BCE Inc (BCE) 2001 Q1 法說會逐字稿

BELL CANADA ENTERPRISES INC. CONFERENCE CALL

All participants please standby your meeting is ready to begin. Good morning ladies and gentlemen, welcome to the BCE Inc., first quarter results conference call. I would now like to turn the meeting over to Ms. [________________]. Please go ahead Ms. Paul.

Thank-you. Good morning, ladies and gentlemen and thank you for joining us this morning. The purpose of our call today is to review the highlights of BCE's first quarter, including the financial results which were released earlier this morning. With us on today's call are Jean C. Monty, Chairman and CEO of BCE and Michael J. Sabia, President of BCE who will be providing our perspectives on the quarter. In addition, we are joined today by Terry Jarman, President and CEO of Teleglobe who will provide a summary of Teleglobe's results. Also on the call is Siim Vanaselja, BCE's CFO who will participate in the Q&A segment of today's call. I would like to point out today, that our press release mentioned a major North American network build out for Teleglobe, which was to have been announced today. There was however, a slight slip in the timing of this announcement; Teleglobe negotiated into the early hours of this morning, but unfortunately couldn't finalize all of the terms of the transaction and that Teleglobe, therefore needs more time to complete this transaction, more to come obviously. Now, before I turn the call over to Jean, I have the great pleasure once again of pointing out to you that today's remarks contain forward-looking statements, with respect to items such as revenues, EBITDA, and earnings. There are risks that actual results will differ materially from those contemplated by the forward-looking statements, and for additional information on such risks, I ask you to consult our filings with the Canadian Securities Commission and the SEC, under Form 40-F and 6-K. These forward-looking statements represent BCE's expectations as of April 25th, 2001 and accordingly are subject to change after such date. However, BCE disclaims any intention or obligation to update or revise any of these forward-looking statements, whether as a result of new information, future events, or otherwise. Today's call is being taped and it will be available in a replay mode from 12:00 p.m. today until 12:00 p.m. Wednesday, May 2nd. The archive of the call is also available on BCE's website at www.bce.ca. It is now my pleasure to turn the call over to Jean.

Thanks [________________] and good morning ladies and gentlemen. Thank you for joining us today. For the first full calendar of operations after the re-alignment of our business units late last year, our core operations are performing well in terms of revenue, EBITDA and earnings, and I think we are making good progress on delivering our game plan. When I survey the industry landscape in general terms, I am particularly pleased with the results we delivered this quarter. After securing the assets we needed for our connectivity content common strategy last year, we said we would focus on execution and that is exactly what we've done this quarter and what we'll continue to do throughout the year. Our results for the quarter reflect a consolidation of both Teleglobe and Bell Globemedia and the percentage growth numbers we will refer to today, reflect the pro forma impact of these acquisitions in 2000 and I want all of you to understand that we are cognizant of the issues that you are facing and trying to understand these pro forma numbers as well. We are not intending here to strictly readjust 2000 to make those numbers or percentages better, we're just showing to you what would be the comparison between 2000 on pro forma basis and the first quarter of 2001, with all the cautions that such adjustments and calculations entail. Let me start with revenues. Revenues from BCE core operations including Bell Canada. Bell Globemedia, Teleglobe, and BCE Emergis, grew 12.4%, due mainly to strong growth at Bell Canada and BCE mergers. And after consolidating BCE ventures with our core activities, consolidated revenues for the quarter were $5.5 billion, up 6.2 % over pro forma revenues for the first quarter of last year. EBITDA growth from core businesses was also strong at 9.7%, and was again attributable to the performance of Bell Canada and BCE Emergis. And on a consolidated basis, that is with BCE ventures, EBITDA for quarter grew to $1.75 billion, up 4% over pro forma EBITDA for the first quarter of last year. Cash baseline earnings from core operations were up 34% with similar growth for core EPS. And when I referred to my comment regarding the caution on adjusting the previous year the most difficult area for all of us including yourselves, is going to be to adjust for the number of shares outstanding, given the issue of shares for the transaction in Teleglobe to the core EPS numbers really take account of all of that, when you do it on a pro forma basis. Our reported cash baseline earnings of ¢37 per share, compares favorably with the ¢29 earned in Q1 of last year, on, again, a pro forma basis. I am also very pleased by the continued strong performance this quarter of our key growth areas, and let me list some of them for you. DSL subscribers grew to a record 466,000 this quarter fuelled by the addition of 101,000 residential Bell Sympatico high-speed addition customers. We increased our customer marketshare by 4% to reach close to a 38% marketshare in Ontario and Quebec. Data revenues grew 31% exceeding our Q4 growth of 29%, driven primarily by a 74% increase in non-legacy data services. Cellular and PCS customers have across all of our wireless companies, grew by 114,000 this quarter, while maintaining a strong focus on post date activations, and in industry leading churn of 1.3%. ExpressVu subscribers reached 800,000 by the first week of April, with 74,000 net additions in the quarter. In addition to the strong financial operating results we delivered this quarter, we also made progress on strengthening our core operations in several areas. On the international front, we remain committed to our strategy with Teleglobe and believe that these assets hold significant potential. Current market environment has, however, led us to revise capital expenditure programs and plans at Teleglobe in order to take advantage of surplus capacity on major fiber systems and resulting improvements in pricing. By optimizing network deployment cost, we will be able to reduce Teleglobe's initial capital requirements, by something like 30% from the US $5 billion to US $3.4 billion while delivering substantially the capability that has been planned, and Terry will say some more about that, particularly as it relates to the different areas of the build out program including our Internet data center strategy. Terry will provide you with more specific details later in the call as I just said, particularly on the different aspects of the build out in North America that they're working so hard on. This capex reduction will not, however, impact BCE's commitment to inject US $900 million of equity into Teleglobe this year. Teleglobe Media made some announcements recently regarding the acquisition of CKY-TV in Manitoba and CFCF-TV in Montreal, both pending CRTC approval, and these transactions are important strategic expansions that strengthen CTV's presence in these markets, as well as providing future revenue generating opportunities. In addition, Bell Globemedia recently acquired 100% of ROBTv as part of our original agreement with Thompson Corporation and Woodridge. Finally, in March, we announced the termination of our forward contracts and subsequent sale of nearly 48 million Nortel shares that we had pledged last year. This transaction resulted in proceeds we see of $4.4 billion or an estimated $4 billion after providing for cash taxes. The proceeds of this transaction were used to repay approximately $2.6 billion of short-term debt and the remaining proceeds will be used to continue funding BCE's growth. At the corporate level, BCE currently has about $ 1.7 billion of cash resources and is debt-free; making it well positioned to fund its growth plans going forward. We are living in an ever-changing environment, while our performance in the first quarter was solid, we are mindful of the potential economic effects on our business, of this changing economic environment. Our largest operating unit, Bell Canada, has a solid foundation of base voice access services which are relatively stable in the face of economic changes. Services such as SmartTouch, consumer long distance, consumer wireless and paper view, are on the other hand, more discretionary in nature, and although we have yet to see any significant impacts from the economy or demands for these services, it could happen if the changes in the economy are drastic, which we don't expect in Canada at this time. On the business side, communication services generally enabled forfeit productivity and trends to survive economic slowdowns. However, economic fallout experience by our customers in terms of bankruptcies or downsizing represents the risk to this area of our business, and we believe it is a manageable risk. Overall, at Bell, there are some signs of softening, but none of these are sufficient at this stage, to cause us to reconsider the financial guidance ranges we previously provided for Bell in 2001, or for 2001, and that is revenue growth for 2001 of 8% to 10% and EBITDA growth of 6% to 8%. In contrast, persistent with other international carriers, the area where we have seen most of the impact to date with regards to the economic changes is Teleglobe, which has already begun to reflect a reduction in the data of growth rates, which were originally anticipated by the industry to be much higher, even though Teleglobe has some very significant growth in data in Q1. As a result, we believe it is prudent to revise guidance for the remainder of 2001, and now anticipate EBITDA in US $90 million to $110 million and as you will remember from our February 5th meeting, this is down from a range of 130 million US to 160 million US, which is what the estimate provided earlier. At the earnings level, this will be partly mitigated by lower depreciation and interest savings as a result of lowering our capex spending by 30%, and more generally across BCE, at this point in time, we expect that the recurring revenue base of the businesses combined with mitigating management actions will permit us and permit the units of the company to meet their financial plans except for Teleglobe as I have just mentioned. That being said, however, in the face of current economic uncertainty, all of our business units will continue to closely monitor their market outlook over the coming weeks and months. Therefore, on a consolidated basis, we are not revising BCEs consolidated revenue, EBITDA, and cash baseline-earning ranges provided on February 5th. But in light of market uncertainty we think it is prudent to now look forward to the lower rate of our guidance range for 2001, namely you will remember our revenue target was identified at $23 to $25 billion, EBITDA at $7.5 to $8 billion, and cash baseline EPS at $1 dollar and ¢57 to the upper end of the range of $1 and ¢62. For Q2, on a consolidated basis, we now anticipate revenues in the range of $5.6 to $6 billion, EBITDA in the $1.8 to $2 billion, and cash baseline EPS in the range of ¢36 to ¢39. So in conclusion, given an economic environment that many predict will continue to soften, I believe that our focus on superior execution becomes even more critical in an effort to continue delivering revenue, EBITDA, and earnings growth in our core operations. We see significant developments in the economy over the coming quarters. We will advise the markets as appropriate. At this stage, however, while we continue and will continue to optimize our earnings potential as we execute our long-term strategy, I reiterate that we remain comfortable with the low end of our guidance range, Michael.

