Bell Aliant

News Releases

Tuesday, February 05, 2008
Bell Aliant Announces Distribution Increase with Fourth Quarter 2007 Results and 2008 Guidance

Distribution increase of 2.8 per cent effective February 2008
Revenue growth of 2.6 per cent in fourth quarter 2007 compared to 2006
Distributable cash projected to grow to $720 – $740 million in 2008

Halifax, NS – Bell Aliant Regional Communications Income Fund (“Bell Aliant” or the “Fund”)¹ (TSX: BA.UN) today announced a distribution increase of 2.8 per cent to $0.2417 per unit per month ($2.90 per unit per annum) effective with the February 2008 distribution, along with its fourth quarter 2007 financial results and financial guidance for 2008.

Fourth quarter Fund results
The Fund reported distributions declared to its unitholders of $89.5 million or $0.705 per unit for the quarter ended December 31, 2007, up 5.2 per cent from the same quarter in 2006.

Bell Aliant Holdings LP’s fourth quarter financial highlights² are as follows:

(In millions of dollars)	Actual Q4 2007	Actual Q4 2006	Percentage Change	Actual 12 months 2007	Pro forma 12 months 2006	Percentage Change
Operating Revenue	$858.7	$837.3	2.6%	$3,373.4	$3,299.2	2.2%
EBITDA³	370.2	363.9	1.7%	1,450.2	1,446.7	0.2%
Capital Expenditures	144.1	131.1	9.9%	543.0	517.5	4.9%
Distributable Cash⁴	169.5	186.8	(9.3%)	701.4	722.9	(3.0%)

“This quarter our revenue growth was at the high end of our expectations, our productivity program exceeded expectations and we completed our planned accelerated broadband rollout,” said Stephen Wetmore, President and Chief Executive Officer. “We also successfully gained forbearance from local service regulation in a number of additional exchanges in our region. These significant accomplishments, along with the marketing flexibility we now have as a result of regulatory changes made in 2007, give us a strong competitive position heading into 2008.”

“We are pleased to announce that our Board of Trustees has approved an increase to our distributions of 2.8 per cent, consistent with our expectations for growth in 2008 and the objectives we set when Bell Aliant was established,” continued Mr. Wetmore.

Highlights of the fourth quarter of 2007 include the following:

Operating revenue increased $21.4 million (2.6 per cent) in the fourth quarter of 2007 compared to the same period a year earlier due to growth in Internet, information technology and other revenue.
Internet revenue grew by $6.4 million (7.7 per cent) in the quarter compared to the same period in 2006 with high-speed Internet subscribers growing by 17.1 per cent from a year earlier.
Information technology revenue increased by $5.1 million (7.0 per cent) in the quarter compared to the same period in 2006, with increased services revenue and higher sales of computer hardware and software.
Other revenue increased $18.5 million (20.4 per cent) in the quarter compared to the same period in 2006 due to higher product sales and out-sourcing revenues.
Local service and long distance revenue declined by $8.3 million (2.3 per cent) and $2.0 million (1.7 per cent), respectively, in the fourth quarter of 2007 compared to the fourth quarter of 2006. Network access services (“NAS”) were 3.2 per cent lower than a year earlier with net NAS declines of 42,282 in the quarter.
Higher revenues, cost containment achieved through productivity improvements and lower provincial capital taxes resulted in an EBITDA increase of $6.3 million (1.7 per cent) in the fourth quarter of 2007 over the same period a year earlier.
Bell Aliant completed its planned accelerated rollout of fibre-to-the-node (“FTTN”) technology in the fourth quarter of 2007, bringing the total number of homes passed with this technology to approximately 188,000 at December 31, 2007. This technology provides higher bandwidth, improving Internet speed and enabling customers to access the company’s IPTV product.
The increase in capital expenditures associated with the accelerated FTTN expansion was the primary reason for a decline in distributable cash in the fourth quarter of 2007 of $17.3 million (9.3 per cent) from the same period a year earlier. Lower distributable cash as a result of the sale of Bell Aliant’s interest in Aliant Directory Services earlier in 2007 also contributed to the decline.
During the fourth quarter, Bell Aliant gained forbearance from local service regulation for a number of exchanges where forbearance was contingent on satisfying specified competitor quality of service criteria.
On January 16, 2008, the City of Kenora announced that Kenora City Council unanimously approved Bell Aliant’s offer to purchase the assets and business of Kenora Municipal Telephone System (KMTS). The transaction closed on February 1, 2008, with an acquisition price of approximately $27 million.

