. Series P retractable preferred shares (a)                   |  |      | 355   |      |  |  | 400   | 
|BCI deferred gain on transfer of assets to Telecom Americas (Note 3) |  |      |      |      |  |  | 486   | 
|Deferred revenue and gains on assets                                 |  |      | 438   |      |  |  | 583   | 
|Other                                                                |  |      | 669   |      |  |  | 1,218 | 
|                                                                     |  |      |       |      |  |  |       | 
|Total other long-term liabilities                                    |  |      | 3,841 |      |  |  | 5,053 | 
|                                                                     |  |      |       |      |  |  |       | 



|(a) |  | 14.2 million shares were outstanding at December 31, 2002. The annual
dividend rate was $1.60 per share. Shareholders have the option to direct BCE
Inc. to redeem all or part of the shares at $25 per share each quarter. BCE
Inc. may choose, at any time, to redeem the shares at $25 per share. BCE Inc.
may, at any time, create another series of preferred shares that Series P
shareholders will have the option to convert into on a share-for-share basis.
1.8 million Series P shares were redeemed for $45 million in 2002.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note 17 FINANCIAL INSTRUMENTS

USING DERIVATIVES

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



| |  | interest rate swaps used to hedge dividends on BCE Inc. preferred shares and
interest on long-term debt             
|- |  | --------------------------------------------------------------------------------------------------------------------
| 
| |  | cross-currency swaps used to hedge foreign currency risk on debt                                                    
| 
| |  | currency forward contracts relating mainly to a net investment in a foreign
subsidiary                              
| 
| |  | forward contracts on BCE Inc. common shares to hedge the cash flow exposures
related to stock compensation payments.

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

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

CREDIT RISK

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



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

As at December 31, 2002, credit risk related to derivative instruments
amounted to $143 million.

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

CURRENCY EXPOSURES

At December 31, 2002, principal amounts to be received under currency contracts
are 300 million Swiss francs, US$516 million and $566 million, whereas
principal amounts to be paid under these contracts are US$553 million and $812
million.

We use these derivatives mainly to hedge foreign-denominated debt and a
net investment in a foreign subsidiary. Instruments that achieve hedge
accounting are marked to spot, in the same
way as the underlying hedged item, while others are carried at fair value.

$715 million of our $15.1 billion of total debt is exposed to fluctuations in
foreign exchange rates after hedging strategies.

Bell Canada Enterprises  71  2002 Annual Report



---



##### 





Notes to Consolidated Financial Statements


Note 17 FINANCIAL INSTRUMENTScontinued

INTEREST RATE EXPOSURES

Long-term debt and preferred shares are usually issued at fixed interest rates.
In managing our fixed to floating interest rate mix, we entered into interest
rate swaps with a notional amount of $1.4 billion, maturing in 2003, 2005 and
2007. We pay interest on swaps of $1.1 billion at the Bankers Acceptance rate
and receive a weighted-average rate of 6.1%. We pay interest on swaps of $284
million at a rate of 5.4% and receive a LIBOR rate plus 2.5%.

$775 million of
our $15.1 billion of total debt is exposed to fluctuations in interest rates
after hedging strategies. $1.1 billion of our $1.5 billion of preferred shares
is exposed to fluctuations in interest rates after hedging strategies. $266
million of our $330 million of notes payable and bank advances is exposed to
fluctuations in interest rates after hedging strategies.

FAIR VALUE

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

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

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

|                                                        |                                     |      |          |      |       |  |          |     |       |  |        |     |   |  |        |     |  
|------------------------------------------------------- | ----------------------------------- | ---- | -------- | ---- | ----- |  | -------- | --- | ----- |  | ------ | --- | - |  | ------ | --- | -
|At December 31                                          |                                     | 2002 |          | 2001
|                                                        |                                     |      |          |     
|                                                        |                                     |      | Carrying |      | Fair  |  | Carrying |     | Fair 
|                                                        |                                     |      | value    |      | value |  | value    |     | value
|                                                        |                                     |      |          |      |       |  |          |     |      
|Investment in Nortel Networks (a)                       |                                     |      | 36       |      |       |  | 34       |     |       |  | 167    |     |   |  | 154    |    
|Long-term debt due within one year                      |                                     |      | 1,696    |      |       |  | 1,747    |     |       |  | 1,676  |     |   |  | 1,669  |    
|Long-term debt                                          |                                     |      | 13,395   |      |       |  | 14,780   |     |       |  | 14,861 |     |   |  | 15,652 |    
|Derivative instruments,
net asset (liability) position: |                                     |      |          |      |       |  |          |     |       |  |        |     |   |  |        |    
|                                                        | Forward contracts  BCE Inc. shares |      |          | (52  | )     |  |          | (58 | )     |  |        | (24 | ) |  |        | (31 | )
|                                                        | Currency contracts (b)              |      |          | 38   |       |  |          | 44  |       |  |        | (50 | ) |  |        | (53 | )
|                                                        | Interest rate swaps                 |      |          |     |       |  |          | 96  |       |  |        |    |   |  |        | 75  |  
|                                                        |                                     |      |          |      |       |  |          |     |       |  |        |     |   |  |        |    
|                                                        | Total                               |      |          | (14  | )     |  |          | 82  |       |  |        | (74 | ) |  |        | (9  | )
|                                                        |                                     |      |          |      |       |  |          |     |       |  |        |     |   |  |        |    



|(a) |  | We have designated 3 million of our approximately 14 million Nortel
Networks common shares to hedge our exposure to outstanding rights to SCPs.
Please see Note 19, Stock-based compensation plans,for more information.                                                                                                                                                                                                                                       
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Currency contracts include cross currency interest rate swaps and foreign
currency forward contracts. We included net gains of $8 million relating to
foreign currency contracts hedging a self-sustaining operation in the currency
translation adjustment account in 2002 (net losses of $23 million in 2001).
Some of the cross currency interest rate swaps are economic hedges but are not
given hedge accounting treatment. We carry these at fair value.

SALE OF ACCOUNTS RECEIVABLE

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

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

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

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

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

|                              |  |           |            |      |  |      |      |   |  |  |      |  
|----------------------------- |  | --------- | ---------- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                              |  | Range (a) |            | 2002 |  | 2001
|                              |  |           |            |      |  |     
|Cost of funds                 |  |           | 2.11%-3.12 | %    |  |      | 2.76 | % |  |  | 2.53 | %
|Average delinquency ratio     |  |           | 3.54%-6.01 | %    |  |      | 6.01 | % |  |  | 3.46 | %
|Average net credit loss ratio |  |           | 0.61%-0.84 | %    |  |      | 0.84 | % |  |  | 0.58 | %
|Weighted-average life in days |  |           | 38-40      |      |  |      | 38   |   |  |  | 39   |  
|Servicing fee liability       |  |           | 2.00       | %    |  |      | 2.00 | % |  |  | 2.00 | %
|                              |  |           |            |      |  |      |      |   |  |  |      |  



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

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

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

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

Bell Canada Enterprises  72  2002 Annual Report



---



##### 





Notes to Consolidated Financial Statements


Note 18 SHARE CAPITAL

(i) PREFERRED SHARES

BCE Inc.s articles of incorporation provide for an unlimited number of First
Preferred Shares and Second Preferred Shares. The articles authorize BCE Inc.s
directors to issue these shares in one or more series and to set the number of
shares and conditions of each series.

The table below is a summary of the principal terms and conditions of BCE
Inc.s authorized series of First Preferred Shares. BCE Inc.s articles of
incorporation show the details of the terms and conditions of these shares.

All First Preferred Shares outstanding at December 31, 2002:



| |  | were non-voting, except under special circumstances when the holders were
entitled to one vote per share                                                                                                     
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | were convertible at the holders option into
another series of First Preferred Shares, except for the Series P shares.
Please see Note 16, Other long-term liabilities,for details about the Series P
shares.

There were no Second Preferred Shares outstanding at December 31, 2002.
All Series Q, T, V and AB shares were authorized but not issued. All of the
authorized Series R, S, U, Y, Z and AA shares were issued and outstanding,
except for:



| |  | Series U shares, which had 14,000,000 shares outstanding
|- |  | --------------------------------------------------------
| 
| |  | Series Y shares, which had 1,147,380 shares outstanding 
| 
| |  | Series Z shares, which had 8,852,620 shares outstanding.

On March 1, 2002, BCE Inc. issued 20 million Series AA shares. 8 million
of these shares were issued through a public bought deal offering. The other 12
million Series AA shares were issued to the holders of the 12 million Series W
shares to replace their Series W shares.

On March 1, 2002, all Series W and X shares were cancelled.

On December 1, 2002, 8,852,620 Series Y shares were converted into an
equal number of Series Z shares.

ENTITLEMENT TO DIVIDENDS

Holders of Series R, U, Z and AA shares are entitled to fixed cumulative
quarterly dividends.

Holders of Series S and Y shares are entitled to floating
adjustable cumulative monthly dividends.

If and when Series Q and AB shares are issued, their holders will be
entitled to floating adjustable cumulative monthly dividends.

If and when
Series T and V shares are issued, their holders will be entitled to fixed
cumulative quarterly dividends.

If Series U shares are still issued and outstanding, their holders will be
entitled to floating adjustable cumulative monthly dividends starting on March
1, 2007.

REDEMPTION FEATURES

The Series R, Z and AA shares are redeemable by BCE Inc. on the date of
redemption and every five years after that date.

If and when Series Q and AB shares are issued, BCE Inc. may redeem them at
any time, starting on the date of redemption.

If and when Series T and V shares are issued, BCE Inc. may redeem them on
the date of redemption and every five years after that date.

BCE Inc. may redeem the Series S and Y shares at any time. BCE Inc. may
redeem the Series U shares on or after March 1, 2007 at $25.00 per share.
However, after March 1, 2007, and if listed, BCE Inc. may redeem them at $25.50
per share.

