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Thursday, July 30, 2009
Bell Aliant reports second quarter 2009 results

• Strong momentum on strategic initiatives 
• Solid EBITDA growth from same quarter in 2008
• Distributable cash increases 1.8 per cent
• First in Canada to announce fibre to the home for an entire city
• On track to meet 2009 guidance across all measures

Halifax, NS – Bell Aliant Regional Communications Income Fund (Bell Aliant or the Fund) (TSX: BA.UN) today reported the Fund’s and Bell Aliant Regional Communications Holdings LP’s (Bell Aliant Holdings LP) second quarter 2009 financial results. 

“Our continued focus on cost management and operational improvements resulted in strong EBITDA performance this quarter and we are on track to meet our 2009 guidance across all measures,” said Karen Sheriff, President and Chief Executive Officer. “The stability of our financial performance and our cost containment allow us to focus on our key strategies to improve service and drive broadband growth."
 
“We are very excited about our recent announcement to be the first in Canada to cover an entire city with fibre to the home (FTTH) in both Fredericton and Saint John beginning later this year, in partnership with the Government of New Brunswick. FTTH is an important part of our strategy to grow broadband and will bring the ultimate Internet and TV experience to our customers, supporting our financial and operational performance going forward.”

Bell Aliant Holdings LP’s second quarter financial highlights

(In millions of dollars)	Q2 2009	Q2 2008	Percentage Change	YTD 2009	YTD 2008	Percentage Change
Operating Revenue	$790	$813	(2.9%)	$1,614	$1,649	(2.1%)
EBITDA	368	361	1.9%	724	715	1.3%
Capital Expenditures	122	128	(4.3%)	230	223	3.1%
Distributable Cash	187	183	1.8%	383	390	(1.8%)

Operating revenues were down $23 million or 2.9 per cent in the second quarter of 2009 compared to the second quarter of 2008, primarily as a result of the timing of information technology (IT) equipment sales and declines in local and long distance revenues associated with lower network access services (NAS).

Despite the revenue declines, EBITDA increased by $7 million, or 1.9 per cent, from the same quarter a year earlier. Labour-related cost reductions and cost containment initiatives accounted for most of the improvement. Beyond the benefits provided by the labour productivity initiatives, EBITDA was boosted slightly in the quarter by a $3 million one-time adjustment that reduced senior management long-term incentive plan expenses. Normalizing for this adjustment, EBITDA growth in the quarter was 1.1 per cent.

Internet revenue grew by $10 million or 10.4 per cent in the second quarter of 2009 compared to the same period in 2008, with the number of high-speed Internet customers 7.9 per cent higher than a year ago, and residential high-speed Internet average revenue per customer (ARPC) 6.0 per cent higher than the same quarter in 2008.

IT revenue declined $13 million or 16.6 per cent in the second quarter of 2009 from the same period last year, following a very strong first quarter in 2009. IT equipment sales were down $11 million from the same quarter a year ago, however, are up $10 million for the first half of 2009 compared to the same period in 2008. 

Local service and long distance revenue declined by $11 million (3.2 per cent) and $7 million (5.8 per cent), respectively, in the second quarter of 2009 compared to the same quarter in 2008, with network access services (NAS) 4.3 per cent lower than a year ago. NAS declines in the second quarter of 2009 increased by approximately 11,000 from the same period a year earlier, driven largely by increased business NAS declines including government contract losses.

Other revenues declined $4 million or 8.1 per cent from the same quarter in 2008, primarily as a result of lower outsourcing revenues.

Capital expenditures in the second quarter of 2009 were $122 million, down $6 million (4.3 per cent) from the same quarter a year ago. Capital intensity for the second quarter of 2009 was 15.4 per cent, including the completion of the wireless backhaul construction project for Bell Mobility, bringing year-to-date capital intensity to 14.2 per cent, in line with Bell Aliant’s 2009 annual guidance of 13.5 – 14.5 per cent.

Distributable cash increased $3 million (1.8 per cent) in the second quarter of 2009 from the same period in 2008, with the cash benefits of higher EBITDA and lower capital spending more than offsetting the loss of distributable cash from discontinued operations.

The Fund maintained its distributions to unitholders and reported distributions of $92 million or $0.725 per unit for the quarter ended June 30, 2009.

On May 12, 2009 Bell Aliant LP issued $350 million of medium term notes, maturing February 17, 2015, with a coupon of 6.29 per cent.