Thanks Jean. Good morning everyone. This morning as we usually do, I just want to walk through a few of the highlights of the performances that have been turned in by the operating companies of course I will exclude Teleglobe because Terry will deal with that in greater details. So first to get started, let me turn to Bell. I think what you see in the quarter in Bell's number is the continuing evidence, I think that this has been a trend for a little while but it is picking up momentum, continuing evidence of the impact and the benefits of the plan that we have had to invest aggressively as Jean mentioned in new growth businesses, be it a data business or wireless business, DSL, ExpressVu or whatever, and I think the rates of growth and the size of those businesses as they are now developing will have a significant and important impact in bringing good balance to Bell going forward. With respect to some of the top-line numbers at Bell, revenues were up 10.2%, EBITDA up 7.8%, that performance very consistent with the kinds of target that we had spoken to you about during our February guidance session. Now that being said, you know, we are never satisfied; it is a very good performance, although particularly in light of a couple of factors. First, the CRTC did have an impact on us first through the contribution decision and second through the delay in the approval of some of our proposed price increases on SmartTouch, and second, as Jean also has alluded to, some signs of a softening economy. So given those two factors, the CRTC and the softer economy while as I say, we are never satisfied it was a pretty good performance. Within Bell, let me just turn to some of the key segments on wireless there I think quite good performance, our revenues were up 22%, now I want to caution you here I think a ruler is probably a bad forecasting device here, recognize that the first quarter of last year was not an especially strong quarter in our mobile business and hence, I think one needs to be a little cautious in just projecting from the rates of growth that you see posted by our mobility company on quarter-over-quarter basis or year-over-year basis from the first quarter of last year to the first quarter of this year, but that being said there are lot of positives in the performance of Pierre Blouin and his team on the mobility side. First, as Jean mentioned, the turn issue, industry-leading performance at 1.3% far superior to our competitors. Our focus on post pay growth continues to pay off. Post pay provider, I think is about 51% of the net adds in the quarter and that's obviously is quite a change from this time last year we were about 100% of the net adds we are on the prepaid basis. Third, our ARPU was flat with the first quarter of 2000. I am happy to say that this is the first time that our first quarter ARPU has not declined on a year-over-year basis since 1993, and again, I think that just reflects the benefits of the strategy that we are pursuing there focusing on high-value customers of managing price perceptions well, and overall, just the value proposition that we are putting in front of the customer. I think if you look at those numbers, calculate a few others, I think it becomes very clear that we are not leading the industry on price and this despite some very competitive pricing and other actions initiated by some of our peers in the industry. Moving on to data and our ISP, data revenues were up 31% that is driven by a very significant increase of 70% in our non-legacy services, and a 90% increase in our ISP revenues. On high speed, again continued success and continued strength, added including alliance 130,000 subscribers now for a total of 466,000, that, I think leaves us feeling pretty comfortable about our ability to hit our year-end target on DSL, which is you will recall are in the order of about 650,000, very much the same story with respect to ExpressVu with 88,000 net adds in the quarter, I think we are well on our way having passed the 100,000 mark in early April, well on our way to achieving 1 million subscribers that milestone by the end of the year. I might say, and again I think strategically this is important, that we continue to have considerable success in penetrating the urban market, which I think for a long time has been perceived as our cable competitors strong hold with 63% of net adds coming from urban centers in the quarter, clearly we have strength there that's up from 55% in the fourth quarter of last year, and now as we speak, more than 50% actually I think 52% ExpressVu subscribers of that subscriber base is in urban areas. Shift of gear now, turning to our local and LD business within Bell. On local services, here is an area where we may be seeing some early signs of a little bit of softness in the economy. Our business lines grew at 2.5% but that's down from 3.8%. Our consumer lines slipped a little bit; slipped below 1% rate of growth in total and nets grew 1.4%, and as you all recall that is just a little bit better than about half the rate of growth that on average we were running through the course of last year. So all of that of course gives us cause to want to monitor this area of the business very closely to see whether or not that develops into a trend and is reflective of the increasing softness in the economy. On the revenue side with respect to local and access services, those revenues stepped up marginally about 1% from Q1 2000, that was driven significantly by 11% increase in SmartTouch services. Now, with CRTC approval, we would anticipate seeing a step up in that percentage of earnings growth coming from our SmartTouch services in the quarters ahead, and finally on long distance, really just a continuation of a trend, our revenues are down about 3% reflecting continuing pricing pressure that's been endemic in that part of the business for sometime. For Bell, our average LD revenue per minute was ¢14.4 and that's down just a little under about 5.9%, little under 6% decline from the first quarter of 2000. Total minutes were up a little bit, but nonetheless, the basic trends in LD continue. Let me turn briefly to the expense side of Bell's performance. As you can see in the materials that we released, we've reported a 12% step up in expenses. I think to understand Bell's underlying expense performance you need to back out a couple of items other than number. First COGS, that are directly related to sales of about a 185 million, and then second, the expense impact of CRTC decisions. When you do that, the step up in expense is as closer to about 3% that's reasonably good. Again, never satisfied and always room for improvement, but reasonably good performance given the impact on the expense side of our business, there have been many startup businesses that were developing, wage increases, etc. So, obviously the expense side continuous to be a key area of focus for us. We said in the February guidance session that in terms of cost structure our objective was to try to take $450 million of expense out of the cost base of the company in the quarter, we think we're generally on track for that. In the quarter, a little under 100 million in improving cost structure that's done through a myriad of activities from improved field management services, improved installation productivity, variety of other things, and that kind of work continues to be an extremely high priority for us because clearly, tight expense management becomes even more important in the context of a potentially softening economy. Now in that regard, we're just completing what is I think a very successful streamlining initiative within Bell that was focused very heavily at management ranks in the company involving about 1,900 employees. That initiative will save us about $70 million this year, and our 12 month run rate basis of about a $100 million, and as you've seen also in the materials that we've released to cover the associated cost of that initiative, we have taken a charge in the quarter of $239 million before tax, $143 after tax. But I might say with respect to that streamlining that while the financial dividends from that are obviously very important to us, at least is important are the operational benefits in providing us with a company that we believe will be quicker and more agile in taking the kinds of decisions that we need to in an increasingly competitive environment. So, that's perhaps enough on Bell. On Bell Globemedia, as you know, the company was officially launched in the first week of January, and hence our report in this segment incorporates both CTV or all of CTV, the Global & Mail, Sympatico-Lycos, and the Globe Interactive properties. With all of that, revenues in the quarter was 306 million that represents about 11% increase over the first quarter of last year. At the same time, EBITDA stepped up 7%, so reasonably good progress there. On the revenue side, about three quarters of those revenues come from television operations which grew at around 8% over the first quarter of last year, while trend represents about 22% of the total, and grew a little over 4%. With respect to the new media component of Bell Globemedia, and in that obviously I include both Sympatico-Lycos and Globe Interactive, I think we are beginning there to see the development of some interesting results with revenues plus quadrupling this quarter to $14 million, and obviously that's the momentum that we would like to continue to develop, although I am certainly not saying that we would expect to see quadrupling every quarter, but nonetheless, significant progress there. On Emergis, Emergis revenues of 143 million for the quarter, that's an increase of 96% compared to the first quarter of last year, and as you know, the primary driver of that growth was in eHealth Solutions, and that's driven significantly by the acquisition of UP&UP in March of last year. Back on the revenue growth, led to an expansion of EBITDA of 26 million, obviously a significant improvement over the $5 million reported for the first quarter of last year. I might say with respect to Emergis and the kind of uncertain economic environment that were we are all in and given the kind of volatility that so many participants in the E-commerce industry have experienced recently, I think one of that company is one of Emergis' great, great attribute is it's overall stability with about 85% of it's revenues being recurring revenues and that gives us a lot of confidence in the strength of the business model of that company going forward. I might just also add that in the quarter, I think you haven't seen the evidence of this yet, but in the quarter, we have also begun a very important process where we are now seeing a lot of positive momentum between Bell Globemedia, Emergis, and Bell from a Canadian domestic perspective in working together to make content, commerce, and connectivity into a reality, the bringing together of those three things. A lot of important work underway, our new product development, I think we're making very good progress in meeting our overall objective of bringing at least 10 convergent products to market this year, and I look forward on a future call of being able to discuss all of that with you in greater detail, but I feel good about the progress that we're making. And, finally, just before I pass this over to Terry, on BCE Ventures, certainly one of the areas of softness in our results with clearly a relatively weak performance on the part of Excel, as a result of the decline in its customer base reduced minutes volumes, overall our sense of reduction in future performance expectations, that has led us to recognizing an impairment charge that we also announced in the materials that you've already looked at of $2 billion which has been applied against Excel's goodwill and long-lived assets. So, with that overall, quite a good quarter we believe, and over to you Terry.

