BCE Inc (BCE) 2005 Q1 法說會逐字稿

Good morning ladies and gentlemen. Welcome to the BCE first quarter results conference call. I would now like to turn the meeting over to Mr. Bernard le Duc. Please go ahead Mr. le Duc.

Thank you very much and good morning everybody.

Thank you for joining us. The purpose of the call is to discuss our first quarter results. And I'm here today with Michael Sabia our CEO. Siim Vanaselja, our CFO, as well as Pierre Blouin from Consumers Markets, Isabelle Courville from Enterprise, Karen Sheriff from SMB, and Steven Wetmore from National Markets. As usual, we'd like to take you through the brief summary presentation that you can find on our website after which we'll be happy to take any questions you may have. Today's call is being webcast and as always the archive is available on the website.

Now before we get started, it's my role to remind you that today's remarks contain forward-looking statements, with respect to items such as revenues, earnings, free cash flow, capital intensity and cost savings. There are risks that actual results will differ materially from those contemplated by the forward-looking statements, and for additional information on these risks, please consult BCE's 2004 annual information form, dated March 2, 2005, as updated in BCE's 2005 first quarter MDNA, which is dated May 3, 2005, both of which the Canadian Securities Commission and with the SEC. These forward-looking statements represent the expectations of BCE and its subsidiaries as of today, May 4, 2005, and accordingly are subject to change after such date. However we assume no obligations, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. With that behind us, I'd now like to turn the call over to Michael.

Thanks Bernard, and good morning everyone, and thanks for joining us. I think in the quarter, generally I think we made some good progress on many fronts. I think we advanced the yardsticks in the plan that we have for transforming and rebuilding this business. That as I always say is a long journey, and we have much to do but I do think, nonetheless, a very solid start to the year.

From a financial perspective at the BCE level, you'll see our revenues up 4.8%, EBITDA up 5.1%. Certainly an improvement over the kind of trends you saw in our revenue performance last year. Good contributions over all. Both metrics, from Globe Media and Telesat. But as always, the foundation of the Company's performance is in Bell, so at the Bell level, you see revenue up about 2.5%, certainly trending better than last year, and EBITDA up 3.4%. That underlying improvement in revenue that we seen a significant improvement in data revenue in the quarter, now that 60% of our data revenues are coming either from the ISP, our broadband IP, product our value added services and that's a pretty stark contrast of the 48% of last year.

So it's a significant improvement in the balance there. And obviously the changes we made in it labor force last year are also contributing to better operating profitability. So all of that is important and all of that is very welcome. But what is at least as important, perhaps even more important is the progress that we're making in the operational transformation of the Company. There again, I think good progress against all the three basic pillars of the plan we talked to you about in December.

In terms of customer experience, I won't go through a lot of details here but good progress in simplifying products and the product catalogs. The introduction of a new privilege program, one in consumer and a different program that I'll talk about in enterprise. Ramping up one bill. Significant, huge improvement in IP VPN provisioning. Again all of that to say good progress there. Bandwidth, the second pillar, our fiber to the node strategy is very much on track in the quarter.

New services, the third, Next generation services, the third pillar. Again, improvement there. I think today we're at about 42% of revenues coming from growth product and in our minds, very much on track for that 55% and that shift in balance between growth products and legacy products that we talked a lot about in December.

Now those kind of operating metrics and given the kind of operating transformation that we're working on in the company, I think it's very important for you to have insight into the progress that we are making here, because that operating progress really does set the foundation for the new company that's being built here. So we intend to take you through this in a little bit greater detail twice a year and we're going to do that at the end of the second quarter, so in other words, the first half, and then we'll report again each year at the December investor conference. And at that time, if at the he said of the second quarter, we'll take you through a set of metrics and then we'll keep reporting against those metrics so you will, in addition to the company's financial performance be able to have some benchmarks from an operating point of view, as well, but we'll go through as we said, twice a year.

I said at the outset that I think we made progress on many fronts but clearly not all. And the most obvious example of that is a pretty slow start in the first quarter in Mobility. I'll take you through this in a minute but that's really, as I can say, there's a tale of two quarters, first January to mid-February and then the second half of the quarter where we very much turned the situation around and you'll see some numbers on that in a minute or two.

As briefly, before I come back to the results, I'd just like to also comment that I think pretty good progress in the quarter on regulatory issues as well. First and foremost, and I believe very importantly, in the government's undertaking a telecom policy review, it's a significant step forward. That's now launched and underway and I might also say and give full credit to the Commission on this for significant improvements in increasing their responsiveness and timeliness of important decision. So again I think progress there.

Now that being said, I will continue to temper my natural optimism, let me say, about the Commission's Voice over IP position. We'll ll have to see how all that goes a little bit down the road, but nonetheless on other issues, I think good progress. And generally I say on all scores, pretty good progress in the quarter.

Now turning to more specifics on DSL, I think very strong performance. This continues to be an important strategic foundation for us going forward. 128,000 net assets. The strongest quarter we've had since the fourth quarter of 2001. This story is all about just solid execution and the channels and advertising, good turn management, COA,. This is about good execution. Value added services continue to grow fast, up over 100% year-over-year.

Over 20% sequentially, and that's important because it helps to bolster RPU by creating more value over that broadband connection and also it helps manage RPU pressures because as we go deeper and deeper in penetration level here and pick up some slower speed subscribers. It's an important offset to -- to our RPU performance as we continue going forward and that's always been part of our plan. So this appears to be working and working well.

At the same time I think we made significant improvements in customer experience. In the ISP with providing new kinds of technical support for people in their homes, for both Bell and non-Bell products. Much better on line customer care. All of that, the combination of value added services, and the work we're doing on a customer experience, all important parts of winning the broad band home.

On video, pretty good growth in subscribers there. Up significantly over the first quarter of last year. I think about 87%. Insurance very solid, and I think that's a considerable accomplishment of Robert Odendaal and his team in Video, given that we also in the quarter changed out about 800,000 conditional access cards.

And that program is going very well we've now done about a million by the end of April. So that's progressing well. And notwithstanding that, which is itself a very major program, a very very solid turn so that, I think a good performance. RPU flat in the quarter, relative to Q1 of last year, due to a couple of factors.

First, the -- the hockey strike caught this on pay-per-view revenues, which is one factor, hopefully a transitory one, for you hockey fans. And second and importantly, we also did take a decision again given the focus we have on customer service, to make sure that our call centers on Video were very much focused on service issues in the first quarter, and we did curtail the amount of the usual upsell activity that they do, and that also contributed to that performance on RPU. That being said, when we look ahead on video, we feel very good about the revenue outlook and RPU performance.