During the quarter, Bell Aliant and Abilis Solutions Inc. (Abilis) announced that the two parties concluded a share purchase agreement for Abilis to acquire from Bell Aliant all of the outstanding shares of xwave New England Corp. (xwave New England) for USD $4.5 million. As a result, Bell Aliant has reclassified the results of xwave New England to discontinued operations in the second quarter of 2009 and restated prior periods for comparison purposes.

Supplementary Financial Information
More information on the Fund’s and Bell Aliant Holdings LP’s Q2 results can be found in Bell Aliant’s supplementary information package, second quarter 2009, available at www.bellaliant.ca.
 
Analyst conference call
A conference call with the financial community is scheduled for Thursday, July 30, 2009 at 1:00 p.m. (Eastern). The dial-in numbers are (866) 223-7781 or (416) 340-8018 for Toronto area participants. Media are invited to attend in a listen-only mode. The title of the call is "Bell Aliant Second Quarter 2009 Financial Results." A replay of the session can be heard until August 13, 2009.  To access the replay, dial (800) 408-3053 or (416) 695-5800 and enter the passcode 8028554#.

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

Notes

The information contained in this news release is unaudited.

(1) Bell Aliant derives virtually all of its income from its indirect ownership in Bell Aliant Regional Communications Holdings, Limited Partnership (Bell Aliant Holdings LP). Bell Aliant Holdings LP’s results combine the results of Bell Aliant Regional Communications, Limited Partnership (Bell Aliant LP), Télébec, Limited Partnership (Télébec) and NorthernTel, Limited Partnership (NorthernTel).
  
(2) On February 1, 2008, Bell Aliant Holdings LP completed the acquisition of the assets and operations of Kenora Municipal Telephone System (KMTS). Bell Aliant Holdings LP’s financial results and subscriber metrics include KMTS data from that date onward.

(3) Percentage changes quoted in this release related to dollar values are based on amounts rounded to the nearest hundred-thousand, consistent with disclosure in the Fund’s and Bell Aliant Holdings LP’s management’s discussion and analysis and supplementary information package. Dollar values quoted in this release are rounded to the nearest million unless otherwise stated. 
 
(4) Bell Aliant Holdings LP defines EBITDA, a non-GAAP measure, as operating revenue less expenses (earnings) before interest, income taxes, depreciation and amortization expense, net benefit plans cost, and restructuring and other charges. For a reconciliation of EBITDA to the most closely comparable GAAP measure, please refer to Bell Aliant Holdings LP’s management’s discussion and analysis for the second quarter of 2009.

(5) Bell Aliant defines capital intensity as capital expenditures as a percentage of operating revenue.

(6) Bell Aliant defines distributable cash, a non-GAAP measure, as cash from operating activities of continuing and discontinued operations of Bell Aliant Holdings LP and of the Fund, plus operating items funded through cash reserves or borrowings, such as working capital, pension deficit funding, restructuring and other charges and cash capital taxes in excess of normalized levels, plus amounts for current income tax provisions plus other elements of working capital changes that do not affect cash flow, less capital expenditures. For a reconciliation of distributable cash to the most closely comparable GAAP measure, please refer to Bell Aliant Holdings LP’s management’s discussion and analysis for the second quarter of 2009.

Forward-looking Statements
This news release contains forward-looking statements concerning anticipated future events, results, circumstances or expectations, including statements relating to the launch of fibre to the home to Fredericton and Saint John, service enhancements and capital expenditure plans.  Unless otherwise noted, such statements describe management’s expectations at July 30, 2009. These statements are based on management's beliefs regarding future events, and are subject to inherent risks and uncertainties that are beyond management's control. Therefore, actual results may differ materially from what is predicted. Assumptions made and risk factors considered in preparing our forward-looking statements are discussed in detail in Bell Aliant’s fourth quarter 2008 earnings and 2009 guidance news release dated February 2, 2009, as well as in the Fund’s and Bell Aliant Holdings LP’s 2008 annual management’s discussion and analysis (MD&A) and annual information forms, and their first and second quarter 2009 MD&As, which are available at www.bellaliant.ca or at www.sedar.com. All forward-looking statements in this news release are qualified by these cautionary statements, and there can be no assurance that the results or events predicted will be realized.  Except as may be required by Canadian securities laws, Bell Aliant disclaims any intention and assumes 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. 

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. Bell Aliant’s employees are committed to deliver the highest quality of customer service, choice and convenience. More information can be found at www.bellaliant.ca.

Q2 2009 Financial documents

For more information contact:

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

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

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