Thank you Michael, and once again good morning everyone. I am pleased to report that Teleglobe's turnaround continues to make good progress, despite Q1 conditions that saw a deteriorating economy, a bit of market slowdown, this together with excess capacity and reduced data prices, as well as a near-term meltdown in the dotcom world which in turn has reduced the opportunity in web hosting services. The upside for Teleglobe is that few of our customers have been indeed lost to bankruptcy. Our dotcom exposure is low, and we continue to look to reduce our risks and increase our strength through partnerships with our major carrier customers. Furthermore, we continue to project significant growth in overall markets or be it a less explosive pace than previously anticipated. Combining our strength in the carrier ISP and content provider markets. We are now looking to expand our customer base with major global enterprises, as well through partnerships with others. Bottom line, Teleglobe is turning around, and we believe its prospects remain bright, more specifically to our results for the quarter. May I remind you, those are all results I'll speak to, are in US dollars. Q1 met our expectations and delivered just over $19 million of EBITDA compared to 0 in Q1 last year and $18 million in the previous quarter. Gross revenue in Q1 was 334 million, essentially flat year-over-year, and up marginally from the previous quarter. More importantly, our Q1 net revenue was a $166 million, 7% higher than this quarter a year ago, and 9% higher than the previous quarter. On a year-to-year basis, data was the positive contributing factor, and quarter-to-quarter results are largely attributable to improvement in voice margins. As G&A expense in the quarter was 56 million, down significantly from 80 million in Q1 last year, and marginally less than the fourth quarter. Network expense in the quarter was 60 million. On a quarter-to-quarter basis, expenses were up from 47 million in Q4. As projected, these higher costs were attributable to increased lease cost incurred prior to transitioning to our own network. Turning to our specific businesses, data revenue totaled 101 million, up 44% on a year-over-year basis. Quarter-to-quarter performance was flat due to heightened price competition and weaker market conditions, particularly in Europe, as well as our exiting of the Intranet distribution agreement in Canada. In general datacom activity margins are falling. However, we believe we are well on our way to moving up the value chain to counter this as well as increase stickiness and the use of bandwidth. Our service portfolio over the coming two quarters will include IP VPN, selective routing, usage paid services, manage wavelengths, and gigabit ethernet service. Our voice services produced Q1 revenue of 233 million on a quarter-to-quarter basis; gross voice revenue was up slightly from Q4, the first increase in 4 quarters. More importantly, we saw our net voice revenues increase for the second consecutive quarter. Voice pricing appears to be stabilizing, and a number of successful measures have been taken to counter margin pressures. In addition, we are looking for modest growth from penetration efforts in higher margin services such as toll free and collect services. We're also looking at partnerships to further increase our scale of margins in this area of our business. For our developing host and content delivery business, we are taking a more cautious approach, given market conditions. We have modified our IDC strategy to fewer and somewhat larger centers so as to be able to better control the build out and take advantage of efficiencies, though this total square footage being brought on-line this year, remain slightly unchanged. We will open hosting centers in Washington DC and Miami in Q2 and Q3 respectively. We also plan openings in London, Toronto, and Montreal before year-end. The service focus of this initiative, we are dedicated in applications hosting, fashion streaming and broadcast, all higher margin recurring services. We will also be leveraging Teleglobe's existing customer base and our partnerships particularly Cap Gemini Ernst & Young to help grow this business. Given the change in global market conditions, our capital requirements are being adjusted downward to reflect reduced demand and price performance improvements available to us due to the overcapacity situation. Overall requirements were expected to decline from 5 billion to 3.4 billion with 700 million coming from overall infrastructure cost reductions, 500 million reductions for our IDC build out and 400 million from optimization and cost savings. 2001 requirements have also been reduced by 30% from 2 billion to 1.4 billion. Most important, going forward, we retain the flexibility to move higher or lower on the investment, depending on upcoming market conditions. In concert with this, our build out strategy has been revised, by timing and design, Teleglobe is now positioned to optimize its network deployment cost and response flexibility by taking advantage of the market fall out and resulting pricing reductions per capacity our major transoceanic and transcontinental fiber systems. By acquiring wavelengths as opposed to dark fiber, Teleglobe will see improved EBITDA performance and increased flexibility relative to matching demand. In short, we will have a much more scalable approach. In this regard, we have completed our analysis of regional network providers in the US, and we anticipate making an announcement of our selection in the very near term. On a related note, and in line with this new approach, we have negotiated revised agreement with Williams Corporation to replace the previous dark fiber provisions with wavelength services. I would like to reiterate, and for you to note, that our plan to deploy approximately 30 additional global points of presence this year, doubling the amount to 2000 will continue as planned. With respect to other developments, as previously discussed in March, we completed an agreement with Telecom Italia wherein we will provide $150 million in services including local access, IP transit, connectivity, as well as voice and hosting services, while procuring from them previously reference capacity in Latin America and the Mediterranean region. Additionally, in March, we were pleased to participate in the pioneering of commercial applications for content delivery services in Italy. We have finalized the partnership with Bell Canada to leverage their present fiscal on customer for all Canadian sales and Teleglobe products and services. This, as a result, will lower our sales cost and continue to optimize the deployment of overall BCE resources. Supplementing established partnership relations with Cisco and Nortel, Inktomi, and CAP Gemini, last week, we disclosed a major expansion of our Sun Microsystems relationships, wherein they will accelerate Teleglobe's implementation that might be [________________] the next generation web and application-hosting centers. Teleglobe has also been designated as one of Sun's elite plus service providers. On the management front, Q1 also showed improvement in the breadth and depth of our bench, as we continue to add senior talent to some of the industry's top competitors. In closing, while market conditions have been and are expected to remain challenging for the remainder of the year, our strategy and value proposition remain compelling, that is a world and business class Internet infrastructure offering best-of-breed global network services with premium reliability and for redundancy, as well as scalable systems and architecture. Secondly, leveraging of our customer base and an increased in number of partnerships, as well as the long-term drive to higher margin offerings to upstream targeting and reduce cost structures. Given current economic uncertainty in the global markets and as a precautionary measure regarding previous third and fourth quarter growth projections, we are revising guidance for the remainder for 2001. Teleglobe now anticipates 2001 EBITDA in the $90 to $110 million range. Based on revenue of approximately $1.5 billon consisting of $975 million from voice, 500 from datacom activity and $25 million from hosting services. In summary, we are making good progress on all fronts. We believe, we have made the appropriate adjustments to our plans and approach to reflect the changed conditions, and are well positioned to continue to respond to further changes and opportunities. Furthermore, from compared to most, Teleglobe is poised to exploit the instability of the market and capitalize on opportunities and the many discontinuities. We will continue to intelligently advance in and deploy systems and solutions that are scalable for today's and tomorrow's customer demands, as well as pursue significant partnering opportunities. Thank-you.