First, because of the subscriber acquisition performance that we had in the quarter, second, because the call centers are now back upselling. And that's had significant impact on RPU. Just an example, for new customers, up about $6 or $7 so that's paying off on new customers. And then third, some of the pricing changes that we put in place in March. So for all of those reasons, as we look forward, we expect to see considerable strengthening revenue growth in the second quarter and beyond.

Again, on the cost side, good execution in Video, particularly on COA. I think our COA is $470. It's never been so low. So very good process there as well. Video sale, we'll keep driving there. Certainly very aggressive tactics from Roger [inaudible] in the Toronto MDU market but we'll continue to make progress there. And we continue to make our plans for the rollout of IPTV later in the year, as we have talked about. Let me turn to mobility. And try to unpack what is a little bit of a complicated quarter here.

Now on the surface, with the growth add performance we had which was meaningfully better than the first quarter of last year, at 277,000 and with our net adds at 82,000, on the surface you can say Mobility performed reasonably well and on the net add side, particularly given the extent of the focus we had in the first quarter of last year, to try to ramp up subscribers significantly there in advance of the billing change.

So the fact that we're a little bit short of the first quarter of last year on net adds is probably understandable. And prepaid, I think was strong. That's partially the result of just the rollover from the success we had with grab-and-go Christmas offers in -- that continued on -- the rollover continued into January and then of course, our picking up our stake in the Virgin net adds to the quarter as well. So prepaid was pretty strong but eng the real story here turns on postpaid.

So let me turn to that and divide the quarter into two parts. And in terms of the first, they call it the first half of the quarter, I think there are two basic drivers that explain performance there. First, through that first part of the year or actually, I think much of it extended throughout, but the wireless market was very, very competitive as it should be. Q1, I would say was unusually competitive and I think I'm choosing my words carefully here.

At the start of the quarter, as a company, Mobility is very much focused on driving pricing discipline and we did take our Christmas offers out of the market, et cetera at this additional time. As it turned out our competitors moved in a quite different direction. I won't go through all the details here, I think you're familiar with them but if you look at unlimited local calling and the extensions of that over three, six and in some provinces, 12 months, Telus and Rogers is one example.

Handset pricing as we tried to price more to the value, some of the premium hand sets in the market, both of our competitors took those products down to zero price points. Low end rate plans were left in the market for a very, very long time, pretty much throughout the whole quarter. So lots of examples.

I don't want to be misheard here I'm not complaining about this, I'm just saying from a pricing strategy point of view we were focused more on pricing discipline and mobility. Our competitors weren't and I think that that cost us through the month of January and perhaps the first part of February. You could say should we have reacted faster? I would say probably. And will we in the future? I will say definitely. You can believe me on that. So pricing and competitive issues is point number one.

Second, I guess I'll call it a billing hangover. Now that's not a system performance or call center issue. As we said to you on the fourth quarter call, all of that was returning normal at the time, and indeed, it was. This is more essentially, a behavioral issue a kind of sticker shock, among some of our customers to receiving three or four bills in a compressed period. And we worked pretty hard with customers through this on payment plans and other kind of arrangements to be flexible, and that was good for many of them, solved many of those problems but not for all. And many suspended service, or used their phones less, et cetera.

As a result of all of that, we decided to take some steps this quarter to clear this up and as a result we wrote off 45,000 postpaid subscribers, not ever an easy thing to do but we believe the right thing to do in the circumstance. As a result, our churn is up to 1.6% but it's important to recognize here, that absent the write-off of 45,000 postpaid subscribers, the underlying rate continues to be good at 1.2%.

The -- when we look -- when we look, then, as I shift now from the first part to the second part, I think it's quite a different story. In the second part of the quarter, as a result of the changes that were put in place by the management team in Mobility. Postpaid recovered very strongly in March. The launch of Push The Talk 10-4 was a great success, above 20,000 subscribers just in the first month.

We picked up a great deal of momentum and in fact exited the quarter with a good deal of momentum, a trend that's continuing. We're pleased to see throughout April where our postpaid gross adds are moving along very well, and consistent with what we were doing in March. I would also say in Mobility, that, on the EBITDA side, at 41% we were quite pleased with that, with significant improvement, 18% in our cost of acquisition.

So as I say, challenging first six weeks or so, a lot of momentum and a significant turn around built in the second six-week period of the quarter. Quickly onto consumers, just a couple of points, just wrapping up on consumer, VoIP and cable telephony much in the news so let me talk a little bit about that. In the quarter, we did see on the residential side, mass erosion of about 1.7%, that's up about 30 basis points.

I might add for the company as a whole, mass erosions came in pretty much I think as expected, about 1.3% . Now returning to the residential side, overall no really significant changes here in the volumes of losses to either Telex, Wireless, DSL or for that matter, VoIP providers. I think the new development as you're all very much aware, in the quarter, is the entry of Vidéotron into the market and that did represent about 10,000, call it 15% of our losses in the quarter.

Now its very early days here but Vidéotron's entry has given us an opportunity to test things and learn some things. So far, very much as expected. It looks like a very very small percentage, less than 5% of the customers who are moving to -- to Vidéotron. So less than 5% of say that 10,000 number are people with two or more Bell products.

Now that's important, because it gives us some initial evidence that there's some confidence that we have in a multiproduct strategy that we've been following for the last while. On that, in terms of bundles, good quarter, topped -- total count of bundles topped 550,000. Pleased with the progress we made.

Now you know, we moved fast on bundles and we done that on purpose in order to quickly get a critical mass out into the market and in doing it quickly, we certainly taken a broad brush approach, just to get out there and learn and to -- to get that different way of operating our business out there and to build our internal learnings about it. That being said, as we go forward, I think we're now in a position where we can do some fine tuning and we're going to.

With respect to more -- much more detailed segmentation, much more targeted marketing, offers aimed much more surgically, at the specific needs of groups of customers, we'll do this in a way that keeps up the momentum on bundles, because that's important but we think at the same time there are opportunities for us to enhance our financial returns from bundling and we'll be doing that. As we in effect enter phase two of our bundling program, having completed phase one now.

Quickly on consumer, to wrap up, on EBITDA, up nicely, the margin up 50 basis points to 45.4%. Again, reflecting good work and profitability on COA and reflecting the progress we're making on Galileo and unifying the back office of our consumer business, so all of that is very much on track.

A few quick words on business. I think very solid quarter in the business markets, revenues up 3%, better performance, far better than anything we saw last year. EBITDA up over 5% -- 5.2%. Margin up, on the revenue side, good growth in Wireless in the business market at 13%, value added services over 50. Continuation of good growth in IT.