INTEREST RATE SWAPS

BCE Inc. has entered into interest rate swap agreements until 2007. These
agreements, in effect, convert the fixed dividends on the Series U and AA
shares into floating rate dividends. The floating dividend rate is equal to the
90-day bankers acceptance rate less 0.675%.

|       |  |               |  |                |  |                  |   |                   |  |                   |       |            |       |                  |            |                |            |  |     |  |     |  |     |  |     |  |       |  |  |  |       | 
|------ |  | ------------- |  | -------------- |  | ---------------- | - | ----------------- |  | ----------------- | ----- | ---------- | ----- | ---------------- | ---------- | -------------- | ---------- |  | --- |  | --- |  | --- |  | --- |  | ----- |  |  |  | ----- | 
|       |  |               |  | Stated capital
|       |  |               |  |               
|       |  | Annual        |  | Convertible    |  | Conversion       |   |                   |  |                   |       | Redemption |       | AuthorizedNumber |            | At December 31
|Series |  | dividend rate |  | into           |  | date             |   | Redemption date   |  | price             |       | of shares  |       | 2002             |            | 2001          
|       |  |               |  |                |  |                  |   |                   |  |                   |       |            |       |                  |            |               
|Q      |  |               |  |                |  | Series R         |   | December 1, 2010  |  | December 1, 2010  |       | $          | 25.50 |                  |            |                | 8,000,000  |  |     |  |    |  |     |  |    | 
|R      |  | $1.5435       |  |                |  | Series Q         |   | December 1, 2005  |  | December 1, 2005  |       | $          | 25.00 |                  |            |                | 8,000,000  |  |     |  | 200 |  |     |  | 200 | 
|S      |  | floating      |  | Series T       |  | November 1, 2006 |   | At any time       |  | $                 | 25.50 |            |       |                  | 8,000,000  |                |            |  | 200 |  |     |  | 200 | 
|T      |  |               |  |                |  | Series S         |   | November 1, 2011  |  | November 1, 2011  |       | $          | 25.00 |                  |            |                | 8,000,000  |  |     |  |    |  |     |  |    | 
|U      |  | $1.3850       |  |                |  | Series V         |   | March 1, 2007     |  | March 1, 2007     |       | $          | 25.00 |                  |            |                | 22,000,000 |  |     |  | 350 |  |     |  | 350 | 
|V      |  |               |  |                |  | Series U         |   | March 1, 2012     |  | March 1, 2012     |       | $          | 25.00 |                  |            |                | 22,000,000 |  |     |  |    |  |     |  |    | 
|W      |  |               |  |                |  |                  |  |                   |  |                   |      |            |       |                  |           |                |            |  |    |  |     |  |    |  |     |  |      |  |  |  | 300   | 
|Y      |  | floating      |  | Series Z       |  | December 1, 2007 |   | At any time       |  | $                 | 25.50 |            |       |                  | 10,000,000 |                |            |  | 29  |  |     |  | 250 | 
|Z      |  | $1.3298       |  |                |  | Series Y         |   | December 1, 2007  |  | December 1, 2007  |       | $          | 25.00 |                  |            |                | 10,000,000 |  |     |  | 221 |  |     |  |    | 
|AA     |  | $1.3625       |  |                |  | Series AB        |   | September 1, 2007 |  | September 1, 2007 |       | $          | 25.00 |                  |            |                | 20,000,000 |  |     |  | 510 |  |     |  |    | 
|AB     |  |               |  |                |  | Series AA        |   | September 1, 2012 |  | September 1, 2012 |       | $          | 25.50 |                  |            |                | 20,000,000 |  |     |  |    |  |     |  |    | 
|       |  |               |  |                |  |                  |   |                   |  |                   |       |            |       |                  |            |                |            |  |     |  |     |  |     |  |     | 
|       |  |               |  |                |  |                  |   |                   |  |                   |       |            |       |                  |            |                |            |  |     |  |     |  |     |  |     |  | 1,510 |  |  |  | 1,300 | 
|       |  |               |  |                |  |                  |   |                   |  |                   |       |            |       |                  |            |                |            |  |     |  |     |  |     |  |     | 

Bell Canada Enterprises  73  2002 Annual Report



---



##### 





Notes to Consolidated Financial Statements


Note 18 SHARE CAPITALcontinued

ii) COMMON SHARES AND CLASS B SHARES

BCE Inc.s articles of incorporation provide for an unlimited number of common
shares and 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.

The table below provides details about the outstanding common shares of
BCE Inc. No Class B Shares were outstanding at December 31, 2002 and 2001.

|                                      |                                                                                     |      |             |            |         |  |           |       |         |  |             |           |  |  |        |    | 
|------------------------------------- | ----------------------------------------------------------------------------------- | ---- | ----------- | ---------- | ------- |  | --------- | ----- | ------- |  | ----------- | --------- |  |  | ------ | -- | 
|For
the year ended December 31        |                                                                                     | 2002 |             | 2001      
|                                      |                                                                                     |      |             |           
|                                      |                                                                                     |      | Number      |            | Stated  |  | Number    |       | Stated 
|                                      |                                                                                     |      | of shares   |            | capital |  | of shares |       | capital
|                                      |                                                                                     |      |             |            |         |  |           |       |        
|Outstanding, beginning of year        |                                                                                     |      | 808,514,211 |            |         |  | 13,827    |       |         |  | 809,861,531 |           |  |  | 13,833 |   
|Shares issued:                        |                                                                                     |      |             |            |         |  |           |       |         |  |             |           |  |  |        |   
|                                      | publicly (a)                                                                        |      |             | 85,000,000 |         |  |           | 2,078 |         |  |             |          |  |  |        |   | 
|                                      | to SBC (a)                                                                          |      |             | 17,862,714 |         |  |           | 500   |         |  |             |          |  |  |        |   | 
|                                      | to employees (under stock option,
employee savings and dividend
reinvestment plans) |      |             | 4,491,003  |         |  |           | 115   |         |  |             | 3,178,980 |  |  |        | 71 | 
|Shares purchased for cancellation (b) |                                                                                     |      |            |            |         |  |          |       |         |  | (4,526,300  | )         |  |  | (77    | ) 
|                                      |                                                                                     |      |             |            |         |  |           |       |         |  |             |           |  |  |        |   
|Outstanding, end of year              |                                                                                     |      | 915,867,928 |            |         |  | 16,520    |       |         |  | 808,514,211 |           |  |  | 13,827 |   
|                                      |                                                                                     |      |             |            |         |  |           |       |         |  |             |           |  |  |        |   



|(a) |  | BCE Inc. publicly issued 85,000,000 common shares in 2002 for a total of
$2.1 billion.
BCE Inc. issued 17,862,714 common shares through private placements to SBC
for $500 million. The net proceeds were used to pay for part of the
repurchase of SBCs 20% interest in BCH.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | In 2001, BCE Inc. bought and cancelled 4.5 million of its common shares for
a total of $191 million.                                                                                                                                                                          

Note 19 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. Employees who participate in the plans
can buy BCE Inc. common shares through regular payroll deductions. In some
cases, the employer may also contribute to the plan. There were 37,311
employees participating in the plans at December 31, 2002.

Each year, employees can choose to have up to a certain percentage of
their annual earnings withheld to buy BCE Inc. common shares. Each
participating company decides on its maximum percentage. In the case of Bell
Canada, it is between 10% to 12%. The employer may contribute up to a certain
maximum percentage of the employees annual earnings. In the case of Bell
Canada, the maximum is 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. BCE Inc. chooses the
method the trustee uses to buy the shares.

The total number of common shares bought for employees was 6,368,907 in
2002 and 4,953,410 in 2001. Compensation expense related to ESPs was $43
million in 2002, $42 million in 2001 and $37 million in 2000. At December 31,
2002, 18,465,011 common shares were reserved for issuance under the ESPs.

BCE INC. STOCK OPTIONS

Under BCE Inc.s long-term incentive programs, BCE Inc. may grant options to
our officers, vice-presidents and other key employees to buy BCE Inc. common
shares. The subscription price is generally 100% of market value on the last
trading day before the grant comes into effect. A total of 34,428,054 common
shares were authorized for issue under these programs at December 31, 2002.

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

Special vesting provisions may apply when:



| |  | there is a change of control of BCE Inc. and the option holders employment
ends under certain circumstances                                                                    
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the option holders are employed by a designated subsidiary of BCE Inc. and
BCE Inc.s ownership interest in such subsidiary falls below the percentage
outlined in the programs.

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

We ensured that exercising the Nortel options will not cause a dilution of
Nortel Networks shares by:



| |  | calculating how many BCE Inc. common shares could be issued under
options granted under stock option programs immediately before the date of the
distribution
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | factoring this number into the calculation that determined how many
Nortel Networks 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 Networks is remitted to BCE Inc.
shortly after the Nortel options are exercised. We credit an amount to retained
earnings equivalent to the market share price of Nortel Networks.

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

|                               |  |           |            |           |  |           |    |           |  |           |            |           |  |  |    |  |  |           |           |   |  |  |    | 
|------------------------------ |  | --------- | ---------- | --------- |  | --------- | -- | --------- |  | --------- | ---------- | --------- |  |  | -- |  |  | --------- | --------- | - |  |  | -- | 
|For the year ended
December 31 |  | 2002      |            | 2001      |  | 2000     
|                               |  |           |            |           |  |          
|                               |  |           |            |           |  | Weighted- |    |           |  |           |            | Weighted- |  |  |    |  |  | Weighted-
|                               |  |           |            |           |  | average   |    |           |  |           |            | average   |  |  |    |  |  | average  
|                               |  | Number    |            | exercise  |  | Number    |    | exercise  |  | Number    |            | exercise 
|                               |  | of shares |            | price ($) |  | of shares |    | price ($) |  | of shares |            | price ($)
|                               |  |           |            |           |  |           |    |           |  |           |            |          
|Outstanding,
beginning of year |  |           | 18,527,376 |           |  |           | 35 |           |  |           | 9,114,695  |           |  |  | 27 |  |  |           | 5,767,012 |   |  |  | 56 | 
|Granted                        |  |           | 8,051,159  |           |  |           | 32 |           |  |           | 11,629,250 |           |  |  | 41 |  |  |           | 4,812,218 |   |  |  | 39 | 
|Exercised                      |  |           | (297,319   | )         |  |           | 12 |           |  |           | (335,669   | )         |  |  | 11 |  |  |           | (986,244  | ) |  |  | 33 | 
|Expired/forfeited              |  |           | (5,810,516 | )         |  |           | 39 |           |  |           | (1,880,900 | )         |  |  | 37 |  |  |           | (478,291  | ) |  |  | 42 | 
|                               |  |           |            |           |  |           |    |           |  |           |            |           |  |  |    |  |  |           |           |   |  |  |    | 
|Outstanding,
end of year       |  |           | 20,470,700 |           |  |           | 33 |           |  |           | 18,527,376 |           |  |  | 35 |  |  |           | 9,114,695 |   |  |  | 27 | 
|                               |  |           |            |           |  |           |    |           |  |           |            |           |  |  |    |  |  |           |           |   |  |  |    | 
|Exercisable,
end of year       |  |           | 6,468,320  |           |  |           | 33 |           |  |           | 2,300,387  |           |  |  | 25 |  |  |           | 1,057,731 |   |  |  | 11 | 
|                               |  |           |            |           |  |           |    |           |  |           |            |           |  |  |    |  |  |           |           |   |  |  |    | 

Bell Canada Enterprises  74  2002 Annual Report



---



##### 





Notes to Consolidated Financial Statements


Note 19 STOCK-BASED COMPENSATION PLANScontinued

The table below tells you more about BCE Inc.s stock option programs at
December 31, 2002.

|                        |  |        |            |      |  |                     |  |                     |    |           |    |  |           |           |           |  |    |  |    | 
|----------------------- |  | ------ | ---------- | ---- |  | ------------------- |  | ------------------- | -- | --------- | -- |  | --------- | --------- | --------- |  | -- |  | -- | 
|                        |  |        |            |      |  | Options outstanding |  | Options exercisable
|                        |  |        |            |      |  |                     |  |                    
|                        |  |        |            |      |  | Weighted-           |  | Weighted-           |    |           |    |  |           | Weighted-
|                        |  |        |            |      |  | average             |  | average             |    |           |    |  |           | average  
|                        |  |        |            |      |  | remaining           |  | exercise            |    |           |    |  |           | exercise 
|Range of exercise price |  | Number |            | life |  | price ($)           |  | Number              |    | price ($)
|                        |  |        |            |      |  |                     |  |                     |    |          
|Below $20               |  |        | 3,252,620  |      |  | 6 years             |  |                     | 15 |           |    |  | 1,479,339 |           |           |  | 13 | 
|$20  $30               |  |        | 1,565,233  |      |  | 9 years             |  |                     | 27 |           |    |  | 8,516     |           |           |  | 26 | 
|$30  $40               |  |        | 7,830,192  |      |  | 9 years             |  |                     | 34 |           |    |  | 1,658,858 |           |           |  | 35 | 
|Over $40                |  |        | 7,822,655  |      |  | 8 years             |  |                     | 41 |           |    |  | 3,321,607 |           |           |  | 41 | 
|                        |  |        |            |      |  |                     |  |                     |    |           |    |  |           |           |           |  |    | 
|                        |  |        | 20,470,700 |      |  |                     |  |                     |    |           | 33 |  |           |           | 6,468,320 |  |    |  | 33 | 
|                        |  |        |            |      |  |                     |  |                     |    |           |    |  |           |           |           |  |    | 

TELEGLOBE STOCK OPTIONS

Since we acquired a controlling interest in Teleglobe in November 2000, holders
of Teleglobe stock options have been allowed to exercise their options under
their original terms, except that when they exercise their options, they will
receive 0.91 of one BCE Inc. common share for every Teleglobe stock option they
hold.