Thanks Terry. This ends our formal remarks and we will now take questions from analysts. In order to allow everyone with questions to participate in the call, we would appreciate if you could limit yourselves to one or two questions, time-permitting, we will come back for a second round. I'd also like to apologize, I understand that there is a certain amount of static on the line. We are not in our usual location for the call and that may account for part of it. Hopefully you will bear with us. Operator, can I ask you to now tell us the mechanics of the call?

Thank-you. You will post the questions today using our quick queue polling feature. If you have a question, please press 1 on your touch-tone telephone. You will hear an answer tone once you are in the queue. If you are using a speakerphone, please lift the handset and then press 1 and should you wish to cancel your question please press the #5. Please press 1 at this time if you have a question. Our first question will come from Richard Talbot of RBC Dominion Securities. Please go ahead.

Thanks very much, good morning.

Morning Richard.

And congratulations on the performance of the domestic business, very nice to see. I think it's really safe to say that what's been preoccupying a lot of investors minds is being the international expansion, and while you've given a lot of detail this morning, I wondered if you could comment on the ability to move from effectively, what is the an upfront fixed investment in the network tomorrow across the success phase to variable capex profile? And, if you could tell us also in some detail as to how you see that evolving? But secondly, in terms of the financing, if there is presumably we're turning back to capex sources of capital may also be impacted for funding this buildup. You've got $2 billion in the holding company in cash and the future capex, you were discussing is in the order of 5 billion if I've got my numbers right, I was just wondering to what extent BCE is prepared to fund that? Thank-you.

On the latter Richard, John Monty speaking, and I'll ask Terry to comment on the flexibility and the scalability of the capital program. On the latter, there is no question that we are ready to finance the Teleglobe program. The $900 million you asked that we had committed is a firm commitment on our part to inject in the equity of Teleglobe. We in effect own virtually 100% through the 20% that SBC owns of Bell, and Bell owning 23% of Teleglobe. There is a slight ownership indirectly through SBC, but we take this to be 100% owned company in our group. We will put our financial resources behind the Teleglobe program. We believe that this is a key element of our evolution over time. This is a long-term asset we're building, and as you well know and all of you know, and certainly you know Richard, as you look at the build out of these programs, Telecom assets in effect if you haven't got a fully deployed maximum reached-type of network for what we're shooting for, the market segments we're shooting for, you really haven't got a strong marketing position in the marketplace, and we definitely want to take advantage of the fact that other players will not be able to move ahead, and there'll be fewer players in this game than there is today. There is already a fewer players than they were and going forward we remain confident in the capability of Teleglobe to generate good returns to our shareholders, but this is a long-term play, and we didn't come into this business or into this game for a one-or-two year payback. We really fully realize all along that this was a long-term payback business, and I think Teleglobe, through Terry and his team is showing some significant progress, so we will put our muscle behind the Teleglobe program, and I'll pass it along to Terry with regards to the scalability of the capital program.

Good morning Richard, I think, it was probably from my prospective being one of the significant advancements in our approach over the last quarter or two, now materialize, Richard, is to look at this investment in a more scalable way without, as Jean alluded to, without jeopardizing our all overall intent here and the scale back from the $5 billion US to the $3.4 first of all in no way jeopardizes our abilities in both short and in long-term, but rather if you like to taste the kind of market conditions, I think more specifically, that's why I emphasize Richard, that we'll not be backing off this 60 points of presence, because I think that's fundamental to our strategy. Where we are backing off is where the capital was anticipated to be spent, relative to the demand curves, and we have done that in the IDC, and the principle back off has been in growth, and frankly in largely in the transport services that interconnect our infrastructure. More specifically, we now look at this program, if you like Richard, in a fixed and variable way, and if you look at the revised 3.4 billion, our estimate is up about 3.4, about 20% of that, Richard, remains in the flexible category and the remainder, if you like, is building the infrastructure, most of that will be this year's expenditures, all of which is necessarily frankly to meet our current growth rates and reduce some our lease cost, as well as ensuring that we build an asset that truly is got the capability in order to extract the value over the long term as Jean said.

Let me say one more thing before we pass to another question, 3 years ago very few people thought we could bring Bell Canada to the level of performance that is at today. I think we should be quite proud of what has been accomplished on many fronts. It's not only the traditional local access and long distance business across the board. We're delivering quite significantly on the value to our shareholders and more importantly on the long-term capability to deliver to our customers across a broad front of services in this new world we're into, so I think we have done something here that nobody believe we could do, we are going to do the same with Teleglobe, and we are not going to do it alone. We are going to do it with others that are of the same view as Bell Canada that they need to have access to a capability on a global front that are nonaligned to the AT&T and WorldComs of this world that want to serve their customers beyond their borders but not necessarily build out the total capability that we will be building out, and we are talking like Telecom Italia, to others to pretty well replicate the Bell Canada Telecom Italia-type of relationship and on that basis we believe that there is a significant future for Teleglobe to play a role on the sphere against the majors with partnerships with the companies the likes of Telecom Italia and Bell. Next question please.