In those engines, more than able to offset the decline that we expect every quarter in local LD, and on legacy data and that's very much the store what we're doing in the business market, building growth engines faster than the decline in our legacy products which is the essence of the strategy that we have under way there. On enterprise, I won't review a lot of numbers, I'll just say, at about, a little bit more than 3% revenue growth, very positive revenue performance there.

I think the first positive quarter since the first quarter of last year on revenue performance in Enterprise,so good progress there. EBITDA up double digit rates. Again, reflecting the good progress we're making in lowering cost and operation in IT. Cogs, et cetera. A lot of good customer movement in the directions that we want this to move. Good growth in IT enabled lines, up 13,000 to 158,000. Many customers over 100 moving to IT networks and services.

Target for the year is 150 so we feel pretty good about that. Broadening out the base of customers moving from just the largest customers and with the heavy concentration and on financial institutions moving now more broadly. Jean Coutu is an example, Wal-Mart is another, lots of school boards, et cetera. So that, all of those positive trend continue in our enterprise business, I might also say that while we're doing that, enterprise has also launched a lot of focus and work on service and as a result of that work, the beginning of April, April 1st, we launched an enterprise service promise. That's an important program.

Isabelle can elaborate on it, but but it's a good opportunities for us to differentiate ourselves by really putting something that we believe is unprecedented out there in the market with respect to a commitment to a standard and consistent level of service for our mid-market enterprise customers. So good progress there and an important development.

Small and medium, again, very good performance on the revenue side reflecting both organic development in that business and also some of the benefits of acquisition, that Karen Sheriff's made to broaden and enhance our capabilities to deliver a virtual CIO strategy. Next link is clearly one of those examples, and got that done in the quarter as well. launched some new and interesting products that Karen can elaborate on with respect to PC and network care for small and medium business.

Interesting product with Microsoft where we will deliver and be the only telco in North America so doing that . we'll deliver a package of Microsoft Office, E-mail, Security, PC Care for small and medium businesses, make their lives a lot simpler, very consistent with our strategy there. Strong growth in value added services. So overall, I will say today that our growth business in small and medium, now represent a little more than 40% of the unit's total revenue, so again, the right and strong underlying trend in both enterprises, small and medium.

Just to wrap up, quick word on GlobeMedia and Telesat. Both very good. GlobeMedia, what can you say. With CTV's rating performance at 18 out of the top 20 programs, I mean that's really the key that drives everything. You see it reflect in pretty good revenue in advertising performance. You might say that the hockey strike might have cost us on pay-per-view and video, but it helped us a little bit on the operating cost side of GlobeMedia, and that helps contribute to the improvement and profitability there.

Very strong quarter at CTV. The Globe & Mail continues. Lots of evidence of its strength against the competition. Recent Nasdaq survey just demonstrating the extent of the Globe's lead over the competition so certainly the financial and operating performance of GlobeMedia continues to be very very strong. Telesat, very much the same kind of story, revenues up significantly, partly as a result of a small acquisition done -- done last year, but also real progress on the organic side. So again, both of those companies, GlobeMedia and Telesat, continuing to do what they've been doing for a while, which is performing at a very high level. So I certainly give credit for the management teams of both.

With that, Siim over to you.

Thanks. Good morning everyone. As Michael said we had a quite a good start to the year with a very solid over all financial performance, both in terms of revenue and EBITDA, and both at the Bell and BCE levels. This is the strongest over all performance we reported since the first half of 2002. So all in all we're quite pleased. BCE's revenue growth of 4.8% this quarter is our fifth consecutive quarter of improved revenue growth, driving that of course with the 2.5% growth at Bell Canada afternoon and the strong performance at Telesat and at Bell Globemedia.

EBITDA contribution from growth services combined with our cost reduction initiatives more than offset the margin erosion from legacy declines and that resulted in good EBITDA growth and in fact the modest increase in Bell Canada's margin to just over 43% and I think that's particularly good EBITDA performance, given the slow first half of the quarter that Michael spoke of in Wireless.

Turning to EPS on the next slide. This quarter we generated $0.51, being $0.01 higher than EPS of a year ago. Our EBITDA growth contributed $0.06 of lift in EPS. However, as I explained in December, when we provided our 2005 guidance, we are impacted by incremental pension expense this year over 2004. And you see take in the first quarter that this had close to a $0.03 negative EPS impact. EPS growth was also partially offset by a $0.02 impact from higher amortization expense and lower foreign exchange gains, and lower equity earnings as a result of the sale of MTS. Finally if we look at our statutory earnings per share, there's no change year-over-year and that's due to the $0.01 gain that was realized in 2004 on the sale of Emergis.

Now let me turn to our cost reduction objective and the progress we're making this quarter. We did deliver 120 million of total cost reduction this quarter that helped drive that EBITDA growth at Bell of 3.4%. 65 million of the cost reduction resulted from our early retirement and early employee departure programs which we initiated at the end of last year and which reduced our head counts by about 5,000 employees. I say that we still haven't quite captured the full cost savings from those programs, due to some of the temporary backfilling that was necessary to insure continuity in our operation and in our service levels. This backfilling need, however, should start to come down in the second quarter.

In addition, we realized the further 55 million of other cost savings and that was comprised approximately of $20 million from procurement savings, largely on hardware at Mobility and Express View. Some 15 million in cost savings relating to the efficiency initiatives we've been working in the business processes, and for moving more traffic on net, particularly in western Canada. And another $15 million that materialized from savings in our sales channels and marketing expenses within the consumer group. So all in all pretty good delivery on a cost side of the equation.

In aggregate, then, those cost savings exceeded the in-quarter EBITDA impact from our changing product mix. Here we estimate a net impact of about $50 million in the quarter from legacy repricing and the erosion of higher marginal legacy services that are now being replaced with lower margin growth services.

In addition to that, we incurred about a $12 million revenue hit and a $7 million EBITDA hit from the impact of the CRTC CDN decision. Let me just talk about that for a minute. For the full 2005 year, we expect that this decision will reduce our revenue by slightly in excess of $60 million and our EBITDA by slightly over $50 million. And that impact is a bit greater than what we had originally expected. The decision now effectively provides that about 90% of all competitor DNA circuits will now be eligible for CDA rate repricing. Of course we are entitled to draw down on our CRTC deferral account commitment, by the amount of the CDN revenue reprice. So consequently, we expect our outstanding deferral account commitment, which stood out at about $200 million at the end of 2004 to be drawn down to about the $130 million range by the end of the year.