2008 Guidance
Refer to the section entitled “Forward-looking Statements” later in this news release for a discussion concerning the material risk factors that could affect, and the material assumptions underlying, Bell Aliant’s 2008 financial guidance provided below, and to Bell Aliant’s Notice Concerning Forward-looking Statements dated February 5, 2008, which is available on Bell Aliant’s website at bell.aliant.ca or at www.sedar.com, for a detailed discussion of these key risk factors and assumptions.

Bell Aliant’s financial guidance for 2008 is as follows:

	2008 Guidance
Operating Revenue	$3.37 - $3.44 billion
Distributable Cash	$720 - $740 million
Capital Intensity⁵	14.5 - 15.5 per cent

“With improved products and services available through our FTTN technology, the benefits of forbearance, and our focus on superior customer service, we expect our average revenue per household to continue to grow in 2008,” said Mr. Wetmore. “We anticipate that Internet will continue to be our primary source of revenue growth in 2008. With our Value Packages and bundles providing the greatest value to our customers, we expect our sales of features and TV will also increase, further supporting growth.”

“Productivity will continue to be of paramount importance in 2008, as the margins on our new services are lower than those on the declining local and long distance businesses. However, with the carryover of the productivity achievements of 2007, we are in a solid position heading into 2008.”

Operating Revenue
Consolidated operating revenue is expected to increase by up to 2 per cent in 2008 from 2007 levels. Growth in Internet revenues, along with increased penetration of features and other services are projected to offset the effects of NAS declines and product substitution on local and long distance revenues, with overall revenue projected to be between $3.37 billion and $3.44 billion in 2008.

Distributable Cash
Distributable cash in 2008 is expected to increase to $720 - $740 million primarily as a result of the expected revenue growth, reduced capital expenditures and productivity improvements containing growth in capital and operating expenditures.

Capital Intensity
With the completion of the accelerated phase of Bell Aliant’s investment in FTTN technology in 2007, capital expenditures are expected to return to a level of 14.5 to 15.5 per cent of operating revenues in 2008, down from 16.1 per cent in 2007.

Analyst conference call
Mr. Wetmore and Glen LeBlanc, Chief Financial Officer of Bell Aliant, will host a conference call with the investment community to discuss Bell Aliant’s year-end results for 2007 and the organization’s 2008 financial guidance. The conference call is scheduled for Wednesday, February 6, 2008 at 9:00 a.m. (Eastern). The dial-in numbers are (866) 862-3915 or (416) 641-6110 for Toronto area participants. Media are invited to attend in a listen-only mode. The title of the call is "Bell Aliant Fourth Quarter 2007 Financial Results." A replay of the session can be heard from February 6 until midnight on February 20. To access the replay, dial (800) 408-3053 or (416) 695-5800 and enter the passcode 3243151#.

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

Forward-looking Statements
This news release contains forward-looking statements concerning anticipated future events, results, circumstances or expectations, in particular as described in the “2008 Guidance” section of this news release. Unless otherwise indicated, such forward-looking statements describe management’s expectations at February 5, 2008. These statements are based on management's beliefs regarding future events, many of which, by their nature are inherently uncertain and beyond management's control. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties which are difficult to predict and assumptions which may prove to be inaccurate.

Some of the factors that could cause results or events to differ materially from current expectations include but are not limited to: management’s ability to achieve strategies and plans; general economic conditions; increasing competition; changing regulations; reliance on systems; changing technology; required operating and capital expenditures; demand for services; achievement of productivity targets; the relationship with BCE and Bell Canada and the availability of business opportunities; pension plan funding; liquidity and financing risk; leverage and restrictive covenants; BCE governance rights; reliance on key personnel and labour relations; legal contingencies and changes in laws; unpredictability and volatility of unit price; the nature of Fund units; limitations on non-resident ownership; dilution through issuance of additional units; and changing taxation rules for income trusts. In addition, a number of assumptions were made in making forward-looking statements in this press release, such as economic assumptions, market assumptions, financial and operational assumptions and assumptions about the execution of certain transactions. Please refer to Bell Aliant’s Notice Concerning Forward-looking Statements dated February 5, 2008, which is available at www.bell.aliant.ca or at www.sedar.com, for a detailed discussion of these key risk factors and assumptions.