Thank-you. Our next question comes from John Henderson of Scotia Capital. Please go ahead.

Yes. Good morning and also congratulations, good results in a difficult economic environment. I would like to focus a bit on Ventures and Excel losses. There were more than expected, and there may be, I don't know if there is any opportunity to move more cost into Excel from Teleglobe and in course is fitting that up, and then also if you could say what the book value of Excel ends up being after the write-down and that was based on, I think, undiscounted cash flows, and finally if you have any increased pressures to dispose off the non-core operations, so you can focus on core, and the real growth parts of the business the pieces that you want, and maybe some comment on timing there.

Thank you John. John regarding the focus on core versus non-core, we expressly put together with Bill Anderson, an organization totally dedicated to dealing with the Ventures, aspect of BCE. These companies, given our financial strength and so on, do not have to be dealt with in the short-term in any way, shape, or form. They are being dealt with to maximize the shareholder value, I am not talking about the 10-year time frame here, but there is no question, as I have said, by the way, a couple of times this is not a month or a couple of quarters, this is going to be a couple of years of working with these companies to find the best solution and not only to optimize shareholders value in the short term by trying to make a transaction here and there, but to make sure that the long-term value that we get involved with in terms of a transaction, when it comes we want to make sure that this is the right thing and it is the solid value that we are creating at all four of the units, the main units in Ventures. With regards to the book value on our books of Excel, we won't comment on that, as you know as I just said, we're negotiating with a lot people in terms of all of the aspects of the Ventures, talking to a lot of people, and it would be inappropriate for us to mention that number given these types of discussion, so I will leave it at that. With regards to the first aspect of your question in terms of, as you said putting cost into Excel and so on that would be a very short-term and very transparent-type of play, if you will, if not call it a game. The right way to do this John, is very much for us to manage these businesses with the cost related to the revenue streams of each of the businesses, that's what we have done. We have separated Teleglobe and Excel quite clearly. Their cost structures are totally independent of each other at this stage. The only relationship, I think is something related to our receivables on the old business side of TBS, I think we used to call it, outside of that the two streams are totally distinct from each other and we'll keep them that way and for us to say we are going to shift cost of Teleglobe into Excel and then do a transaction, I think it would be asking too much of the intelligence of the others on the other side of the table when we do these transactions. So I think we can't playback that sort of game, but at the end of the day, we are developing on all aspects of these ventures, the best economic environment that our partnerships that we are looking at could be looking for I think the BCI announcements of what they're trying to do is a good example of that in working the assets in Asia and working the assets in Latin America the way we have announced. This is the right way to do it, and it does take some time to do these transactions. So we'll need the year or two ahead of us to deliver the results, and I think on all aspect of BCE Ventures, and we have a good team to do it totally distinct from core.

What should we expect out of Excel for the year, I think we were talking about EBITDA in the order of 100 million for the year, prior to this?

I think the number here [_______________] is around 25 to 30 million is the new number I am told now. I don't know the exact number.

Thank-you.

You're welcome.

Thank you and our next question comes from Stuart Isherwood of UBS Warburg. Please go ahead.

Hi, good morning. I just wanted to followup on that question with Ventures, first of all, and ask if you are prepared if it takes a couple of years to decide on the right course of action with these operations, are you prepared at the BCE level to commit more capital and think in particular of Excel and BCI?

It would have to be minimal just to make sure that this discipline is in place. It would have be minimal and in line with the direction that we have already chosen, and at this time we are working on the assumption, and Bill Anderson is working on the assumption that he cannot count on the BCE financial support for these non-core activities. But that doesn't mean that in the process of working out a direction, and by the way, when you say choosing a direction going forward, we have chosen directions and all of these assets, but we are not obviously going to disclose the chosen directives. The issue for us now is to execute on these chosen directives and as we do execute, and there is a requirement for a standby or a slight investment in tens of millions of dollars, sure, we will do that but major capital commitment to redirect the business, no, we won't.

Okay, thank-you, and if I can just ask one more question on Teleglobe, could you just confirm that the capex reduction, I think, a total 1.7 billion, if you could just confirm that that in no way impacts the revenue target for the operation that is purely on a cost saving front as opposed to scaling back.

All right Stuart. As I think I outlined, I outlined some of that scaling brackets is the function that we do at this stage with the economists who knows, we do see a decrease in our data revenue both for long term and I am sure [_______________] inappropriate way we can perhaps communicate that, but perhaps this is the scaling back in our data voice revenues and particular on the hosting side stood.

Okay, does that answer your question.

Yes. Thank-you.

operator, next call.

Thank you. Our next question comes from Jonathan Robinson of National Bank Financial. Please go ahead.

Hi, good morning. Yet, another one on Teleglobe. Terry, you had said before that Q3 this year was going to probably be the first quarter where we saw some fairly material turnaround in Teleglobe, operationally. Are you holding on to that in the light of this guidance?

Yeah. I think, absolutely Jonathan, I would say, and I think it's the appropriate thing to do, hence the cautionary note is we were looking at data connectivity growth in the 60% to 70% for those quarters given the trends, and our view now is that it is more in line with the 40%, but we will see in the third and fourth quarter, even with that drop, the turnarounds really start to materialize, but at that point we will see the reduction in our least cost as our own network build starts to kick in and we start to migrate from these leases. So, I do see less explosive data growth in the third and fourth quarter, but we do see continued improvement quarter-over-quarter, and I think it will become apparent in the third and fourth quarter not perhaps to the tune of explosive extent of what we had anticipated given what appears to be, but could change the drop in the datacom activity at [_______________].

Okay, thanks very much.

Okay.

Thank-you. Our next question comes from Peter Rhamey of BMO Nesbitt Burns. Please go ahead.

Yes, thanks very much and good morning. I would like to change the focus for a minute on to Bell Canada proper. Michael, you mentioned costs, savings initiatives, talked about in February. I was wondering how much flexibility do you have to accelerate that in the event that the economy slowdown begins to have a more major impact? And a more detailed question. Could you talk a little bit about the impact of the change in constitution regime with respect to, maybe Siim can answer this, with regards to long distance revenue growth year-over-year and year over sequential quarter?

Peter, on the first point with respect to flexibility to accelerate or intensify our efforts on expenditure reduction, we are as we speak, Peter already very focused on this. We witnessed the streamlining activity that we talked about during the earlier part of the call. We are also already moving on a variety of other fronts to particularly with respect to process we design and process efficiencies, supply management improvements. The current economic situation of a lot of equipment vendors is certainly one of the silver linings and that situation, as it allows us in terms of equipment negotiations and pricing negotiations with equipment vendors that can help us on the capital side. So, there are a variety of activities that's going across the board. We are already, as I say, pursuing this very aggressively. We will continue to and clearly to the extent that we do continue to see or rather see some intensification in softening of the economy. We will leave no stone unturned in working the expense side of the business in order to maximize our EBITDA performance and our earnings performance within Bell. So, I do believe that there is flexibility there, although I don't want to overstate that, Peter, because we are already being very aggressive in our efforts to reduce expenses and improve the efficiency of the company. A word on capex, in addition to my comment about equipment vendors and pricing associated with that, we are also looking hard at our capex program to ensure that we are managing that in such a way that should the economy soften further that we will have some flexibility with respect to our capital program. So, we are re-examining a lot of things as we speak in the interest of getting a little bit of flexibility there. Now again that being said, there are a number of important strategic priorities that we are pursuing and building through that capex efforts this year. So, I wouldn't want you to believe that you will see a dramatically different capex program than we have talked about in the past at Bell, and as you will recall, our base number there is on the order of above $3.5 billion exclusive of Aliant and exclusive of Spectrum that I would say that most of that capex will be committed, but we are managing in a way that we don't get ahead of ourselves and that we do maintain some degree of flexibility.