Main message though, all in all, we're solidly on track. I think that achieved our targeted cost savings of $500 to $600 million this year. Our free cash flow for the quarter was negative $162 million as you can see on the next slide. That's down from the free cash flow in the first quarter of last year. Free cash flow, as you know, is traditionally weaker in the first quarter due to the timing of outflows, such as bonus payments, the number of public utility and property tax assessments that have to be paid. And a number of prepayments of license fees and other amounts.

All of those items in the first quarter this year drove about a $75 million of higher working capital payments this quarter, compared to last quarter. And then secondly, in the quarter, we knew there was going to be a number of other impacts and let me just walk you through those. First, $200 million increase year-over-year in cash taxes paid, relating mainly to Bell's final tax installment for 2004, and the increase year-over-year income taxes at Mobility and some of the other subsidiary companies. We then incurred higher pension and benefit payments of about 65 million. Pretty much all of that is due to the special funding contribution made by Aliant.

We incurred $82 million of increased restructuring payment relating to the employee departures. Again that kind has split between Aliant and Bell Canada. Capital expenditures were higher by about $56 million, and then lastly, as you will -- you'll recall, we received Telesat insurance proceeds in the first quarter of last year, of $43 million which don't come into our cash flow this year.

Now with respect to capital expenditures, our higher capital spending this year is very much in line with our budget, and that does reflect principally the ongoing investment in our strategic priorities. As you know that's the investment in increased bandwidth. Wireless applications and services development and efficiency enablement.

I say almost two-thirds of the amount that we spent this quarter on Capex was ear marked for key programs, such as Galileo, fiber to the node, DSL expansion IPTV and wireless DVDO. Now keeping on free cash flow, over the balance of the year, we do expect to achieve our free cash flow target range of 700 to $900 million. That target range for the year reflects the in year impacts of our recent dividend increase of $0.12 per common share. It also reflects an estimated increase of $350 million of pensions and other benefit funding over the course of the year.

Estimated cash taxes of 550 million. Both in respect of Bell Canada, it's final tax installment, which I spoke of and which was paid in the first quarter. But also the cash tax liabilities of Mobility, Aliant and a number of other subsidiaries. On taxes, I think it is important for me to note that Bell Canada, the legal entity, is not expected to have any significant cash tax payments this year as we'll substantially make use of the tax loss carryforwards that we acquired from 360 networks. Similarly in 2006, we expect to use any remaining losses from 360 as well as the investment tax credit carry forwards and other intergroup tax loss monetization balances that we have available.

That will largely eliminate cash taxes at the Bell level for 2006. And then in 2007 there should also be no significant cash tax payments at Bell given that the company's tax installment base should be nominal. So I guess the bottom line is that 2008 should be the earlier year that Bell Canada, the legal entity should have to make any cash tax payments of any significance. So I think that's enough on free cash flow. Let me wrap up by saying that, I think -- I mean following a good start to the year, we remain very much on track toward achieving our financial guidance target. Looking ahead for the year, we continue to see opportunities for improvement in revenue growth rates from the current level.

Probably more so in the second half of the year as we begin to realize more traction from higher subscriber levels and from our capital investment activities paying off. At the same time, we'll also continue to keep a very close eye on the pace of the legacy erosion and voice over IP competition as the year unfolds. For the second quarter in particular, we intend to keep a sharp focus on driving our operational performance, Wireless is getting back on track after a slow start for the first half of the quarter. And we've already seen improvements, both operationally and financially in March and through April.

It'll probably take into the third quarter, however, for the revenue growth and churn level to get back to what we would consider the right levels. Now having said that, we do expect wireless customer activations to catch up, to return to more normal levels in Q2, and that will add some increased, cost of acquisition expense for the quarter, therefore we may see some slight moderation in our EBITDA growth rates for Q2 relative to Q1, but certainly that doesn't change our view for the year at all.

In Business, growth from new services and recent acquisitions will continue to support the good progress that's under way and here I think that we really have some good transaction, both in the SMB and the Enterprise market. So over all we're quite pleased with our momentum. There's no change to the 2005 financial guidance that we provided to you on December 15th.

As Michael said at the end of the second quarter, we'll share more of the progress on our strategic milestones with you. So with that, I'll turn the call back to you, Bernard.

Thank you Siim. We now like to move to the Q&A section of our call. Please restrict yourselves, as always, to one question. We have a fairly long list of people wanting to ask questions so we'll try to move rapidly and get to everybody. So operator could you just remind on the logistics of placing a question, and then we'll get onto the first caller on the list.

[OPERATOR INSTRUCTIONS]. The first question is from Richard Talbot from RBC.

Thank you very much. Good morning. The question is on Galileo. You're running at about a $500 million a year savings, the objective is between a billion, and a billion five. In order to go from where you are today to the ultimate run rate, I wonder if you could talk about what the split in terms of savings between labor and procurement and so forth is likely to be? And whether you would see the split that you're at today being what it will ultimately be?

And the second point is, is it contingent on getting -- is achieving the ultimate run rate contingent on getting a 100% of the enterprise customers migrated over to IP? For example, you've got 1,000 enterprise customers. 100 have switched over. Do you need to get the other 900 completely switched over, or if you have a small base that's left, would that still mean you've got to run parallel networks? Thanks.

Richard, I just quickly touch on the second of those, turn to Siim on the first. On -- on your questions, we are continuing to make very good progress on IT migration. The range of guidance that we gave you with respect to cost reduction in -- in December, I think we identified in the enterprise market or the business market in general, something on the order of about $200 million range, I think between 500 and $700 million in cost savings in the business market and then with the residuals coming out of the consumer business.

So that range of 5 to 700 is -- to some degree contingent and we said it in December. Is to some degree contingent on the rate of migrations but nonetheless, we continue with the progress that we're making and what Isabelle is seeing in the enterprise market to feel pretty confident about our ability to deliver certainly in the range and hopefully at the upper end of the range.

So we'll have to see a bit how this unfolds, but based on everything that we're seeing today, we feel pretty good about it. And the range of fluctuation here is relatively modest. In addition to that, we're doing a lot of interesting work. A lot of interesting work with equipment vendors on the technology side with respect to the technological capability to utilize capabilities at the edge of the network to greatly simplify the migrations for some of our mid and smaller customers which will be also a big help to us and to greatly simplify and smooth out some of the customer transition issues.

So we feel pretty good about everything that we're seeing. In fact, if anything, I would say the market is moving to IP, to be honest, actually faster than we had anticipated, and it made us very glad that we took the decisions that we took a year ago to move aggressively here because we're better positioned to be able to meet the needs of those customers as they want to move to IP and to build the functionality and the productivity for themselves that is involved in that. Siim, do you want to talk about that?