Because of the sale of Teleglobe on December 31, 2002, all of the
outstanding Teleglobe stock options are now vested. Please see Note 8,
Discontinued operations,for more information about the recent developments
relating to Teleglobe.

The table below is a summary of the status of Teleglobes stock option
programs.

|                                                        |  |             |            |           |  |             |    |           |  |             |            |           |  |  |    |  |  |           |            |   |  |  |    | 
|------------------------------------------------------- |  | ----------- | ---------- | --------- |  | ----------- | -- | --------- |  | ----------- | ---------- | --------- |  |  | -- |  |  | --------- | ---------- | - |  |  | -- | 
|For the period
ended December 31                        |  | 2002        |            | 2001      |  | 2000       
|                                                        |  |             |            |           |  |            
|                                                        |  |             |            |           |  | Weighted-   |    |           |  |             |            | Weighted- |  |  |    |  |  | Weighted-
|                                                        |  | Number      |            | average   |  | Number      |    | average   |  | Number      |            | average  
|                                                        |  | of BCE Inc. |            | exercise  |  | of BCE Inc. |    | exercise  |  | of BCE Inc. |            | exercise 
|                                                        |  | shares      |            | price ($) |  | shares      |    | price ($) |  | shares      |            | price ($)
|                                                        |  |             |            |           |  |             |    |           |  |             |            |          
|Outstanding,
January 1, 2002
and 2001, and
Nov. 1, 2000 |  |             | 10,204,966 |           |  |             | 39 |           |  |             | 18,934,537 |           |  |  | 36 |  |  |           | 20,106,612 |   |  |  | 37 | 
|Exercised                                               |  |             | (182,554   | )         |  |             | 16 |           |  |             | (2,911,216 | )         |  |  | 24 |  |  |           | (330,223   | ) |  |  | 13 | 
|Expired/forfeited                                       |  |             | (5,755,689 | )         |  |             | 40 |           |  |             | (5,818,355 | )         |  |  | 44 |  |  |           | (841,852   | ) |  |  | 38 | 
|                                                        |  |             |            |           |  |             |    |           |  |             |            |           |  |  |    |  |  |           |            |   |  |  |    | 
|Outstanding,
December 31                                |  |             | 4,266,723  |           |  |             | 37 |           |  |             | 10,204,966 |           |  |  | 39 |  |  |           | 18,934,537 |   |  |  | 36 | 
|                                                        |  |             |            |           |  |             |    |           |  |             |            |           |  |  |    |  |  |           |            |   |  |  |    | 
|Exercisable,
December 31                                |  |             | 4,266,723  |           |  |             | 37 |           |  |             | 6,073,732  |           |  |  | 38 |  |  |           | 8,035,329  |   |  |  | 33 | 
|                                                        |  |             |            |           |  |             |    |           |  |             |            |           |  |  |    |  |  |           |            |   |  |  |    | 

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

|                        |  |                     |           |                     |  |           |  |           |    |           |    |  |           |           |           |  |    |  |    | 
|----------------------- |  | ------------------- | --------- | ------------------- |  | --------- |  | --------- | -- | --------- | -- |  | --------- | --------- | --------- |  | -- |  | -- | 
|                        |  | Options outstanding |           | Options exercisable
|                        |  |                     |           |                    
|                        |  |                     |           |                     |  | Weighted- |  | Weighted- |    |           |    |  |           | Weighted-
|                        |  |                     |           |                     |  | average   |  | average   |    |           |    |  |           | average  
|                        |  |                     |           |                     |  | remaining |  | exercise  |    |           |    |  |           | exercise 
|Range of exercise price |  | Number              |           | life                |  | price ($) |  | Number    |    | price ($)
|                        |  |                     |           |                     |  |           |  |           |    |          
|Below $20               |  |                     | 463,366   |                     |  | 3 years   |  |           | 12 |           |    |  | 463,366   |           |           |  | 12 | 
|$20  $30               |  |                     | 327,364   |                     |  | 3 years   |  |           | 25 |           |    |  | 327,364   |           |           |  | 25 | 
|$30  $40               |  |                     | 1,202,235 |                     |  | 1 year    |  |           | 37 |           |    |  | 1,202,235 |           |           |  | 37 | 
|Over $40                |  |                     | 2,273,758 |                     |  | 1 year    |  |           | 44 |           |    |  | 2,273,758 |           |           |  | 44 | 
|                        |  |                     |           |                     |  |           |  |           |    |           |    |  |           |           |           |  |    | 
|                        |  |                     | 4,266,723 |                     |  |           |  |           |    |           | 37 |  |           |           | 4,266,723 |  |    |  | 37 | 
|                        |  |                     |           |                     |  |           |  |           |    |           |    |  |           |           |           |  |    | 

PRO FORMA NET EARNINGS

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

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

|                                                        |                                                    |      |       |           |  
|------------------------------------------------------- | -------------------------------------------------- | ---- | ----- | --------- | -
|For
the year ended December 31                          |                                                    | 2002
|                                                        |                                                    |     
|Net earnings, as reported ($ millions)                  |                                                    |      | 2,475 |          
|Pro forma impact ($ millions)                           |                                                    |      | (27   | )        
|                                                        |                                                    |      |       |          
|Pro forma net earnings ($ millions)                     |                                                    |      | 2,448 |          
|Pro forma net earnings per common share (basic) ($)     |                                                    |      | 2.71  |          
|Pro forma net earnings per common share (diluted) ($)   |                                                    |      | 2.67  |          
|                                                        |                                                    |      |       |          
|Assumptions used in Black-Scholes option pricing model: |                                                    |      |       |          
|                                                        | Dividend yield                                     |      |       | 3.3       | %
|                                                        | Expected volatility                                |      |       | 30        | %
|                                                        | Risk-free interest rate                            |      |       | 4.6       | %
|                                                        | Expected life (years)                              |      |       | 4.4       |  
|                                                        | Number of options granted                          |      |       | 8,051,159 |  
|                                                        | Weighted-average fair value of options granted ($) |      |       | 7         |  
|                                                        |                                                    |      |       |          

SPECIAL COMPENSATION PAYMENTS (SCPs)

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

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

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

To
manage the cost of SCPs, we have:



| |  | entered into forward contracts to hedge our exposure to outstanding
rights related to options on BCE Inc. common shares                                                    
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | designated approximately 3 million Nortel Networks common shares to
hedge BCEs exposure to outstanding rights related to the options on the Nortel
Networks common shares.

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



| |  | 2,936,431 relating to BCE Inc. common shares        
|- |  | ----------------------------------------------------
| 
| |  | 2,849,029 relating to Nortel Networks common shares.

All of the outstanding SCPs covered the same number of shares as the
options they relate to. It is the employers responsibility to make the
payments under the SCPs. The expense related to SCPs was $1 million in 2002,
$64 million in 2001 and $82 million in 2000. The expense of $1 million in 2002
includes a recovery of $59 million relating to forfeitures of SCPs.

Bell Canada Enterprises  75  2002 Annual Report



---



##### 





Notes to Consolidated Financial Statements


Note 20 EMPLOYEE BENEFIT PLANS

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

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

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

A number of individual pension benefit plans had projected benefit
obligations that exceeded the fair value of their related plan assets at
December 31, 2002. The aggregate projected benefit obligation of these plans
was $2,598 million, and the aggregate fair value of plan assets was $1,880
million.

Similarly, a number of individual pension benefit plans had plan
assets that exceeded projected benefit obligations at December 31, 2002. The
aggregate projected benefit obligation of these plans was $9,217 million, and
the fair value of their related plan assets was $10,662 million.

|                                                |                                |  |                  |        |                |  |        |       |      |  |        |      |   |  |        |      |  
|----------------------------------------------- | ------------------------------ |  | ---------------- | ------ | -------------- |  | ------ | ----- | ---- |  | ------ | ---- | - |  | ------ | ---- | -
|                                                |                                |  | Pension benefits |        | Other benefits
|                                                |                                |  |                  |        |               
|                                                |                                |  | 2002             |        | 2001           |  | 2002   |       | 2001
|                                                |                                |  |                  |        |                |  |        |       |     
|Projected benefit obligation, beginning of year |                                |  | 11,737           |        |                |  | 10,497 |       |      |  | 1,607  |      |   |  | 1,637  |     
|                                                | Current service cost           |  |                  | 223    |                |  |        | 212   |      |  |        | 35   |   |  |        | 31   |  
|                                                | Interest cost                  |  |                  | 749    |                |  |        | 732   |      |  |        | 115  |   |  |        | 116  |  
|                                                | Actuarial (gains) losses       |  |                  | (19    | )              |  |        | 799   |      |  |        | 173  |   |  |        | (100 | )
|                                                | Estimated benefits payments    |  |                  | (654   | )              |  |        | (794  | )    |  |        | (77  | ) |  |        | (74  | )
|                                                | Employee contributions         |  |                  | 6      |                |  |        | 6     |      |  |        |     |   |  |        |     |  
|                                                | Business combinations          |  |                  | 26     |                |  |        |      |      |  |        | 1    |   |  |        |     |  
|                                                | Special termination costs      |  |                  | 122    |                |  |        | 266   |      |  |        |     |   |  |        |     |  
|                                                | Plan amendment                 |  |                  | 50     |                |  |        |      |      |  |        |     |   |  |        |     |  
|                                                | Divestitures and other         |  |                  | (425   | )              |  |        | 19    |      |  |        | (42  | ) |  |        | (3   | )
|                                                |                                |  |                  |        |                |  |        |       |      |  |        |      |   |  |        |     
|Projected benefit obligation, end of year       |                                |  | 11,815           |        |                |  | 11,737 |       |      |  | 1,812  |      |   |  | 1,607  |     
|                                                |                                |  |                  |        |                |  |        |       |      |  |        |      |   |  |        |     
|Fair value of plan assets, beginning of year    |                                |  | 13,922           |        |                |  | 14,254 |       |      |  | 385    |      |   |  | 361    |     
|                                                | Expected return on plan assets |  |                  | 1,127  |                |  |        | 1,012 |      |  |        | 32   |   |  |        | 28   |  
|                                                | Actuarial gains (losses)       |  |                  | (1,365 | )              |  |        | (597  | )    |  |        | (110 | ) |  |        | (3   | )
|                                                | Estimated benefits payments    |  |                  | (654   | )              |  |        | (794  | )    |  |        | (77  | ) |  |        | (74  | )
|                                                | Employer contribution          |  |                  | 21     |                |  |        | 17    |      |  |        | 76   |   |  |        | 73   |  
|                                                | Employee contribution          |  |                  | 6      |                |  |        | 6     |      |  |        |     |   |  |        |     |  
|                                                | Business combinations          |  |                  | 25     |                |  |        | 65    |      |  |        |     |   |  |        |     |  
|                                                | Divestitures and other         |  |                  | (540   | )              |  |        | (41   | )    |  |        | (7   | ) |  |        |     |  
|                                                |                                |  |                  |        |                |  |        |       |      |  |        |      |   |  |        |     
|Fair value of plan assets, end of year          |                                |  | 12,542           |        |                |  | 13,922 |       |      |  | 299    |      |   |  | 385    |     
|                                                |                                |  |                  |        |                |  |        |       |      |  |        |      |   |  |        |     
|Funded status                                   |                                |  | 727              |        |                |  | 2,185  |       |      |  | (1,513 | )    |   |  | (1,222 | )   
|Unamortized net actuarial (gains) losses        |                                |  | 1,286            |        |                |  | (18    | )     |      |  |       |      |   |  | (286   | )   
|Unamortized past service costs                  |                                |  | 95               |        |                |  | 52     |       |      |  | 1      |      |   |  | 1      |     
|Unamortized transitional (asset) obligation     |                                |  | (143             | )      |                |  | (259   | )     |      |  | 376    |      |   |  | 440    |     
|Valuation allowance                             |                                |  | (136             | )      |                |  | (122   | )     |      |  |       |      |   |  |       |     
|                                                |                                |  |                  |        |                |  |        |       |      |  |        |      |   |  |        |     
|Accrued benefit asset (liability),
end of year  |                                |  | 1,829            |        |                |  | 1,838  |       |      |  | (1,136 | )    |   |  | (1,067 | )   
|                                                |                                |  |                  |        |                |  |        |       |      |  |        |      |   |  |        |     