So, you don't see yourself cutting back in your growth initiatives DSL or wireless in order to improve marketing?

We think that the right way to build the future of the business is to pursue those strategic initiatives for the longer term, and I think it would be mortgaging the future of the company to cut back on those areas of the business, and to cut those back aggressively now simply in the interest of whatever short-term benefit there may be, but over the longer term, we think we are building their engines for growth for the future, and that we believe we have, we know we have, the financial capability to see that through in a prudent way and that's what we will do so that as the economy strengthens, we will be well positioned in having built these engines for the future. So, Peter, I don't see, I wouldn't like you to expect to see dramatic changes in that capex program and certainly you will not see any strategic realignment in terms of the initiatives that we are pursuing at Bell this year.

Very good. Thank-you. And contribution?

On contribution, the issue there is not so much for us on the, I am not going to go into a lot of details here, but on the revenue side of the business per say, the real impact that contribution decision has had on us has been much more on the expense side of the business, and it has been one of the challenges that we have had to face. So, I don't see dramatic changes on the revenue side as a result of the contribution decision, but clearly we have had to step up to an incremental challenge on the expense side, and it's one of the reason why we continue to be, we are reasonably satisfied with the quarter's performance because we have had to offset that additional hurdle. Now, as we now have the approval of the CRTC to pass on in pricing some of the impact of the expense side, the incremental tax associated with the change in the regime, you will see us pass that through and you will see that begin to be reflected in the next quarter's numbers, but again Peter, we don't anticipate anything dramatic there. We will just pass on what you know we are able to pass on already.

Great, thank you very much.

Thank-you, and our next question comes from Robert Goff of Credit Suisse First Boston. Please go ahead.

Thank you very much. Good morning. Could you just discuss your current view of the balance between growth and short-term financials, at Bell Mobility, DSL, and ExpressVu, and where you may see that balance evolving?

I'm not sure I follow the question Rob, could you elaborate a little bit please?

When you're looking at your growth initiatives, are you tempted to push hard on the momentum at the expense of short-term financials or do you think you have the right growth versus financials balance at the current time?

Well, let me answer it this way. If you're satisfied and we are with the financial targets we've put in the window, even in this economic environment, we are saying we're going to be within those targets and within that envelope, which is pushing as hard on the growth initiatives we can, trying to and delivering the financial targets, and if that's the right mix, and we believe it is, that's what we are going to be doing. The issue is, Michael has just said, could we push harder on DSL right now that we are, well, a 100,000 new additions in one quarter is one hell of a lot, can we maintain that level and still be within the financial targets. This is a very tough question and requires execution and analysis in much greater detail than we can do on this call. We think we can, maybe not at a 100,000 per quarter that would be pushing the envelope a little too much, but certainly at a growth rate that will probably surpass the numbers that we had quartered, but certainly at the numbers we had quartered on DSL. There is no question that ExpressVu is an expensive build out, but again we're breaking through the numbers, on additions, and doing it at a lesser cost than we had contemplated in terms of COA cost of acquisition. So, therefore, we're being able to manage the balance between short-term earnings and long-term growth, and I think we're very conscious of all of that and all of the business activities that we've got, and on Mobility, I think the approaches there are the same. We will meet our financial targets and deliver on our Mobility targets. So, we're satisfied on the plan that we have the right mix. We will deliver on that mix. I think what you're alluding to is, do we change our view of that given the economic environment? At this stage what we see, we mentioned it a couple of times already this morning, we're not changing our view, we think the balance is there, and we'll look forward on that and on the BCE level the same comments can be made. When you look at the new media business of Globemedia, when you look at Emergis, and you look at Teleglobe, we think that even with the bit of softness on Teleglobe, as Terry has alluded to, and with the challenge of developing Emergis, and the new media businesses in Globemedia, we think that even though it's a significant commitment to long-term growth, we will meet the financial targets of BCE within the envelopes provided, so the range is provided. So, I think we have got the balance, but obviously we're looking at this continuously to make sure that we are on the same wavelength with all of you.

Very good, thank-you.

Rob, this is Michael J. Sabia, I just want to take the opportunity on your question to clarify one thing. I think I had mentioned in my comment that on the ExpressVu just picking up your point on some of our gross businesses that add to the net assets in the quarter were around 80,000 so that there is no confusion, the correct number for that is 74, so I overstated a little bit, but I just wanted to clarify that.

And I will come back for one more.

Sorry Rob. There is something that we are doing just to try to have a better dialogue with all of you, and I wanted to wait till we had a little more data, and a little bit of history, a little of going forward to give you a sense. We'll do all of that in good time, but just to give you a sense of where we are now, if you take the Bell Canada traditional businesses that have been affected by deregulation and strong competitive pressures such as LV and access, local and access and long distance, and then add to that the Teleglobe voice business which in this case is similar to the voice traditional businesses of Bell Canada, you take these 3 segments of BCE's businesses and you take that over the core activities of BCE, you'll realize that already today these businesses account for about 50% of BCE that's quite an accomplishment, what it says in effect in that the other 50% is everything else at significant growth rates, whether it's Teleglobes data business, whether it's Emergis, whether it's Bells data business growing at 30% in the quarter, whether it's Mobility, you really start to see a massive transformation of BCE compared to where it was 3 or 4 years ago, we're excluding Nortel obviously. BCE had very few of these revenue streams to be able to show and develop a business. So that's basically something that we think you're question is effective, it is critically important for us to have a dialogue with you all on the growth aspect of BCE versus its traditional businesses of being transformed, given technology and given deregulations, more on that later.

Thank-you, and our next question will come from Dvai Ghose of CIBC World Markets. Please go ahead.

Yes thanks very much. One question on Teleglobe and one on Bell Canada International. On the Teleglobe side Terry, you're talking about moving from dark fiber to wavelength which obviously incurs significant capital savings up front, but I am wondering in the longer term isn't that going to hurt your margin significantly, given the fact that you're essentially leasing wavelengths from your competitors are selling to the same end-users, and on a related point with the financing of Teleglobe, Jean, are you committed that should you not able to find any partners to help you with the financing to fund the full $5 billion of capex on a going forward basis? And then on BCI, my question is to do with commitment to the Ventures asset, as you know with the Vesper asset sale being delayed BCI is promissory note, which is going to be drawn, is BC prepared to support them if required?

On the Teleglobe let me reiterate, the capital program now is 3.4 not 5 ...

I am talking about Canadian side.

Okay, and we are committed to help Teleglobe finance the whole thing, so that there should be no quivering about that. There is no misunderstanding, I hope between all of us. We will get it done, if we get it done with partners, and we think the value grew up by partners beyond finance is really what we think is required here to build a stronger business, fine, but we think the economics of this over the long term are appropriate, and that we will get a return on our capital. With regards to the other comments, Terry.