Should any factor impact Bell Aliant in an unexpected manner, or should assumptions underlying the forward-looking statements prove incorrect, the actual results or events may differ materially from the results or events predicted. All of the forward-looking statements made in this press release are qualified by these cautionary statements, and there can be no assurance that the results or developments anticipated by Bell Aliant will be realized or, even if substantially realized, that they will have the expected consequences for Bell Aliant.

Except as may be required by Canadian securities laws, we disclaim any intention and assume no obligation to update or revise any forward-looking statement even if new information becomes available, as a result of future events or for any other reason. Readers should not place undue reliance on any forward-looking statements. Forward-looking statements are provided for the purpose of providing information about management’s current expectations and plans relating to fiscal 2008. Readers are cautioned that such information may not be appropriate for other purposes.

About Bell Aliant
Bell Aliant (TSX: BA.UN) is one of North America’s largest regional communications providers. Through its operating entities it serves customers in six Canadian provinces with innovative information, communication and technology services including voice, data, Internet, video and value-added business solutions. Through its xwave offices, Bell Aliant also provides IT professional services in Canada and the US. Bell Aliant’s 10,000 employees are committed to deliver the highest quality of customer service, choice and convenience.

¹ Bell Aliant commenced operations on July 7, 2006, following the completion of the plan of arrangement (the “Plan of Arrangement”) of Aliant Inc. (“Aliant”), which was described in Aliant’s management information circular, dated April 14, 2006. Bell Aliant derives all of its income from its indirect ownership in Bell Aliant Regional Communications Holdings, Limited Partnership (“Bell Aliant Holdings LP”) and its direct ownership in Bell Nordiq Trust. Bell Aliant Holdings LP’s results combine Aliant’s former wireline operation in Atlantic Canada, information technology and other operations and Bell Canada’s former wireline operation in its regional territories in Ontario and Quebec, and the operations of Télébec, Limited Partnership and NorthernTel, Limited Partnership.

² In order to provide meaningful year over year comparisons, Bell Aliant has provided pro forma results with the periods from January 1 to July 7, 2006, restated to reflect the operation of Bell Aliant Holdings LP as if the Plan of Arrangement had been completed on January 1, 2006.

³ EBITDA does not have any standardized meaning prescribed by Canadian GAAP. It is therefore unlikely to be comparable to similar measures presented by other reporting issuers. Bell Aliant defines EBITDA as earnings before interest, income taxes, depreciation and amortization expense, net benefit plans cost, and restructuring and other charges.

⁴ Distributable cash does not have any standardized meaning prescribed by Canadian GAAP. It is therefore unlikely to be comparable to similar measures presented by other reporting issuers. Bell Aliant calculates distributable cash using EBITDA, adding or deducting any cash items not included in EBITDA but that are required for operating purposes in the current period, including the following items:
(i)    Cash funding requirement for current service pension costs for defined benefit pension plans and other employee benefit plans to the extent not already deducted in determining EBITDA;
(ii)    An adjustment to cash capital taxes to reflect a normalized level that will be achieved once announced provincial tax rate reductions come into effect in future years;
(iii)    Cash expenses incurred by the Fund as these are not included in the EBITDA or pro forma EBITDA of Bell Aliant Holdings LP;
(iv)    Cash interest expense;
(v)    Other cash income or expenses that may be incurred to the extent not included in EBITDA or pro forma EBITDA;
(vi)    Adjustments for certain one-time or other normalizing expense items;
(vii)    The portion of consolidated distributable cash that is generated for the benefit of the non-controlling interest in controlled subsidiaries;
(viii)    Capital expenditures; and
(ix)    The portion of distributable cash generated by discontinued operations.

⁵ Bell Aliant defines capital intensity as capital expenditures as a percentage of operating revenues.

View Supplementary information

For more information contact:

Media Relations:
Kelly Gallant
(866) 762-6540
kelly.gallant@bell.aliant.ca

Investor Relations:
Zeda Redden
(877) 487-5726
zeda.redden@bell.aliant.ca