Yes, I will. Richard, as you know, our target for the year is 500 to $600 million of cost savings. Split roughly equally between the consumer and business segments. Certainly a large part of that, about $300 million, should come from the workforce reduction initiative. The 5,000 people downsizing that we concluded. The way we tend to track this is by initiatives in each of the customer focusing units as well as in the factories.

So to give you a by the more flavor, when you look at the consumer segment with the key initiatives that are focused thereon, creating additional efficiencies in the contact centers, focusing on reduced costs of acquisitions, process reengineering on the cog side of the business, and then just driving efficiencies on marketing, billing, SG&A, all of those for 2000 -- and for the first quarter, we probably delivered about $46 million in savings in Consumer relating to those initiatives. The target on those specific types of initiatives is 200 to $250 million for Consumer for the year.

Enterprise side, similar story, it's all of the process transformation work that's under way in cogs and SG&A. That delivered about $17 million this quarter, and it should deliver close to $70 million for the year. In SMB, much stronger focus here on contact centers, the order of the cash process, driving integration of business acquisitions that we've undertaken, realizing synergies there.

And again, similar to the other units, driving process reengineering opportunities to creates efficiencies in cogs and marketing. And that for SMB should be in the raising of $30 million. In the -- in the wholesale and CSG group have been the focus there is a little bit different and it's all on carrier relations and effecting better swap rates for our cross border traffic with other carriers and we think that's something in the range of 25 to $35 million, could be delivered there.

And then you sort of get into a Aliant with its workforce reduction and process transformation initiatives. They should deliver, I think Aliant it is given guidance on that about $55 million. And then the balance of the savings is really all in the factories and operations and BST, and that's where all of our transformation initiatives, of Galileo are going on with regard to infrastructure and billing and service provisioning, maintenance. So I think hopefully that gives you the flavor of the type of opportunities we see to get up to the 500 to 600 range for the year.

Thanks very much in answering. Good luck with it.

Thank you. The next question is from Daniel Henriques from Goldman Sachs. Please go ahead.

Good morning. I have a question, just trying to have a sense about the trajectory of the recovery of the wireless business as it relates to RPU and net adds. You mentioned this quarter you had some credits basically because of retention, to compensate customers for billing errors.

How much of an impact did it have in the first quarter? There is some leftover about those credits for the second quarter or should we see a step up in RPU sequentially here? Second point in terms of net adds, I just want to make sure, I apologize if you mentioned it on the call. Do you think with 45,000 disconnections, are you totally done in terms of the issues with the bad debt issues with the billing system or you think there may be something leftover and also if you can give us virgin represented of your net adds so we can try to forecast the growth going forward? Thank you.

Take this in pieces. First, on the issue of credit and bad debt, et cetera, let me handle that first from a financial point of view. Turn to Siim generally on that and then with respect to the other issues, turn to Pierre.

At the end of the fourth quarter, we outlined for you the impact that billing system migrations were having in terms of increased cost and EBITDA pressure for the company, and customer goodwill credit rebates were included there. I think once we got into the first quarter, those numbers have come down significantly, and there's always a level of -- of customer credit that -- that we provide through the call centers, is appropriate.

So that certainly has not been a significant issue or driver in the first quarter and those have come down certainly by the end of the first quarter to -- to very normal levels. Again. Because of the temporary suspends that we disconnected, there was an increase in the level of bad debt provisioning over and above what we would have normally experienced in the quarter and that would be in the magnitude of 20 to $30 million.

So in terms of your, -- the other part of your question, this is Pierre Blouin, first on Virgin, no, unfortunately, we can't disclose the numbers and that one, you should contact Virgin but we recognize as we've said in our numbers, a portion of the activation of Virgin I think it was to the tune of about 50%. So in our prepaid numbers, you do find those.

In terms of a trajectory for activation, I think as you see on the slides, that we've put on our website, there's been a substantial rev up from January to March. We're seeing April at the same level, or even better. So you can expect, in terms of what we're seeing right now, we're expecting that we'll be back on track at historical level, in terms of ramp up for the year.

And clearly we the launch of the 10-4 on the post-paid side where we're very satisfied and add quite a bit of fast ramp up and a lot of success in the first few weeks of the launch, we were up about 20,000 activations, which was a great success for us. So all of this put together in our focus with the new management team on getting this business on track very quickly since February, we're comfortable on the trajectory as we're now taking, and that you see on the slide there.

The 45,000 difficulties connections are you basically done with the disconnections.

We feel that we've taken the appropriate actions that we need to take there and now we'll get on with the management of the business.

Thank you.

Thank you. The next question is from Vince Valentini from TD Newcrest. Go ahead.

Good morning. The question's on the business market. You put up 3% revenue growth, and your data revenue is quite strong at 6.6. Question on two fronts: One, can you strip out acquisitions for us and give us what your organic growth would have been, and secondly if you can give some sort of comment on what you think the overall business and enterprise market conditions are right now, for example, your revenue growth I believe you assume is ahead of the market growth. If you can characterized that it will be very helpful.

I'll take that in two parts. I'll just comment quickly on the acquisition, organic issue and then I'll turn to Isabelle with Karen with respect to market conditions and how we're doing relative to that. A couple of points first. Very important for I think our investors to understand that investments and acquisition to enhance the capabilities and breadth of the company, to broaden out our capabilities, to allow us to operate successfully not just to the business but in the business, and similarly in consumer, not just to the home but in the home.

These capability-enhancing moods are things that are integral to the strategy of the company and we have done some and will continue to be optimistic and look for other opportunities to do that, so the distinction between organic and acquisition is in some ways, I'll come back to this but in some ways, in our minds, a false distinction, because we're also seeing, as we bring in more to the business or to the home capability and to the company, it's also helping us drag a rather, excuse me, as we bring in more in the business and in the home capability, important distinction here, I'm sorry, it's also helping us drag organic types of growth along with it as we are able to assemble a more compelling package and more compelling solution for the customer.

So these things very much work together and the thing integrates quite well in terms of how to we try draw revenue growth in the company. And I think from an investment community's perspective. Very important to see in our mind the virtuous circle that exists between the broadening capabilities and the driving of organic growth and the two things I say work hand in hand. That's point number one.

Points number two, high level, high level. I would say that order of magnitude you should look at our revenue growth and if you want to make a distinction which we will regard as increasingly artificial between organic and acquisition, you can roughly split it 50-50 or so. Now with that, Isabelle Courville.