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

|                          |  |      |        |      |  |  |        |  
|------------------------- |  | ---- | ------ | ---- |  |  | ------ | -
|At December 31            |  | 2002 |        | 2001
|                          |  |      |        |     
|Accrued benefit asset     |  |      | 2,070  |      |  |  | 1,988  |  
|Accrued benefit liability |  |      | (1,377 | )    |  |  | (1,217 | )
|                          |  |      |        |      |  |  |        |  
|                          |  |      | 693    |      |  |  | 771    |  
|                          |  |      |        |      |  |  |        |  

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

Other assumptions we used were:



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

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

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

The table below shows the components of the net benefit plans expense
(credit).

|                                                |  |                  |        |                |  |      |        |      |  |      |        |      |  |  |     |   |  |  |     |   |  |  |     |  
|----------------------------------------------- |  | ---------------- | ------ | -------------- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  |  | --- | - |  |  | --- | - |  |  | --- | -
|                                                |  | Pension benefits |        | Other benefits
|                                                |  |                  |        |               
|For the year ended
December 31                  |  | 2002             |        | 2001           |  | 2000 |        | 2002 |  | 2001 |        | 2000
|                                                |  |                  |        |                |  |      |        |      |  |      |        |     
|Current service cost                            |  |                  | 223    |                |  |      | 212    |      |  |      | 191    |      |  |  | 35  |   |  |  | 31  |   |  |  | 30  |  
|Interest cost                                   |  |                  | 749    |                |  |      | 732    |      |  |      | 696    |      |  |  | 115 |   |  |  | 116 |   |  |  | 109 |  
|Expected return on
plan assets                  |  |                  | (1,127 | )              |  |      | (1,198 | )    |  |      | (1,104 | )    |  |  | (32 | ) |  |  | (28 | ) |  |  | (28 | )
|Amortization of
past service costs              |  |                  | 6      |                |  |      | 12     |      |  |      | 3      |      |  |  |    |   |  |  |    |   |  |  |    |  
|Amortization of net
actuarial (gains) losses    |  |                  | 1      |                |  |      | (4     | )    |  |      | (7     | )    |  |  |    |   |  |  | (6  | ) |  |  | (5  | )
|Amortization of
transitional (asset)
obligation |  |                  | (56    | )              |  |      | (60    | )    |  |      | (64    | )    |  |  | 39  |   |  |  | 40  |   |  |  | 40  |  
|Increase in valuation
allowance                 |  |                  | 14     |                |  |      | 102    |      |  |      | 30     |      |  |  |    |   |  |  |    |   |  |  |    |  
|Other                                           |  |                  |       |                |  |      | (71    | )    |  |      |       |      |  |  |    |   |  |  | 1   |   |  |  |    |  
|                                                |  |                  |        |                |  |      |        |      |  |      |        |      |  |  |     |   |  |  |     |   |  |  |     |  
|Net benefit plans
(credit) expense              |  |                  | (190   | )              |  |      | (275   | )    |  |      | (255   | )    |  |  | 157 |   |  |  | 154 |   |  |  | 146 |  
|                                                |  |                  |        |                |  |      |        |      |  |      |        |      |  |  |     |   |  |  |     |   |  |  |     |  

Bell Canada Enterprises  76  2002 Annual Report



---



##### 





Notes to Consolidated Financial Statements


Note 21 CONTRACTUAL OBLIGATIONS, COMMERCIAL COMMITMENTS AND CONTINGENCIES

CONTRACTUAL OBLIGATIONS

The table below shows our contractual obligations at December 31, 2002. Rental
expense relating to operating leases was $363 million in 2002, $700 million in
2001 and $410 million in 2000.

|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |       |  |  |  |       |  |  |  |        | 
|----------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---------- |  | ----- | ----- |  |  |  | ----- |  |  |  | ----- |  |  |  | ------ | 
|                                          |  | 2003 |       | 2004 |  | 2005 |       | 2006 |  | 2007 |       | Thereafter |  | Total
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |      
|Long-term debt
(excluding
capital leases) |  |      | 1,593 |      |  |      | 978   |      |  |      | 1,197 |            |  |       | 1,131 |  |  |  | 1,818 |  |  |  | 7,907 |  |  |  | 14,624 | 
|Capital leases (a)                        |  |      | 102   |      |  |      | 96    |      |  |      | 61    |            |  |       | 48    |  |  |  | 37    |  |  |  | 123   |  |  |  | 467    | 
|Notes payable and
bank advances           |  |      | 330   |      |  |      |      |      |  |      |      |            |  |       |      |  |  |  |      |  |  |  |      |  |  |  | 330    | 
|Operating leases                          |  |      | 486   |      |  |      | 414   |      |  |      | 384   |            |  |       | 352   |  |  |  | 301   |  |  |  | 1,758 |  |  |  | 3,695  | 
|Purchase obligations                      |  |      | 545   |      |  |      | 227   |      |  |      | 120   |            |  |       | 112   |  |  |  | 48    |  |  |  | 173   |  |  |  | 1,225  | 
|Other contractual
obligations             |  |      | 124   |      |  |      | 10    |      |  |      | 7     |            |  |       | 6     |  |  |  | 5     |  |  |  | 11    |  |  |  | 163    | 
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |       |  |  |  |       |  |  |  |        | 
|Total                                     |  |      | 3,180 |      |  |      | 1,725 |      |  |      | 1,769 |            |  |       | 1,649 |  |  |  | 2,209 |  |  |  | 9,972 |  |  |  | 20,504 | 
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |       |  |  |  |       |  |  |  |        | 



|(a) |  | The imputed interest to be paid in connection with the capital leases
amounts to $67 million.
|--- |  | ---------------------------------------------------------------------------------------------

COMMERCIAL COMMITMENTS

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



| |  | $4,866 million in total credit and other bank facilities, of which $767 million was drawn
|- |  | -----------------------------------------------------------------------------------------
| 
| |  | $196 million in standby letters of credit                                                
| 
| |  | $279 million in various other commitments.                                               

Of the $4,866 million in total credit and other bank facilities, $1.3
billion is used to support our commercial paper programs, excluding extendable
Class E notes. No amount has been drawn on our commercial paper programs.

Also included in total credit and other bank facilities is a bridge
facility of $1.1 billion that was not drawn at December 31, 2002.

In addition, at December 31, 2002, Bell Canada had $50 million of Class E
Notes outstanding. BCE Inc. had no Class E Notes outstanding at December 31,
2002. The maximum principal amount that can be issued is $360 million for BCE
Inc. and $400 million for Bell Canada. Though these notes are not supported by
committed lines of credit, we may extend them in certain circumstances.

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

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

GUARANTEES

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

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

Certain indemnification undertakings can extend for an unlimited period
and generally do not provide for any limit on the maximum potential amount,
although certain agreements do contain specified maximum potential exposure
representing a cumulative amount of approximately $4 billion. The nature of
substantially all of the indemnification undertakings prevents us from making a
reasonable estimate of the maximum potential amount we could be required to pay
counterparties as the agreements do not specify a maximum amount and the
amounts are dependent upon the outcome of future contingent events, the nature
and likelihood of which cannot be determined at this time. Historically, we
have not made any significant payments under such indemnifications. As at
December 31, 2002, an aggregate amount of $42 million has been accrued in the
consolidated balance sheet with respect to these indemnification undertakings,
relating mainly to environmental liabilities.

AGREEMENT BETWEEN BCE INC. AND SBC

As part of the repurchase of SBCs 20% interest in BCH, on June 28, 2002 BCH
granted SBC an option to buy 20% of BCHs outstanding common shares. The option
expired on January 30, 2003.

BCE Inc. has agreed to buy $314 million of BCH
Convertible Series B Preferred Securities held by SBC at face value on or
before December 31, 2004.

AGREEMENT WITH MANITOBA TELECOM SERVICES INC. (MTS)

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

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



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

Bell Canada Enterprises  77  2002 Annual Report



---



##### 





Notes to Consolidated Financial Statements


Note 21 CONTRACTUAL OBLIGATIONS, COMMERCIAL COMMITMENTS AND CONTINGENCIEScontinued

If MTS does not exercise its put option, Bell Canada can exercise its call
option. Under the terms of the call option, Bell Canada has the option to buy
MTS interest:



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

Bell Canada has not received any formal notice from MTS that it plans to
exercise the put option in February 2004.

AGREEMENT WITH CGI

We entered into an agreement on July 1, 1998 with CGIs three majority
individual shareholders. The agreement includes put and call options, and
rights of first refusal, on the CGI shares that these shareholders hold.

The put options give these CGI shareholders the right to gradually sell a
portion of their shares to BCE Inc. until January 4, 2004. The call option
gives BCE Inc. the one-time right to buy all of their CGI shares that BCE Inc.
has not already bought, during the period from January 5, 2004 to January 4,
2006.

The exercise price per share of any put or call option is 115% of the
20-day average market price of CGI shares before the exercise date, payable in
BCE Inc. common shares. If the options were fully exercised, our equity
ownership interest in CGI would increase to approximately 40%.

In December 2002, we informed CGI that our prior publicly stated intention
to dispose of the control block in CGI following the exercise of the put and
call options in 2003 and 2004 is no longer our preferred course of action.