Yeah, I think I can be fairly and perhaps have a dialogue in real detail, but your observation 6 months ago was valid. Today, Davi what we've done over the last, divide 3-4 months is, we've actually done a very detailed analysis on EBITDA level, cash level, and NPD level, on a cost per DS0 mile, and now buying wavelengths on terrestrially certainly in US, Europe, and I believe transoceanic is substantially better on all fronts than building from a fiber base, given the state of the industry and availability of capacity to that. For example, our build out strategy in the US was approaching about just over ¢4 per DS0 mile deal, I had hoped to announce today, but we'll be no more than probably a couple of weeks away, we'll see our cost as a result of those arrangements to be somewhere in excess of 30% lower. So Dvai, in summary your observation was absolutely correct, the notion that those people with lots and lots of fiber are at a significance strategic advantage on the cost curve, frankly has now done a 180-degree turn, I'm not sure why we've taken this new approach as the added benefit of those being per Richard Talbot's question being we have more flexibility to respond to demand be [_______________].

Now, is that just a US phenomena or you're going to outsource other parts of your..?

What probably I didn't mention you should do is we are actually looking at replicating that in Europe and what wasn't the case when we were in discussion with a number parties, I believe the contrary to our analysis and conclusion 6 to 9 months ago, I think those same opportunity is, not think, they are there undoubtedly on transoceanic.

Okay.

Now, how long will this last? Our view is that it will last 2 to 3 years, but that is a timeframe in which we are operating, so we're looking to capitalize on some of these downturn discontinuities.

Ghose your question, I believe I understood it correctly by saying are we going to put more money in Vesper's. Is that what you said?

No, the question is there may be a capital shortfall for Vesper because they have already committed a promissory note and the asset sale hasn't taken place. Will you help them plug that, if necessary?

No, Vesper is.. if you are talking about new...

No, no. I am talking about BCI in terms of promissory note to Telecom America.

Oh, you are sure. I am sorry. I thought you meant putting in more money in Vesper's.

No, no. Sorry, I wasn't clear. I am talking about the Telecom America's commitment on the fact that ..

No, no question. This is a partnership that is worthwhile for the long-term direction and the partnership with Telmex and SBC we really believe that has got a lot of merits so no question we will support BCI in the short term to redirect it's activities, but I think, on the standalone basis with the sources of funds they can get to and the way they have arranged their affairs in terms of the convertible debentures they have got in play and all of that, I think they can meet their own commitments, but if there is a shortfall to be taken account of, definitely we will stand behind BCI.

Okay. Thanks for the clarification.

Dvai. This is Terry Jarman. Just to get a complete story, in any conclusion that we reach over the next couple of weeks prior of that conclusion as a protection for another discontinuity of longer term any arrangement on wavelengths we reach will also include an option for substantial dark fiber, if we wish to take up that option, and in that way we get our cake and eat it. If there is a significant change in demand over the longer term and technology and cost we can then protect ourselves as well along with it.

Okay, thanks very much.

Okay, next one please.

Thank-you, our next question comes from Glen Campbell of Merrill Lynch, please go ahead.

Yes, thanks very much. Two questions. First, could you comment on the longer-term growth outlook for Teleglobe and BC together giving us your new thoughts on where the market is going?

We gave an indication on February 5th of 2001 to 2003, growth rates for revenues and EBITDA. I am looking for those numbers here for a second. Let me make sure I give you the right numbers. Revenue BCE a range of 11% to 13%, compound annual growth rate of 2001 to 2003. The reason why we used to 2001 is that if you remember is the adjustment to pro forma is difficult for all of you and sometimes will, excuse the term, goose up some of these growth rates, so we wanted to give you a proper number, and when we look at this year we have to give you a pro forma, so I think you can look at these pro forma growth numbers in relationship to these, but basically these are after we have got a solid year of total performance 2001, and we are looking forward to 2003. EBITDA is at 13% to 15% [_______________]. With regards to Teleglobe, I don't think I have those with me. Do you have similar numbers for Teleglobe at your disposal Terry given the adjustment of length?

Yeah, I think what we are trying is Glen just to talk in gross terms.

Sure.

I think what we have to be aware of here is the volatility projecting forward from our analysis an included number of independent outside bodies. If we project forward what we are seeing in the data connectivity side and overall in the businesses on voice data and hosting, our original plan had shown [_______________] growth revenues combining those business in the high teens, and we are now projecting that with the mid-teens, not substantial, what has taken place is certainly a drop off in the hosting revenues. But it's not, I think at this stage it's crystal bowling and that's why I think it's important to adjust that reports in our plan that gives us flexibility because I don't think anybody doubts what the long-term direction here is in terms of broadband and Internet and services accordingly.

I think that is fair, thanks. You had great success at Bell Canada with data revenue growth and clearly some it is conservative but most of it is business. I wondered if you could give us a little bit of color on so where you are having your wins, types of customers, reasons for your success, and whether you think you can keep it going at 30% plus?

Are you talking about Canada?

Yes, Bell Canada data revenues.

Well the whole thing basically started when we created Nexxia, and new applications and services really are at the large customer level first. So we had some very significant success and virtually all large bids we won on new network capability and megabits for the desktops for the large financial institutions, large government contracts, and so on. At this stage, to cash discount a significant growth was coming from the high-speed area. This was not in our base obviously in previous years at the levels we are at in 2000, this was still good base, but it was growing from something like 50,000 to 60,000 in 1999, and this year we are starting to have a base of customers of well over 450,000 and moving from there. So, that's going to add significantly to the growth as we move forward. These probably are the two key areas the DS1, the DS3, the megabits for the desktops, all of these types of services obviously the IP and VPN service that was just announced recently by Nexxia's very important area of growth that we see going forward, as we go down market from the very largest accounts and that's one of the processes we are into now. Now, that we have got that base established, significant growth is still to come with the largest accounts in the country the top 300 in Nexxia, but we're starting to look at the same solutions at the regional level of Quebec and Ontario and working that with our partners in the other areas of the country, and there is no question that these are going to filter us through with the whole organization, but we have to start at the top end. At the consumer level it is basically going to be DSL.

I am now hearing about some competitors catching up with you though. Should we in our forecast be assuming that the competitors start to get a little bit more of this very big pie? Or do you actually think you can hold or even widen this lead that you have?

Well you know you should never take your competitors for granted and we are not, but at the same time, we think we have got enough tools in our arsenal to take them on. At least we have proven it thus far, but it would be unfair for me to say that our competitors are not going to put together some compelling offerings of their own in due time, but at this stage we are not seeing them win. So, the key to all of this is going to be who wins in the marketplace, and we have won the share that we wanted, and we are a bit aggressive on our share, but at this stage this is an ascent market, and we want to be established as a clear leader.

Well, numbers are terrific, thanks very much.

Thank-you, and our next question comes from Greg MacDonald of Morgan Stanley, please go ahead.

Thanks, hi everyone. I wanted to direct this question towards Terry and build a little bit on the question a couple ago that Dvai was talking about with respect to the ability to supplement your capex budget at Teleglobe with potential partnerships. Just wanted to direct the question on focusing on what's happening in the capital marker rates now and the difficulty that some of your competitors are having focusing on their own funding relative to executing on the business plans? And I guess when you look at what's happening there and you maintain full commitment to this business, is it not worth talking a little bit about what the potential for joint ventures or even more significant equity investments in some of these other competitors out there that they are having difficulty as a way of supplementing your build out or even the way of expanding? Can you talk a little bit about how you view that from the strategic standpoint?