At Enterprise, I think we're quite pleased with the quarter because as you know, and as you just said in your question, the issue we had, a huge decline in the legacy part of our business, we talked about, the legacy data portion. But even if you include IP and all of the connectivity market, there's various reports on that, but the minimum decline is 5% and some reports even quote 8% decline in the connectivity business. So to be able to show a growth rate of 3%, it's obviously quite an achievement, and the way we are doing that is to that develop growth engines that upset the decline in legacy, and that's what we've done successfully in the quarter.

So the strategy is all antigrowth, upsetting the decline in legacy by migrating our customer to IP and we've talked about that. We are very successful in the market place. We're signing contracts, we're signing customers and we're migrating them quite fast and the second part of our business is to fill those new capabilities. We call them ICT solution, and that's growing very fast. In the quarter, we announced our security business, that is quite successful already. We launch our first few business networking solutions so it's a series of applications that rise over the IP network and it's driving a lot of growth for the IP network as well.

The first one, was the -- we call it ICam. It's a live trade solution and visual base. Here in Quebec was the first customer was we've got now 23 customers signed up so we're quite excited. And we're working on many other solutions, call center, when we -- where we announce a deal with National Bank, a $17 million deal which was the whole integration of the call center which is a new line of business for us at Bell, we're quite excited to implement that with national bank. So a lot of momentum in our growth business. Karen.

In the small medium business market I think I'm as bullish about our performance vis-a-vis the market as Isabelle is. And and the -- I think the performance is a broad recognition that the strategy makes sense, and becoming the virtual CRO for our customer, the whole point was to drive and bring in new capabilities into the company. We've done that with nextlink, with Karen Systems, we're launching new products. Michael mentioned a couple of them.

We launched PC care this past month which gives our customers the ability to get from a single source, which is what they want, the care for their PCs and their networks. Whether it's on line or whether we have to roll a truck. It's a great service. It's profitable, and I think even more importantly, the launched this past week in a soft launch manner of our product with Microsoft, our bundle to bundle in Microsoft Office and E-mail and Security, and the whole ball of wax for about $50 a months.

A small or medium business customer, again gets coverage from our network products all the way through the IT products all in one place, and again nf terms of the performance, vis-a-vis the market, I continue to be blown away by the demand we are seeing in the last three products we launched. On PC Care, we're at early stages, but we're at about double forecast. And on Productivity Suite, again, a soft launch. We hit 20% of our one-month forecast in about a day. So I think we're doing well vis-a-vis the market because I think the strategy is just very well placed.

Thank you.

Thank you. The next question is from Greg MacDonald from National Bank Financial.

Good morning. The question is a strategic one for Michael. You mentioned in your press release, one of your strategic priorities being the delivery of abundant, reliable, and secure bandwidth. I want to focus on the abundance portion of that.

It's becoming clear from SBC , and the indications from Verizon are pretty obvious, but from SBC becoming more commited to VDSL. It indicates to me that they're pretty much focused on the fact that 20, probably more like 25 megabits is necessary to compete in the television world or tomorrow's broadband world. Your existing strategy for single family units is 15 megabits per second. I wonder have you changed the view at all in the last 3 to 6 months?

Have things changed in terms of your view of what's necessary for bandwidth and is it possible, if that is the case that your looplank targets are not low enough or not short enough and therefore we could be looking at potential increase in Capex going forward on that component of the network spend? Thanks.

Short answer, no. The -- I think we were quite clear, Greg, in December when we talked about the ramping up of bandwidth and the residential network, of taking it into the mid-teens in 2005, and then building up to something on the order of 20 to 26 megabits.

In fact we wen't as far as 26 meeting bits in 2006. As we continue to roll out OPID LANs. Take fiber out to the remote, so we would not necessarily differ with you, or with SBC with respect to bandwidth requirements in a -- never mind it's a video world, but a video world plus a value-added service world.

But we believe the technology strategy which I might add, we were very pleased to see SBC and others increasingly coming on board with, of fiber to the node, we believe has certainly the capability of delivering what I would describe as commercially valuable bandwidth to the home because there's not a lot of use sitting on top of the water main not because big water mains, drinking out of them can be endure just to your health.

So what we think we have is strategy that matches nicely. Commercially utilizable bandwidth with the technological requirements that we will need to have to be able to put a very compelling home management, home communications, home entertainment package into the market. That's always been our strategy. There's no change there. There's no need to change. There's no incremental capex associated with that other than the type of capex that we've already talked about. And as I emphasized in December and continue to do so now, we do foresee next year and the year after our ability to bring our capex levels down as we continue to draw between cashflow performance and the business. So all in all, no change.

As a quick follow-up, Michael, it seems to me the standardization of VDSL is picking up, or at least that's the way I'm drawing a conclusion on. Do you agree with that and are you thinking internally more along the times of VDSL versus ADSL 2+

I'm not sure if it's exactly VDSL, but it's the technology thing and maybe we should sit down and talk about it in more detail. It's more ADSL 2+ at the end of the day but I think the standardization of IT-side to the home and then to pass IPTV or other products with value added services added to it, so you're right on that side. I think SBC is coming on board quite aggressively now in fact, and others are following. So it looks like it's all aligned very close to our strategy.

Thanks guys.

The next question is Glen Campbell from Merrill Lynch.

Thanks very much. You're a wholesale supplier to Shaw in the west. You've seen the impact of competition from cable telephonies, at least in the early stages. Assuming you don't get forbearance in the near term, and you don't get your way necessarily on the voice over IP regulation, what do you think is the realistic level of market share lost that investors should expect where cable telephony is rolled to cable telephony.

I'm not going to -- I'm not going to speculate on that. You're a very capable analyst, and you know what experience is in other markets, both in Europe, where's one set of circumstances in the United States where there's another set of circumstances and I think you're very well positioned to be able to assess, given that we are the only telecom in North America that has the breadth of platform capability that we have to manage home needs in a integrated way, for you to make whatever judgments you think are appropriate to make.

We have our own view on that. And we feel and continue to feel very confident about everything that we're seeing about our ability to -- to react to these changes in the environment which is part of our job and to build a really good business given the capabilities that we have and that's what we're doing.

Fair enough. I might try a different one, then. On tax, Siim you outline the fact that Bell Canada will not be cash taxable for the next couple of years. Note six to the statements describes an arrangement with BCI. Can you give us a sense in present value terms what these -- what these tax benefits might be worth. In terms of reduction of taxes below what you would normally pay at the statutory rate?

The BCI tax loss monetization in particular?

That plus what you described at Bell.