We began discussions with CGI about the future of our investment in CGI.
No final decisions have been made, but we have started discussions to develop a
plan to:



| |  | realize the maximum value of our investment in CGI                                                                                                             
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | enhance the value of CGI by taking steps to retain CGIs management and to
ensure that the company continues to deliver high-quality services to its
customers.

To allow enough time for these discussions, CGIs three majority
individual shareholders have agreed to defer the exercise date of the put
options until April 15, 2003.

SHARED SERVICES AGREEMENT

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

In 2004, Bell Canada may:



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

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

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.

The plaintiffs claim damages of US$1.19 billion, plus interest and costs,
which they allege is equal to the amount they advanced. This represents
approximately 95.2% 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.

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

Note 22 SUPPLEMENTAL DISCLOSURE FOR STATEMENTS OF CASH FLOWS

|                                                       |  |      |       |      |  |  |       | 
|------------------------------------------------------ |  | ---- | ----- | ---- |  |  | ----- | 
|For the year ended
December 31                         |  | 2002 |       | 2001
|                                                       |  |      |       |     
|Interest paid on long-term debt                        |  |      | 1,019 |      |  |  | 1,381 | 
|Income taxes paid                                      |  |      | 1,284 |      |  |  | 1,348 | 
|Cash restricted to collateralize short-term bank loans |  |      |      |      |  |  | 233   | 
|                                                       |  |      |       |      |  |  |       | 

Bell Canada Enterprises  78  2002 Annual Report



---



##### 





Notes to Consolidated Financial Statements


Note 23 RECONCILIATION OF CANADIAN GAAP TO UNITED STATES GAAP

We have prepared these consolidated financial statements according to
Canadian GAAP. The tables that follow 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.

STATEMENTS OF OPERATIONS

|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |       |  
|------------------------------------------------------------------------------------ | ------------------------------------------------------- | ---- | -------- | -------- | ------- | -------- | ------ | ---- | -------- | ----- | ------- | ------ | ---- | ---- | -------- | ----- | ------- | ---- | ---- | - |  |  | ------ | ---- | - |  | ------ | - |  |  | ------ | - |  |  | ------ | ----- | -
|For
the year ended December 31                                                       |                                                         | 2002 |          | 2001 (1) |         | 2000 (1)
|                                                                                     |                                                         |      |          |          |         |         
|                                                                                     |                                                         |      | Canadian |          | Adjust- |          | U.S.   |      | Canadian |       | Adjust- |        | U.S. |      | Canadian |       | Adjust- |      | U.S.
|($ millions, except share amounts)                                                   |                                                         | GAAP |          | ments    |         | GAAP     |        | GAAP |          | ments |         | GAAP   |      | GAAP |          | ments |         | GAAP
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |     
|Operating revenues                                                                   |                                                         |      | 19,768   |          |         |          |       |      |          |       | 19,768  |        |      |      | 19,340   |       |         |      |     |   |  |  | 19,340 |      |   |  | 16,668 |   |  |  |       |   |  |  | 16,668 |      
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|Operating expenses (a)(b)(l)                                                         |                                                         |      | 12,146   |          |         |          | 256    |      |          |       | 12,402  |        |      |      | 12,098   |       |         |      | 363  |   |  |  | 12,461 |      |   |  | 9,953  |   |  |  | 230    |   |  |  | 10,183 |      
|Amortization expense (c)                                                             |                                                         |      | 3,146    |          |         |          |       |      |          |       | 3,146   |        |      |      | 3,826    |       |         |      | 11   |   |  |  | 3,837  |      |   |  | 3,352  |   |  |  | 31     |   |  |  | 3,383  |      
|Net benefit plans (credit) expense (d)                                               |                                                         |      | (33      | )        |         |          | 37     |      |          |       | 4       |        |      |      | (121     | )     |         |      | (216 | ) |  |  | (337   | )    |   |  | (109   | ) |  |  | (114   | ) |  |  | (223   | )    
|Restructuring and other charges (e)                                                  |                                                         |      | 887      |          |         |          |       |      |          |       | 887     |        |      |      | 980      |       |         |      | 10   |   |  |  | 990    |      |   |  |       |   |  |  |       |   |  |  |       |      
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|Total operating expenses                                                             |                                                         |      | 16,146   |          |         |          | 293    |      |          |       | 16,439  |        |      |      | 16,783   |       |         |      | 168  |   |  |  | 16,951 |      |   |  | 13,196 |   |  |  | 147    |   |  |  | 13,343 |      
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|Operating income                                                                     |                                                         |      | 3,622    |          |         |          | (293   | )    |          |       | 3,329   |        |      |      | 2,557    |       |         |      | (168 | ) |  |  | 2,389  |      |   |  | 3,472  |   |  |  | (147   | ) |  |  | 3,325  |      
|Other expense (income) (b)(f)(m)                                                     |                                                         |      | (2,468   | )        |         |          | (28    | )    |          |       | (2,496  | )      |      |      | (4,015   | )     |         |      | 54   |   |  |  | (3,961 | )    |   |  | (97    | ) |  |  | 9      |   |  |  | (88    | )    
|Impairment charge                                                                    |                                                         |      | 770      |          |         |          |       |      |          |       | 770     |        |      |      |         |       |         |      |     |   |  |  |       |      |   |  |       |   |  |  |       |   |  |  |       |      
|Interest expense (g)                                                                 |                                                         |      | 1,161    |          |         |          | (10    | )    |          |       | 1,151   |        |      |      | 1,056    |       |         |      |     |   |  |  | 1,056  |      |   |  | 935    |   |  |  |       |   |  |  | 935    |      
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|Earnings from continuing operations before
income taxes and non-controlling interest |                                                         |      | 4,159    |          |         |          | (255   | )    |          |       | 3,904   |        |      |      | 5,516    |       |         |      | (222 | ) |  |  | 5,294  |      |   |  | 2,634  |   |  |  | (156   | ) |  |  | 2,478  |      
|Income taxes (b)(h)                                                                  |                                                         |      | 1,593    |          |         |          | (198   | )    |          |       | 1,395   |        |      |      | 1,759    |       |         |      | (108 | ) |  |  | 1,651  |      |   |  | 1,338  |   |  |  | (137   | ) |  |  | 1,201  |      
|Non-controlling interest (i)                                                         |                                                         |      | 668      |          |         |          | (14    | )    |          |       | 654     |        |      |      | 186      |       |         |      | (24  | ) |  |  | 162    |      |   |  | 323    |   |  |  | (8     | ) |  |  | 315    |      
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|Earnings from continuing operations                                                  |                                                         |      | 1,898    |          |         |          | (43    | )    |          |       | 1,855   |        |      |      | 3,571    |       |         |      | (90  | ) |  |  | 3,481  |      |   |  | 973    |   |  |  | (11    | ) |  |  | 962    |      
|Discontinued operations (j)                                                          |                                                         |      | 577      |          |         |          | 198    |      |          |       | 775     |        |      |      | (3,057   | )     |         |      | 146  |   |  |  | (2,911 | )    |   |  | 3,812  |   |  |  | (5,033 | ) |  |  | (1,221 | )    
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|Net earnings before cumulative effect of change in
accounting policy                 |                                                         |      | 2,475    |          |         |          | 155    |      |          |       | 2,630   |        |      |      | 514      |       |         |      | 56   |   |  |  | 570    |      |   |  | 4,785  |   |  |  | (5,044 | ) |  |  | (259   | )    
|Cumulative effect of change in accounting policy (m)(n)                              |                                                         |      |         |          |         |          | (7,268 | )    |          |       | (7,268  | )      |      |      |         |       |         |      | 21   |   |  |  | 21     |      |   |  |       |   |  |  |       |   |  |  |       |      
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|Net earnings (loss)                                                                  |                                                         |      | 2,475    |          |         |          | (7,113 | )    |          |       | (4,638  | )      |      |      | 514      |       |         |      | 77   |   |  |  | 591    |      |   |  | 4,785  |   |  |  | (5,044 | ) |  |  | (259   | )    
|Dividends on preferred shares                                                        |                                                         |      | (59      | )        |         |          |       |      |          |       | (59     | )      |      |      | (64      | )     |         |      |     |   |  |  | (64    | )    |   |  | (79    | ) |  |  |       |   |  |  | (79    | )    
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|Net earnings (loss) applicable to common shares                                      |                                                         |      | 2,416    |          |         |          | (7,113 | )    |          |       | (4,697  | )      |      |      | 450      |       |         |      | 77   |   |  |  | 527    |      |   |  | 4,706  |   |  |  | (5,044 | ) |  |  | (338   | )    
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|Other comprehensive earnings (loss) items                                            |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|                                                                                     | Change in currency translation adjustment               |      |          |          |         |          |        |      |          |       |         | 30     |      |      |          |       |         |      |      |   |  |  |        | 158  |   |  |        |   |  |  |        |   |  |  |        | 107   |  
|                                                                                     | Change in unrealized gain or loss on investments (k)    |      |          |          |         |          |        |      |          |       |         | 9      |      |      |          |       |         |      |      |   |  |  |        | (168 | ) |  |        |   |  |  |        |   |  |  |        | 2,788 |  
|                                                                                     | Additional minimum liability for pension obligation (d) |      |          |          |         |          |        |      |          |       |         | (81    | )    |      |          |       |         |      |      |   |  |  |        |     |   |  |        |   |  |  |        |   |  |  |        |      |  
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|                                                                                     | Comprehensive earnings (loss)                           |      |          |          |         |          |        |      |          |       |         | (4,739 | )    |      |          |       |         |      |      |   |  |  |        | 517  |   |  |        |   |  |  |        |   |  |  |        | 2,557 |  
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|Net earnings (loss) per common share  basic                                         |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|                                                                                     | Continuing operations                                   |      |          |          |         |          |        |      |          |       |         | 2.09   |      |      |          |       |         |      |      |   |  |  |        | 4.23 |   |  |        |   |  |  |        |   |  |  |        | 1.32  |  
|                                                                                     | Net earnings (loss)                                     |      |          |          |         |          |        |      |          |       |         | (6.07  | )    |      |          |       |         |      |      |   |  |  |        | 0.65 |   |  |        |   |  |  |        |   |  |  |        | (0.50 | )
|Net earnings (loss) per common share  diluted                                       |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|                                                                                     | Continuing operations                                   |      |          |          |         |          |        |      |          |       |         | 2.06   |      |      |          |       |         |      |      |   |  |  |        | 4.18 |   |  |        |   |  |  |        |   |  |  |        | 1.28  |  
|                                                                                     | Net earnings (loss)                                     |      |          |          |         |          |        |      |          |       |         | (6.10  | )    |      |          |       |         |      |      |   |  |  |        | 0.64 |   |  |        |   |  |  |        |   |  |  |        | (0.53 | )
|Dividends per common share                                                           |                                                         |      |          |          |         |          |        |      |          |       | 1.20    |        |      |      |          |       |         |      |      |   |  |  | 1.20   |      |   |  |        |   |  |  |        |   |  |  | 1.24   |      
|Average number of common shares outstanding
(millions)                               |                                                         |      |          |          |         |          |        |      |          |       | 847.9   |        |      |      |          |       |         |      |      |   |  |  | 807.9  |      |   |  |        |   |  |  |        |   |  |  | 670.0  |      
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|Adjusted net earnings (loss) (o)                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|Net earnings (loss), as reported                                                     |                                                         |      |          |          |         |          |        |      |          |       | (4,638  | )      |      |      |          |       |         |      |      |   |  |  | 591    |      |   |  |        |   |  |  |        |   |  |  | (259   | )    
|Amortization expense on goodwill and other intangible
assets                         |                                                         |      |          |          |         |          |        |      |          |       |        |        |      |      |          |       |         |      |      |   |  |  | 918    |      |   |  |        |   |  |  |        |   |  |  | 511    |      
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|Net earnings (loss), adjusted                                                        |                                                         |      |          |          |         |          |        |      |          |       | (4,638  | )      |      |      |          |       |         |      |      |   |  |  | 1,509  |      |   |  |        |   |  |  |        |   |  |  | 252    |      
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|Adjusted net earnings (loss) per common share                                        |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      
|                                                                                     | Basic                                                   |      |          |          |         |          |        |      |          |       |         | (6.07  | )    |      |          |       |         |      |      |   |  |  |        | 1.79 |   |  |        |   |  |  |        |   |  |  |        | 0.26  |  
|                                                                                     | Diluted                                                 |      |          |          |         |          |        |      |          |       |         | (6.10  | )    |      |          |       |         |      |      |   |  |  |        | 1.77 |   |  |        |   |  |  |        |   |  |  |        | 0.23  |  
|                                                                                     |                                                         |      |          |          |         |          |        |      |          |       |         |        |      |      |          |       |         |      |      |   |  |  |        |      |   |  |        |   |  |  |        |   |  |  |        |      



|(1) |  | The figures for 2001 and 2000 have been restated for the United States GAAP difference relating to the pension valuation allowance (see Note 23(d)).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