Yeah, I mean obviously one doesn't want to speculate, but I think you pointed on an important point here, Greg, I have used and Jean has used, that partnerships and clearly we see this is one of the major ways we could move Teleglobe forward and as a combined impact of de-risking as well as accelerating, and we are in a very fortunate position, Teleglobe, given its base of customers around the world globally most of whom are not aligned, if you like, with the three, four, five major players, and so we have, Greg, a very specific program underway that is being executed to talk to these and others and to leverage those partnerships in such a way that we can leverage their channel and we can build our business with and through them. In addition your other one, in terms of clearly this massive change, if this continue to take place, we believe, strategically, it would not be wise to go on an acquisition hunt for some of these entities is the existing totality, but clearly what is presenting itself as opportunity is to pickup assets, customer bases, people, products that are really important as we move through here. So, we are examining Greg those alternatives.

Terry, this is a follow on, what I'm looking at, I have to think that the opportunity to buy dark fiber is as attractive right now given some of these competitors troubles out there as the lease opportunity is, can we read the fact that you're leasing as a hint that you might be leaving your options open?

No, I think it's a deliberate strategy not to rule out both, and its not a leasing, its acquisition of wavelengths is the approach, which frankly, if you look at it, is really no different than dark fiber, except somebody's put the electronics on.

Another form of IRUs.

It is an IRUs, Greg. It's not a lease; it would be clearly an acquisition.

So it's an indefinite timeline

Absolutely, and IRU is absolutely no different than a dark fiber. Most of the dark fiber purchases come with that kind of approach.

With the option on the dark fiber on the top, if ever the economics moving favor of us putting the electronics on the fiber. What Terry is basically saying is the economics of [________________] is better now than us putting the electronics on the fiber.

So what we are about to conclude Greg, is and to give the classic expression that is we're in a position now and we go exploit it to have our cake and eat it, and that's to buy wavelength levels which gives us more flexibility to respond to demand both absolute and geographically, and also as a backup plan, I think, Dvai mentioned it to have an option on dark fiber down the road at some significant quantities given that the exploration does take place in the two to three year timeframe, and then I think it just to say we get our cakes and eat it.

And really the attractiveness to me is on the downside, you can go the other way as well, were you could, with that sort of approach scale back on the growth we've got embedded in the $3.4 billion. Even at 3.4, there is a growth element obviously because that business growing, and if ever we don't see the growth rates over the year, couple of years going forward. We have flexibility with that approach to scale back the $3.4 billion even further while keeping our point to presence and our reach intact.

And Greg, just to say, just where this leads you to in terms of flexibility is we will go light in North America as you know, and essentially light eight wavelengths on our own dark fiber at any rate we'll be looking to replicate that, but in a way that's asymmetrical around the US. By that it means that our demand curve between certain points in the US only requires two wavelengths, then we will do that with further cross sections and geographies require more than that we'll have the flexibility to do that. So, I think it's a much wise and most strategic approach. It wasn't opened to us six to nine month ago, because it would have caused disadvantage, now that is not the case. In fact, probably building at this stage would cause disadvantage with other service light competitors.

One last question.

Thank-you.

Thank-you. Our next question will come from Steven AJ Salamon of your HSBC securities. Please go ahead.

Thank you very much, and if could maybe, some non-Teleglobe questions. I wanted to ask about the data revenue sequentially Q1 over Q4, it appears to be down a sink. I'm wondering if that is a seasonal effect or what the explanation might be there. Secondly, with respect to residential local rates, some of the mobile pricing out there looks like it is starting to be pretty competitive with the residential local rates, wondering if you can comment on that generally, but more specifically with the price capital review going on right now. Do you see any potential for the CRTC for bearing from regulating local rates, is that a possibility given the mobile competition? And also, final question with respect to Emergis, just wondering what your sense of how the UP&UP acquisition is performing presumably progress in the US would also open the door to more traffic for Teleglobe potentially if you look at the US revenue at Emergis, it seems to be relatively flat Q1 over Q4. Are things progressing there the way you would like or is there something that needs to be there?

Well Steve, I give you credit for putting a lot of questions on the table under the guise of the last question.

Thank you Michael.

First data revenues. Yes, it's a seasonal issue. Its largely driven by the typical expansion that we get in the fourth quarter on our gateway business associated with a lot of customers finalize equipment purchases, etc., near the end of the year, and it that has the effect of pushing up our data revenues at the end of the year and then they slip back a little bit into the first quarter of the year. So that's not an unexpected element of our earnings report this year in our own minds.

Can you give a sense of what the equipment revenues might have been out of that, so we can see what the service growth would have been?

Yeah, I haven't got that now in front of me, but it's purely on equipment. But it would account for the absolute bulk of all of that because we continue to believe that there's a lot of momentum in our data business, as Jean has mentioned, particularly on the large enterprise customers, we're having a lot of success in the marketplace, and we feel very good about how that business is developing. So, it is a seasonal factor. We can get back if we be with a specific number on the equipment side, you can see that kind of effect that I'm describing here. Let me just take your questions not in any particular order. With respect to price caps, obviously this is a very important proceeding that the CRTC has underway. Your question as to whether or not we would expect to see CRTC forebear in the area of local access, if I'm understanding your question, that is not something that we would necessarily foresee at this point if that would occur. We will see how that proceeding unfolds. We believe that there's an important public quality issue here that will have an obviously consequential issue for us, that on the one hand there are pressures to keep local rates due to price cap regime at a relatively low level. On the other hand, there is a public policy interest in enhancing competition, but it's very difficult to divulge what those simultaneously. So that's an issue we'll see how the CRTC grapples with that as they go forward. So that's my comment on price cap. With respect to the issue of both mobility and local rates, we don't really see any substitution possibilities of any consequence there. So, that's not something that we would look to seeing as a trend developing in the industry, not withstanding where, wireless prices are. Or where we would see the going over the foreseeable future. In fact, going back to a somewhat earlier life, I think that tendency is apparent in other markets, but it's apparent in other markets where those markets don't have a history of quality, a wireline local, residential, or business service. We don't really see that developing here in any meaningful way. On Emergis, I think the UP&UP transaction, I think, is beginning to develop momentum now or beginning is probably too conservatives, it is now developing a significant amount of momentum. I think early on that needed some work, but I think Brian Edwards and his team are now very much on this, and I think we're beginning to see some of the significant benefits there. I think there're also a lot of initiatives underway to expand Emergis' eHealth business in the United States, and I think you'll see that continuing to grow at a very attractive way as Emergis concentrates on the two verticals that they have already identified, which as you know, our financial services and eHealth. UP&UP is an important anchor transaction there, as you know, gives Emergis critical mass and a presence in the market, and I think, you will see over the coming weeks and months, a lot of further progress there. We feel very good about that business and obviously to the extent of their opportunities in the business that Emergis is doing to generate business for Teleglobe, clearly we would leave no stone unturned in doing that, although we would not see that as a significant driver of demand for Teleglobe services. But clearly the whole scene of synergies across the portfolio is something that's important to us and we'll exploit them anywhere and everywhere we find them. So I think that's your list, Steve.

Yeah, thank-you.

I would just like to thank everyone for joining us this morning. I appreciate your interest in our company and we will look forward to talking to you in July when we'll report our second quarter earnings. Have a good day. Thanks a lot.