Well, if I recall correctly, I think there may be something in the range of $100 million of tax loss value at BCI. A lot of that value goes back to BCI and it's shareholders, and a portion of it comes to us, but the BCI monetization, we should doublecheck, but I think the value that Bell gets from it is not -- not very substantial.

But more generally, on an annual basis, we look to optimize the over all position of Bell Canada and therefore, where there's tax losses building up in certain parts of the organization, Bell West for example, we would put in financing structures that move those losses into Bell Canada, and in a particular year, these can vary quite dramatically, depending on the year that we're in, but those would be typically in the range of moving 100 to $200 million of tax losses within the group.

So we should think in terms of total value of a couple hundred million today, from what you described at Bell.

Ongoing?

PV.

No. I'm saying the value of the tax losses.

Okay.

So, I think there's -- over all within the group, we're probably minimizing about, you know, 100 to $150 million of cash tax liability by optimizing the over all position of the group.

Okay. Thanks.

Thank you, The next question is from Peter Rhamey of BMO Nesbitt Burns. Please go ahead.

Great. Thank you and good morning. Siim, you provided a great break down on ERIP and other cost savings by consumer and business. I wonder if you might take a crack at the extended reprice you're getting in the market. That would be on slide 11, the cost pressures.

There is some color you can give on -- you already talked about legacy, I wonder if you could break it down between the two segments. And Michael, did I hear you say you're looking at more targeted bundles in the future -- you've learned an awful lot. Did I construe that as being equivalent to taking the pricing up?

You had to be very blunt with your instrument of bundles up from now and this might offer an opportunity to perhaps not give -- not give away about you to reprice as much as you have in the past and just focus those -- those initiatives on very targeted segments? Thank you.

Lots of different issues there. I don't know. Isabelle or Karen, you want to comment very briefly, very briefly on pricing trends in the various markets but very quickly and then I'll turn to the bundles issue.

We talked. A bit more color. Not too sure. On the LD , we see that in the numbers, the reprice is substantial, but it's nothing unexpected. We know that. And the whole strategy is about upsetting that. It's well above -- double digit decline, and we've been suffering that in the enterprise market for some time. Nothing new there.

The other reprice that we are monitoring very carefully but we're absolutely on track is the reprice that occurs legacy from legacy to IP and we monitor very carefully because our strategy is when the customer is on IP, to go back and sell value added solution.

And end of quarter what you're seeing is the success of that strategy because the IT plus the value added solution, revenue offset the legacy decline so we're on track on both. Notwithstanding the reprice.

And SMB, very similar, no change really in trajectory on reprice. The primary area reprice for us is tall and it's been close to -- close a little under double digit for some time now but no big change there. We don't have much of a reprice scenario in our IT market, because we have so little legacy data in our portfolios. For us, it's growth.

Now the consumers, the consumers side have clearly lots of pricing activities and repricing activities and I think you've seen us act on the few fronts first, we put price increases forward on video, on wireless and value added services.

You've seen us come out also on voice over IP with, you know, I guess pricing that was reasonable to us but as Michael mentioned in Q1 we placed strong pricing action by competitors and in some cases, competitors keeping wireless promotional plans that were very aggressive, sometimes 50% discounts in the market for a year, promotional pricing, and some of the promotional pricing usually last a month. It's just a promotion.

So we faced that, we started increasing pricing on hardware. And competitors took it to zero at the same time. The last -- this week, sorry, Telus announced their PocketPC, which is exactly the same model as ours. $150 less than the price we're in in the market with, so we're facing that type of stuff, plus deals done in the third party retail, with now residual that we were not supportive of and trying to do so

All of that, quite a bit of pricing action, at least there was in Q1 and hopefully it's not going to repeat itself in Q2. We're trying to be disciplined but we can not let competitors out of the market but trying to be disciplined and the price increases, I think is some example of that.

Thank you. The $60 million therefore going forward would be probably given how intense things were in Q1, should trend better for the remainder of the year. It is that a fair statement?

eng you're talking about the 60.

$60 million in cost pressure reprice this quarter.

We'll have to see. It's 50 million of products mixed impact in the quarter.

Peter, we've obviously gone through the detail computation product by product line to get that and I think in our reporting information, with what we tell you on our local business or long-distance business, margins on wireless, I think you can -- you've probably got an option, reporting to -- to put that together, but our intention would be on a quarterly basis going forward, to -- to continue to provide to you our views on how that product mix is changing and how the growth versus legacy components of the business are evolving.

Peter, let me very quickly get onto your bundle issue. Get more time for other questions. I think what we moved, we moved very successfully on bundles, we moved on the right way on bundles. To get bundles out onto the marketplace, to give it the opportunity to learn, To -- to advance our multi product strategy, which is a core element of where the company is -- is headed.

At with everything else in life, when you start something, you do things, you do -- you get them out there, you learn, and then you come back and adjust and that's very much, always been our plan, to come back, learn, we've learnt. Now what we're going to do is not so much you expressed, it's simply pricing issue, I express it as a segmentation and targeting issue.

Such that we can, very surgically now, given our capabilities in analyzing and understanding our customer base, target right on on the specific needs of much more microscopic customer segments and that, I believe will allow us to both continue momentum but also importantly enhance our financial returns associated with the strategy, as we continue to roll it out and we will continue to roll it out very aggressively.

Thank you very much Michael.

Thank you. The next question is from John Henderson From Scotia Capital.

Question for Siim on the CDNA impacts. I think you noted 7 million in the quarter but 50 million annually. And I was trying to get a reconciliation of that, And how much, in the quarter would have been retroactive?

The retroactive part in the quarter was really negligible. It was maybe $2 million.

All right.

And I think our -- our operating guys and our regulatory people have just worked through projections for the balance of the year as these CDNs reprices continue to take effect, and that's how we reach those levels of revenue and EBITDA impact after the full year.

So we just saw a little bit of it in Q1.

Yes. It will certainly ramp up more through the balance of the year.

Okay. That's great. A quick follow-up on the RPU and wireless. Down 3.4% in postpaid. Could you say that was really all relating to the bad debt, and would you have, certainly inconsistent with other industry players, what would be a more normalized RPU level?

Well,in terms of -- I'm not sure I can fully answer what would be a more normalized RPU. But, let's say that it was mostly related to what Michael described, from the sticker shock effect of bad debt, and we've seen a sequential improvement from month- to-month, in fact in Q1, that seems to continue in April as I said before. That added to the price increase on bad, improved usage, and improved postpaid activation should get us back on track as we said before, to historical level and market level.

That's great. Thanks very much.

Thank you. The next question is from Dvai Ghose of CIBC World Markets. Please go ahead.