Bell Canada Enterprises  79  2002 Annual Report



---



##### 





Notes to Consolidated Financial Statements


Note 23 RECONCILIATION OF CANADIAN GAAP TO UNITED STATES GAAPcontinued

STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE EARNINGS (LOSS)

|                                                        |  |      |     |      |  |      |     |   |  |  |       |  
|------------------------------------------------------- |  | ---- | --- | ---- |  | ---- | --- | - |  |  | ----- | -
|For the year ended
December 31                          |  | 2002 |     | 2001 |  | 2000
|                                                        |  |      |     |      |  |     
|Currency translation adjustment                         |  |      | 10  |      |  |      | (20 | ) |  |  | (178  | )
|Unrealized gain (loss) on investments (k)               |  |      | (1  | )    |  |      | (10 | ) |  |  | 2,788 |  
|Additional minimum liability for pension obligation (d) |  |      | (81 | )    |  |      |    |   |  |  |      |  
|                                                        |  |      |     |      |  |      |     |   |  |  |       |  
|Accumulated other comprehensive earnings (loss)         |  |      | (72 | )    |  |      | (30 | ) |  |  | 2,610 |  
|                                                        |  |      |     |      |  |      |     |   |  |  |       |  

RECONCILIATION OF TOTAL SHAREHOLDERS EQUITY

|                               |                                                                                           |      |        |         |   |         |        |      |   |  |        |       |  
|------------------------------ | ----------------------------------------------------------------------------------------- | ---- | ------ | ------- | - | ------- | ------ | ---- | - |  | ------ | ----- | -
|For the
year ended December 31 |                                                                                           | 2002 |        | 2001(1) |   | 2000(1)
|                               |                                                                                           |      |        |         |   |        
|Canadian GAAP                  |                                                                                           |      | 12,871 |         |   |         | 16,799 |      |   |  | 17,279 |      
|Adjustments                    |                                                                                           |      |        |         |   |         |        |      |   |  |        |      
|                               | Operating expenses (a)                                                                    |      |        | (622    | ) |         |        | (564 | ) |  |        | (360  | )
|                               | Purchase price adjustment (c)                                                             |      |        |        |   |         |        | (768 | ) |  |        | (768  | )
|                               | Employee future benefits (d)                                                              |      |        | 17      |   |         |        | 330  |   |  |        | 114   |  
|                               | Gain on disposal of investments and on reduction
of ownership in subsidiary companies (f) |      |        | 163     |   |         |        | 163  |   |  |        | 179   |  
|                               | Other                                                                                     |      |        | 56      |   |         |        | 40   |   |  |        | 83    |  
|                               | Tax effect of the above adjustments (h)                                                   |      |        | 97      |   |         |        | (35  | ) |  |        | 6     |  
|                               | Non-controlling interest effect of the
above adjustments (i)                              |      |        | 120     |   |         |        | 21   |   |  |        | 2     |  
|                               | Discontinued operations (j)                                                               |      |        |        |   |         |        | (342 | ) |  |        | (425  | )
|                               | Unrealized gain (loss) on investments (k)                                                 |      |        | (1      | ) |         |        | (10  | ) |  |        | 2,788 |  
|                               |                                                                                           |      |        |         |   |         |        |      |   |  |        |      
|United States GAAP             |                                                                                           |      | 12,701 |         |   |         | 15,634 |      |   |  | 18,898 |      
|                               |                                                                                           |      |        |         |   |         |        |      |   |  |        |      



|(1) |  | The figures for 2001 and 2000 have been
restated for the United States GAAP
difference relating to the pension valuation
allowance (see Note 23(d)).                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(a) |  | Pre-operating expenses and subscriber acquisition costs
Under Canadian GAAP, pre-operating
expenses and subscriber acquisition costs
can be deferred and amortized if they meet
certain criteria. Under United States
GAAP, these costs are expensed as
incurred.                                                                                                                                                                                                                                                                 
|   
|(b) |  | Investment tax credits
Under Canadian GAAP, investment tax
credits are recorded as a reduction of
the related expenditure. Under United
States GAAP, they are recorded as a
reduction of the income tax provision.                                                                                                                                                                                                                                                                                                                
|   
|(c) |  | Goodwill
Under Canadian GAAP, prior to July 1,
2001, the total purchase price on
acquisitions is based on the market value
price for a reasonable period before and
after the date of acquisition. Under
United States GAAP, the aggregate purchase
price on acquisitions is based on the
market price for a reasonable period
before and after the date the transaction
is announced. This difference between
Canadian GAAP and United States GAAP
results in a difference in the amount of
purchase price allocated to goodwill.
|   
|(d) |  | Future benefits for employees
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.                                                                                                                                                                                                                                                                                                             



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Additionally, Canadian GAAP requires
recognition of 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. Recently the United States
regulators have interpreted this to be a
difference between Canadian and United
States GAAP. In light of these recent
developments, we retroactively increased
previously reported United States GAAP net
income for fiscal 2001 and 2000 by $61
million (net of a tax expense of $41
million) and $18 million (net of a tax
expense of $12 million), respectively (2001
 $0.07 per basic share and $0.07 per
diluted share; 2000  $0.03 per basic share
and $0.02 per diluted share).
|
| | Under United States GAAP, an additional
minimum liability is recorded for the excess
of the unfunded accumulated benefit
obligation over the recorded pension
benefits liability. An offsetting intangible
asset is recorded equal to the unrecognized
prior service costs, with any difference
recorded as a reduction in accumulated other
comprehensive income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



|(e) |  | Restructuring and other charges
Under Canadian GAAP, when assessing the
impairment of capital assets, estimated
future net cash flows are not discounted in
computing the net recoverable amount. Under
United States GAAP, the calculation of
impairment is made on a discounted basis.                                                                                                   
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(f) |  | Gains on investments
Under Canadian GAAP and United States
GAAP, gains on investments are calculated
in a similar manner. Differences in
Canadian GAAP and United States GAAP,
however, will cause the underlying
carrying value of the investment to be
different. This will cause the resulting
gain to be different.                                                                    
|   
|(g) |  | Interest expense
Under Canadian GAAP, convertible debentures
are split in two components, debt and
equity. Over time, the debt component is
increased to reach its original face value
at maturity by recognizing an accretion
expense as part of interest expense. Under
United States GAAP, convertible debentures
are recorded as long-term debt and no
accretion expense is recognized.
|   
|(h) |  | Income taxes
In addition, the income tax adjustment also
reflects the impact on income taxes of the
United States GAAP adjustments that we
describe above. 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 must be used
to calculate future income tax assets and
liabilities under Canadian GAAP
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | only income tax rates of enacted tax law can be used under United States
GAAP.                                                                     



|(i) |  | Non-controlling interest
The non-controlling interest adjustment
represents the impact on non-controlling
interest of the United States GAAP
adjustments that we describe above.                                                                                                                                                                                                                                                                                                                                        
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(j) |  | Discontinued operations
Under United States GAAP, the gain on
reduction of our ownership in Nortel
Networks in 2000 resulting from the
distribution of our interest in Nortel
Networks was credited directly to retained
earnings. Additionally, other differences
between Canadian GAAP and United States
GAAP will cause the historical carrying
values of the net assets of discontinued
operations to be different.                                                                                                 
|   
|(k) |  | Change in unrealized gain (loss) on investments
Our portfolio investments would be
classified as available-for-sale under
United States GAAP and carried at fair
value with any unrealized gains or losses
included in other comprehensive earnings,
net of tax.                                                                                                                                                                                                                                                      
|   
|(l) |  | Accounting for stock-based compensation
In December 2002, the FASB issued Statement
of Financial Accounting Standards (SFAS) No.
148, Accounting for Stock-Based Compensation
 Transition and Disclosure,which applies
to fiscal years ending after December 15,
2002. It amends the transitional provisions
of SFAS 123 for companies that choose to
recognize stock-based compensation under the
fair value-based method of SFAS 123, instead
of choosing to continue following the
intrinsic value method of APB 25.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In accordance with this standard, we
adopted the fair value-based method of
accounting on a prospective basis, effective
January 1, 2002 and accordingly recorded
operating expenses of $27 million in 2002
($2 million in the first quarter, $3 million
in the second quarter, $15 million in the
third quarter and $7 million in the fourth
quarter). The impact on both basic and
diluted earnings per
share is nil in the first and second
quarters, $0.02 in the third quarter and
$0.01 in the fourth quarter.
|
| | 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 original date of adoption
of SFAS 123. In the table below, the fair
value of each option grant is estimated on
the date of the grant using the
Black-Scholes pricing model.                                                                                                                  

|                                                                                                              |                                                    |      |        |      |   |      |      |        |   |  |       |        |  
|------------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | ---- | ------ | ---- | - | ---- | ---- | ------ | - |  | ----- | ------ | -
|For the
year ended December 31                                                                                |                                                    | 2002 |        | 2001 |   | 2000
|                                                                                                              |                                                    |      |        |      |   |     
|Net earnings (loss), as reported                                                                              |                                                    |      | (4,638 | )    |   |      | 591  |        |   |  | (259  | )     
|Compensation cost included in net earnings                                                                    |                                                    |      | 27     |      |   |      |     |        |   |  |      |       
|Total compensation cost                                                                                       |                                                    |      | (68    | )    |   |      | (60  | )      |   |  | (276  | )     
|                                                                                                              |                                                    |      |        |      |   |      |      |        |   |  |       |       
|Pro forma net earnings (loss)                                                                                 |                                                    |      | (4,679 | )    |   |      | 531  |        |   |  | (535  | )     
|Pro forma net earnings (loss) per common share (basic)                                                        |                                                    |      | (6.12  | )    |   |      | 0.58 |        |   |  | (0.92 | )     
|Pro forma net earnings (loss) per common share (diluted)                                                      |                                                    |      | (6.14  | )    |   |      | 0.57 |        |   |  | (0.94 | )     
|Assumptions used in Black-Scholes option
pricing model for BCE stock options granted:                         |                                                    |      |        |      |   |      |      |        |   |  |       |       
|                                                                                                              | Dividend yield                                     |      |        | 3.3  | % |      |      | 3.3    | % |  |       | 2.8    | %
|                                                                                                              | Expected volatility                                |      |        | 30   | % |      |      | 25%37 | % |  |       | 29%37 | %
|                                                                                                              | Risk-free interest rate                            |      |        | 4.6  | % |      |      | 5.1    | % |  |       | 6.3    | %
|                                                                                                              | Expected life (years)                              |      |        | 4.4  |   |      |      | 4.5    |   |  |       | 4.5    |  
|                                                                                                              | Weighted-average fair value of options granted ($) |      |        | 7    |   |      |      | 10     |   |  |       | 13     |  
|                                                                                                              |                                                    |      |        |      |   |      |      |        |   |  |       |       
|Assumptions used in Black-Scholes option pricing model
for Nortel Networks Corporation stock options granted: |                                                    |      |        |      |   |      |      |        |   |  |       |       
|                                                                                                              | Dividend yield                                     |      |        |      |   |      |      |        |   |  |       | 0.1    | %
|                                                                                                              | Expected volatility                                |      |        |      |   |      |      |        |   |  |       | 54     | %
|                                                                                                              | Risk-free interest rate                            |      |        |      |   |      |      |        |   |  |       | 4.9    | %
|                                                                                                              | Expected life (years)                              |      |        |      |   |      |      |        |   |  |       | 4      |  
|                                                                                                              | Weighted-average fair value of options granted ($) |      |        |      |   |      |      |        |   |  |       | 41     |  
|                                                                                                              |                                                    |      |        |      |   |      |      |        |   |  |       |       



|(m) |  | Accounting for derivative instruments and hedging activities (SFAS 133)
On January 1, 2001, we adopted SFAS 133,
Accounting for Derivative Instruments and
Hedging Activities,as amended by SFAS 138.
In accordance with this standard, all
derivatives must be recorded on the balance
sheet at fair value under United States
GAAP. Additionally, certain economic hedging
strategies such as the use of interest rate
swaps to hedge preferred share dividends and
the SCP hedging strategy no longer qualified
for hedge accounting under United States
GAAP. As a result, other assets increased by
$44 million and a net gain of $21 million
was recorded on the transition to the new
rule.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Bell Canada Enterprises  80  2002 Annual Report



---



##### 





Notes to Consolidated Financial Statements


Note 23 RECONCILIATION OF CANADIAN GAAP TO UNITED STATES GAAPcontinued



| |                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Furthermore, on January 1, 2001, the forward contracts relating to the
Nortel Networks shares, which we previously recorded in other comprehensive
income at their fair value of $2,005 million, and the offsetting change in
the value of the hedged Nortel Networks shares, were reclassified to earnings
on the transition to the new rule. There was no effect on net earnings.



| |                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The change in the fair value of derivative contracts no longer
qualifying for hedge accounting under United States GAAP is reported in net
earnings. This resulted in a pre-tax gain of $27 million ($44 million in
2001).



|(n) |  | Recent changes to accounting standards
Business combinations and goodwill and other intangible assets                                                          
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | The Financial Accounting Standards Board (FASB) recently issued new Standards
No. 141,
Business Combinations,and No. 142, Goodwill and Other Intangible Assets.



| |                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------
| | Effective July 1, 2001, Standard No. 141 requires us to account for all business combinations using the purchase method.



| |                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Effective January 1, 2002, Standard No. 142 requires us to no longer amortize goodwill and indefinite-life intangible assets to earnings and to
assess them for impairment each year. This includes a transitional impairment
test.



| |                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As of June 30, 2002, we had allocated our existing goodwill and
indefinite-life intangible assets to our reporting units and completed the
assessment of the quantitative impact of the transitional impairment test
measured as 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 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 Standard No. 142. The impairment loss related to impaired
goodwill of reporting units in Teleglobe ($6,604 million), Bell Globemedia
($545 million) and BCE Emergis ($119 million).



| |  | Impairment or disposal of long-lived assets
The FASB recently issued new Standard No. 144, Accounting for the Impairment
or Disposal of Long-lived Assets.This standard applies to fiscal years
beginning after December 15, 2001 and covers how to account for and report
impairments or disposals of long-lived assets. We are required to record an
impairment loss on long-lived assets that are held and used when the carrying
amount of the asset is not recoverable from its undiscounted cash flows. The
impairment loss is the difference between the assets carrying amount and
estimated fair value.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                                        
| | ---------------------------------------
| | Long-lived assets that are disposed of:



| |  |  | by sale are recorded at the lower of their carrying amount or estimated
fair value (less costs to sell) when certain criteria are met. Depreciation
stops at the same time.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | other than by sale are accounted for and reported like assets being held
and used.                                                                                         



| |  | Costs relating to exits and disposals
The FASB recently issued new Standard No. 146, Accounting for Costs
Associated with Exit or Disposal Activities.Effective January 1, 2003, the
standard requires costs relating to exits or disposal activities started
after December 31, 2002 to be recorded at their fair values when a liability
has been incurred. Under the previous guidance of Emerging Issues Task Force
Issue 94-3, Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit and Activity (including Certain Costs Incurred in a
Restructuring),certain exit costs were recorded when management committed to
an exit plan. We do not expect that Standard No. 146 will have a significant
effect on our financial position or results of operations.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Accounting for asset retirement obligations
In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations,which applies to financial statements for fiscal years beginning
after June 15, 2002. It covers how to recognize and remeasure obligations
associated with the retirement of tangible long-lived assets. We have not yet
determined whether SFAS 143 will have any effect on our business, results of
operations and financial condition.                                                                                                                                                                                                                                                                                                                     
|
| |  | Disclosure of guarantees
In November 2002, the FASB issued Interpretation (FIN) No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others,which requires companies that act as
guarantors to disclose more information in their financial statements about
their obligations under certain guarantees. It defines a guarantee and also
requires guarantors to recognize a liability for the fair value of their
obligation when they enter into these guarantees.                                                                                                                                                                                                                                                          



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The disclosure requirements of FIN No. 45 apply to financial statements
issued after December 15, 2002. We have applied them to the presentation of
our consolidated financial statements. The recognition requirements of FIN
No. 45 apply to guarantees made or changed after December 31, 2002. We have
not yet determined whether the recognition requirements will have any effect
on our business, results of operations and financial condition.



| |  | Consolidation of variable interest entities
In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities.This interpretation clarifies how to apply Accounting Research
Bulletin No. 51,
Consolidated Financial Statements to those entities defined as 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. Variable interest entities are commonly
referred to as special purpose entities.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | FIN No. 46 applies immediately to all special purpose entities created
after January 31, 2003, and by the beginning of the first interim or annual
reporting period beginning after June 15, 2003 for special purpose entities
created before February 1, 2003.



| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We currently conduct certain transactions through special purpose
entities and are assessing the structure of these transactions against the
criteria set out in FIN No. 46.



|(o) |  | Adjusted net earnings
The adjusted net earnings reflect the impact of no longer amortizing goodwill
and indefinite-life intangible assets, effective January 1, 2002. Please see
Note 23(n), Recent changes to accounting standards,for more information.                                                                                                                                                                                                                                                                            
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(p) |  | Pro forma disclosures
If we assume that Bell Globemedia was created on January 1, 2000, the
unaudited pro forma consolidated figures for the year ended December 31, 2000
would have been $17,741 million in revenues, $4,663 million in net earnings,
$7.26 basic earnings per share and $6.87 fully diluted earnings per share.
For the year ended December 31, 2001, the figures would have had an
insignificant effect on pro forma consolidated revenues, net earnings, basic
earnings per share and diluted earnings per share.

Note 24 SUBSEQUENT EVENT

ISSUANCE OF SERIES AC PREFERRED SHARES

On February 20, 2003, BCE Inc. filed a short form prospectus with Canadian
securities regulatory authorities relating to the issue of 20 million Series AC
Preferred Shares for total proceeds of $510 million.

BCE Inc. is proposing to
issue six million of the 20 million Series AC Preferred Shares under a public
bought deal offering, the net proceeds from which to be used to redeem a
portion of the outstanding Series P Preferred Shares or repay our indebtedness
under the bridge facility relating to the repurchase of SBCs 20% interest in
BCH.

The remaining 14 million Series AC Preferred Shares would be issued to the
holders of BCE Inc.s 14 million Series U Preferred Shares if BCE Inc. elects
to exercise its option to buy all of their shares.

Holders of the Series U Preferred Shares would use the proceeds from the
sale of their shares to buy the 14 million Series AC Preferred Shares for the
subscription price of $357 million.

These transactions are scheduled to close on or about February 28, 2003.

LAWSUIT LAUNCHED AGAINST FIVE FORMER DIRECTORS OF TELEGLOBE

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, without establishing any basis on which its allegations are
made, is seeking a declaration that such redemption and retraction were
prohibited under the Canada Business Corporations Act and that 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
be indemnified by 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.

Bell Canada Enterprises  81  2002 Annual Report



---



##### 





Board of Directors and Corporate Officers


Board of Directors

as at February 26, 2003

André Bérard, O.C.Montréal, Québec
Chairman, National Bank of Canada. 
A director since January 2003.
A director of Bell Canada and
Telesat Canada.

Richard J. Currie, C.M.Toronto, Ontario
Chairman, BCE Inc. 
A director since May 1995.
Chairman of the Pension Fund
Committee. Chairman of
Bell Canada and Telesat Canada.

Anthony S. Fell, O.C.Toronto, Ontario
Chairman, RBC Dominion
Securities Limited. 
A director since January 2002.
A member of the Audit Committee
and the Pension Fund Committee.
A director of Bell Canada and
Telesat Canada.

Donna Soble KaufmanToronto, Ontario
Lawyer and Corporate Director. 
A director since June 1998.
A member of the Corporate
Governance Committee.
A director of Bell Canada,
Bell Canada International Inc.,
Bell Globemedia Inc. and
Telesat Canada.

Thomas E. Kierans, O.C.Toronto, Ontario
Chairman, Canadian Institute
for Advanced Research (CIAR). 
A director since April 1999.
A member of the Audit Committee.
A director of Bell Canada and
Telesat Canada.

Brian M. LevittMontréal, Québec
Co-Chair, Osler, Hoskin & Harcourt
LLP, Business Lawyers. 
A director since May 1998.
A member of the Corporate
Governance Committee and the
Management Resources and
Compensation Committee.
A director of Bell Canada,
Bell Globemedia Inc. and
Telesat Canada.

The Honourable
Edward C. Lumley, P.C.South Lancaster, Ontario
Vice-Chairman, BMO Nesbitt
Burns Inc. 
A director since January 2003.
A director of Bell Canada and
Telesat Canada.

Judith Maxwell, C.M.Ottawa, Ontario
President, Canadian Policy
Research Networks Inc. 
A director since January 2000.
A member of the Corporate
Governance Committee and
the Pension Fund Committee.
A director of Bell Canada and
Telesat Canada.