Thanks very much. Good morning Michael if I can ask you a big picture question. When I talk to your shareholders, as to why the institutions as to why they own BCE, the universal response seems to be because of solid free cash flow and dividend support, and I think we're all very encouraged by your Galileo initiative which really showed up in the quarter.

If you agree your mandate is to maximize dividend streams to shareholders in a prudents fashion, I wonder if you agree that that is your mandate, But if it is your mandate, why does BCE still stubbornly hold onto non-dividending assets like Bell GlobeMedia and CGI, which are performing well about you not dividending any cash to BCE, and therefore to BCE shareholders, and why is BCE arguably about pursuing the most aggressive pricing of the incumbent telcos in Canada on the LD side -- 11% decline, exacerbated by your own pricing.

On the wireless side, company specific issues for sure, but the trend is being very negative in terms of your RPU versus your peer group, so you can't really blame the market for that. And you did slash prepaid pricing ahead of the Virgin launch. How is all of this dividend friendly?

Well, I guess I won't surprise you too much to say I don't agree with most of what you said. The mandate of this company, and the mandate we have, is to build a great business, and that's what we're in the process of doing. Building a great business is -- has many aspects.

One aspect, a very important aspect of building a great business is insuring that our shareholders participate in the benefits of that great business in a variety of ways. One of them is through devices like dividends, and I think the yield of this company is to put it mildly, competitive with the yield of essentially anybody, by and large anybody, in North American telecom So where he feel good and we're pleased to be able to increase dividends in December.

And as always, in building a great business, we'll continue to look for opportunities to do things like that. At the same time, as we have been continuing to do, we'll continue to invest in the business to make sure we have the capabilities to compete very successfully in the market, and to deliver world class communications services to both our consumer and business customers because that's how we will build and maintain and grow the profitability of this business, and the strength of this business over the medium term.

So we will continue to do what we've been doing, which is to build this business in a balance way, recognizing the varying needs and the various needs of our stakeholders. Some of that has implication for the decisions that's we make to related assets of the company. I won't comment further on the specifics that you -- that you mentioned. Publicly.

I'm already on the record with respect to BGM and the importance of the content there and how that is an element, ingredients and enhancing our capabilities going forward, so beyond that, I won't go -- I won't go further than that at this point. And again, I think there's -- I'll be fair and direct about it, I think there's a fair deal of disinformation around with respect to pricing and I think that one needs to look pretty broadly across the market, one needs to look at what's going on in MDU pricing in Toronto.

And Roger's response to our VDSL initiative. If you want to talk about aggressive pricing, you need to look at some of the things that both Pierre and I mentioned with respect to Mobility and they're very different in discipline directions that we were proposing to take, that our competitors chose not to move in a similar -- in a similar direction. So while I encourage you to have a look with an unbiased eye at the activities and operations of many of our competitors and the commercial reality that the industry really lives in as opposed to what some would like you to believe it that the industry lives in.

Next question.

Thank you. The next question is from Rob Goff from Haywood. Go ahead.

Thank you. Good morning. My question would be a different take on Glen's question. Trying to ascertain, to what extent do you view digital telephone as a distinct service, just like high speed, where you want to compete head to head for market share with the cable providers and other voice over IP providers?

When you say digital telephone, you mean voice over IP?

Yes.

At the end of the day, we're not necessarily looking at it that way but much more in terms of this is an additional service that we provide consumers, are asking for it so we will provide it.

The product that we are launched, when you look at it, we believe with the features that we have is the leading voice product in the Canadian market right now and we're excited about it. It's still an early start and this business is going to grow over time, so we will meet the customer demands of it and make a successful business out of it.

And it is one where at the even of the day you would expect your voice over IP subscriber count to be equivalent to or exceed that of the competitors.

Well, on that one, I guess your projection as good as ours and you look in the market but we'll go where the consumers and the customers are asking us to go and we'll see how this rolls out over time.

Okay. Thank you.

That you and the last question is from Jeffrey Fan from UBS. Go ahead.

Thank you very much. A quick follow-up to the first question regarding IP migration and I want to get a clarification on Michaels answer, regarding the savings that is contingent on IP migration. When you say you expect -- I think substantial migrations to IP, are you talking about the core at work or the edge, in order to get the savings.

Oh, it's both. But the edge is where the challenge is. Isabelle, you want --

You said a lot. I can probably retake it from a network perspective but it's really what you said at the beginning. We're migrating the core, we're migrating the edge, we're migrating the customer, we're migrating our own traffic.

So where we are now, we're progressing very rapidly and I think some numbers are given publicly on this core migration. Of course, it's the easiest thing to do. It's all into our control And we migrate most of the core by the end of 2006. That will provide substantial savings all in it is and it's completely under our control and we're moving fast on this one.

Second, the enterprise migration, the migration of the customer within the enterprise market, that's also we're migrating quite rapidly and what will remain at the ends and Michael will touch on, in the access network, we want to continue to migrate some of our customers but before that, we're working with equipment vendors to add some solutions that may or may not involve the necessity for the customer to migrate.

We can probably put some additional element of the network to do sort of a, call it a virtual migration, to be able to do additional savings. So the whole program, it's going to, kind of savings, the whole program is about year after year with productivity, with change in process, with customer after customer migrating to IP. The savings are coming proportional to the effort we're putting in the market. So it's a well designed plan and we won't two years to get some savings. We're getting savings right away and you see that at the end of quarter.

Okay. And just lastly to wrap up, Michael you mentioned with the Videotron launch, it's given you an opportunity to learn. Can you share with us what what exactly you learned and how you used that knowledge to help yougoing forward and was the number, the Videotron gain a surprise to you through the quarter.

The answer to the second question is no. Pretty much consistent with the kind of thing we had anticipated, although I will say that we were -- we were -- we were surprised by Videotron's pricing, which we think is -- is at the end of the day not a constructive pricing for the over all industry, including, eventually Videotron so that one was an issue, but that's their decision and we'll deal with it in the market place. And we're, you know, more than prepared to and have begun to do things to react to that kind of -- that kind of decision with respect to -- to pricing. And the first part of the question was.

Just what did you learn and.

Yeah, yeah. Thanks. Well, I think my beside answer on that is I think you'll have to see what our subsequent moves are in the market place and I don't really want to review all of those here for obvious competitive reasons about you you'll begin in the weeks and coming months what we learned and how we can utilize that and use it to our advantage.

Thank you very much.

Thank you.

Thank you again. That brings us to the end of our call. If there's further follow-up items, don't hesitate to contact the investor relations group. Otherwise, I wish you a have good day.

The conference is now ended Please disconnect your lines at this time. We thank you for your participation and have a great day