John H. McArthurWayland, Massachusetts
Dean Emeritus, Harvard University
Graduate School of Business
Administration. 
A director since May 1995. A member
of the Management Resources
and Compensation Committee.
A director of BCE Emergis Inc.,
Bell Canada and Telesat Canada.

J. Edward Newall, O.C.Calgary, Alberta
Chairman, Newall and Associates. 
A director since May 1989. Chairman
of the Audit Committee and a member
of the Corporate Governance
Committee. A director of Bell Canada
and Telesat Canada.

Thomas C. ONeill, F.C.A.Don Mills, Ontario
Corporate Director. 
A director since January 2003.
A director of Bell Canada and
Telesat Canada.

Robert C. PozenNewton, Massachusetts
Chief of Commerce and Labour,
Massachusetts State House. 
A director since February 2002.
A member of the Audit Committee
and the Pension Fund Committee.
A director of Telesat Canada.

Michael J. SabiaMontréal, Québec
President and Chief Executive
Officer, BCE Inc. 
A director since October 2002.
A director and Chief Executive
Officer of Bell Canada.
Chairman of BCE Emergis Inc., 
BCE Nexxia Inc., and
Bell Globemedia Inc.
A director of Bell ExpressVu Inc.,
Bell Mobility Holdings Inc., and
Telesat Canada.

Guy Saint-Pierre, C.C.Montréal, Québec
Chairman, Royal Bank of Canada. 
A director since May 1995.
Chairman of the Corporate
Governance Committee.
A director of Bell Canada and
Telesat Canada.

Paul M. Tellier, P.C., C.C., Q.C.Montréal, Québec
President and Chief Executive
Officer and a director,
Bombardier Inc. 
A director since April 1999.
Chairman of the Management
Resources and Compensation
Committee. A director of
Bell Canada and Telesat Canada.

Victor L. Young, O.C.St. Johns, Newfoundland
Corporate Director. 
A director since May 1995.
A member of the Audit Committee
and the Management Resources
and Compensation Committee.
A director of Aliant Inc.,
Bell Canada and Telesat Canada.

Corporate Officers

as at February 26, 2003

Michael J. Sabia
President and Chief
Executive Officer

William D. Anderson
President, BCE Ventures

Alain Bilodeau
Senior Vice-President

Michael T. Boychuck
Senior Vice-President and
Corporate Treasurer

Linda Caty
Corporate Secretary*

Francis P. Crispino
Chief Strategy Officer

Leo W. Houle
Chief Talent Officer

Lawson A.W. Hunter
Executive Vice-President 
Competitive Affairs

Barry W. Pickford
Senior Vice-President, Taxation

Stephen P. Skinner
Senior Vice-President and
Corporate Controller

Martine Turcotte
Chief Legal Officer

Siim A. Vanaselja
Chief Financial Officer

Stephen G. Wetmore
Executive Vice-President

* Effective March 31, 2003

Bell Canada Enterprises  82  2002 Annual Report



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(PHOTOS OF CORPORATE OFFICERS)




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Committees of the Board


The committees of the Board of Directors, and their principal responsibilities
and their members are identified below.

THE AUDIT COMMITTEE



| |  | Reviews BCEs annual and interim consolidated financial statements,
including the managements discussion and analysis, and recommends them to
the Board for approval                                                                              
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Evaluates the integrity of our financial reporting                                                                                                                                                                                                 
| 
| |  | Monitors our risk management and regulatory compliance programs                                                                                                                                                                                    
| 
| |  | Monitors our internal control system                                                                                                                                                                                                               
| 
| |  | Reviews and monitors our policies and practices on business ethics                                                                                                                                                                                 
| 
| |  | Reviews and recommends the appointment of the external auditor, including
the terms, independent relationship and fees                                                                                                                             
| 
| |  | Reviews and recommends the mandate of our internal auditor                                                                                                                                                                                         
| 
| |  | Monitors the relationship between the Audit Committee and the audit committees of related entities                                                                                                                                                 
| 
| |  | Monitors the relationship between the Audit Committee, the other committees of the Board and management                                                                                                                                            
| 
| |  | Reviews the audited financial statements of our pension plan, pension
fund and the unitized pooled fund that we sponsor for the collective
investment of our pension fund and the pension funds of our participating
subsidiaries (the master fund)

The Audit Committee contacts the internal and external auditors directly to
discuss and review specific issues when necessary.

The Audit Committee met seven times in 2002.

THE CORPORATE GOVERNANCE COMMITTEE



| |  | Reviews and makes recommendations on corporate governance issues,
including the size and structure of the Board, responsibilities, tenure
and performance standards of directors, and composition of Board
committees
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Identifies candidates for directors                                                                                                                                                                                  
| 
| |  | Reviews directors remuneration in relation to current compensation practices                                                                                                                                        
| 
| |  | Evaluates the performance of directors                                                                                                                                                                               
| 
| |  | Evaluates shareholder proposals                                                                                                                                                                                      
| 
| |  | Reviews each directors comments on the effectiveness of the Board and
his or her own participation and reports the results to the Board                                                                             
| 
| |  | Helps new directors become
acquainted with BCE and our governance process                                                                                                                                            
| 
|  |  | The
Corporate Governance Committee met five times in 2002.                                                                                                                                                           

THE MANAGEMENT RESOURCES AND COMPENSATION COMMITTEE



| |  | Reviews and recommends the appointment of the Chief Executive Officer and other officers                                    
|- |  | ----------------------------------------------------------------------------------------------------------------------------
| 
| |  | Monitors management resources and succession planning                                                                       
| 
| |  | Reviews and recommends executive compensation policy, and the
compensation of the Chief Executive Officer and other officers
| 
| |  | Monitors the performance of the Chief Executive Officer and other officers                                                  
| 
| |  | Reviews any proposed major changes to the organization, and to our pension and benefit plans                                

The Management Resources and Compensation Committee met five times in 2002.

THE PENSION FUND COMMITTEE



| |  | Advises on policies relating to the administration, funding and
investment of our pension plan, pension fund and master fund                          
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Reviews the impact of the pension plans liabilities and funding of
proposed changes to the benefits under the plan                                   
| 
| |  | Approves long-term funding objectives in relation to the pension plans liabilities                                                                   
| 
| |  | Approves the appointment or removal of the pension plans actuary                                                                                     
| 
| |  | Reviews and monitors the process for carrying out our responsibilities as
employer and administrator of the pension plan, pension fund and master
fund
| 
| |  | Approves changes to the investment policies and goals of the pension fund and the master fund                                                         
| 
| |  | Reviews the investment performance of the pension fund and the master fund                                                                            

The Pension Fund Committee was created in November 2002 and had its first
meeting in January 2003.

MEMBERS OF COMMITTEES OF THE BOARD

|                           |  |                        
|-------------------------- |  | -----------------------
|Audit                      |  | Management Resources   
|J.E. Newall  Chairman     |  | and Compensation       
|A.S. Fell                  |  | P.M. Tellier  Chairman
|T.E. Kierans               |  | B.M. Levitt            
|R.C. Pozen                 |  | J.H. McArthur          
|V.L. Young                 |  | V.L. Young             
|                           |  |                        
|Corporate Governance       |  | Pension Fund           
|G. Saint-Pierre  Chairman |  | R.J. Currie  Chairman 
|D. Soble Kaufman           |  | A.S. Fell              
|B.M. Levitt                |  | J. Maxwell             
|J. Maxwell                 |  | R.C. Pozen             
|J.E. Newall                |  |                        

Bell Canada Enterprises  84  2002 Annual Report



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Shareholder Information


SHARE FACTS

Symbol
BCE

Listings
Toronto (TSX), New York (NYSE) and Zurich (SWX) stock exchanges

Common Shares Outstanding
915,867,928 as at December 31, 2002

Stock Splits
Three-for-one on April 26, 1979 and two-for-one on May 15, 1997

Quarterly Dividend*
$0.30 per common share

2003 Dividend Schedule*

|                   |  |                 
|------------------ |  | ----------------
|Record Date        |  | Payment Date    
|March 17, 2003     |  | April 15, 2003  
|June 16, 2003      |  | July 15, 2003   
|September 15, 2003 |  | October 15, 2003
|December 15, 2003  |  | January 15, 2004

* Subject to approval by the Board of Directors.

Withholding Taxes on Foreign Investors
Dividends on BCE shares paid or credited to non-residents of Canada are subject
to withholding tax at 25%, unless reduced by treaty. Under current tax
treaties, U.S. and U.K. residents withholding tax rate is 15%.

Since January 1, 2001, BCE is required to solicit TINs (taxpayer identification
numbers) and W9 declarations of residency from certain U.S. investors. Where
these have not been received, BCE may be required to deduct the Internal
Revenue Services specified backup withholding tax at a rate of 30% on all
dividends.

2003 ANNUAL MEETING

The annual meeting of BCE shareholders will take place at 9:00 a.m. (Montréal
Time), Wednesday, May 28, 2003, at Le Centre Sheraton Montréal, 1201, boul.
René-Lévesque Ouest, Montréal, Québec, in the Ballroom, Level 4.

The meeting will also be webcast live on our website at www.bce.ca.

We offer various ways to vote your proxy form. For more details, visit our
website during proxy season or read the instruction form accompanying your
annual package.

2003 QUARTERLY EARNINGS RELEASE DATES

First quarter  April 30, 2003
Second quarter  July 30, 2003
Third quarter  October 29, 2003
Fourth quarter  February 4, 2004

CORPORATE DOCUMENTS

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.ca for our service Our News, Your Way.
Corporate documents can also be requested from the Investor Relations group.

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 annual 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, please contact our transfer agent
and registrar.

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, tax
forms), contact:

Computershare Trust Company of Canada
9th Floor, 100 University Avenue
Toronto, Ontario M5J 2Y1
e-mail: bce@computershare.com
Tel.: (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.)

Investor Relations
For any other shareholder inquiries, contact:

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 Investor Relations section on our website at www.bce.ca

TRADE-MARKS

BCE, BCE Emergis and Emergis are trade-marks of BCE Inc. The Rings and Head
design, Bell, Sympatico.ca and Sympatico are trade-marks of Bell Canada.
VoiceNet is a trade-mark of Bell Mobility Inc./Bell Mobilité Inc. ExpressVu is
a trade-mark of Bell ExpressVu Limited Partnership. SmartTouch is a trade-mark
of Stentor Resource Centre Inc. The Globe and Mailis a trademark of Bell
Globemedia Publishing Inc./Bell Globemedia Publications Inc. Juno Awards is a
trade-mark of Canadian Academy of Recording Arts and Sciences. Open Mike With
Mike Bullard is a trade-mark of Insight Production Company Ltd. Audiovox Thera
is a trade-mark of Audiovox Corporation. Data Valet is a trade-mark of
Travelnet Technologies, Inc. Any other trade-marks, corporate, trade or domain
names mentioned in this annual report are properties of their respective
owners.

Cette publication est disponible en français.

BCEs Annual Report is printed with vegetable-based ink and is recyclable.



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(LOGO)

BCE Inc.
1000, rue de La Gauchetière Ouest
Bureau 3700
Montréal (Québec)
H3B 4Y7

www.bce.ca



Communications
email: bcecomms@bce.ca
tel: 1 888 932-6666
fax: (514) 870 4385



Investor Relations
email: investor.relations@bce.ca
tel: 1 800 339-6353
fax: (514) 786-3970





Printed in Canada