BCE Inc (BCE) 2014 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to BCE's second-quarter 2014 results conference call. I would now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead.

Thank you Wayne, and good morning to everybody on the call and webcast. As usual, I'm joined here today with George Cope, Bell's President and CEO; as well as Siim Vanaselja, our CFO.

We did release our second-quarter results earlier this morning. All the usual information including the news release and slide presentation for this call are available on BCE's website. And following a review of the slide presentation by both George and Siim, we'll move on to the Q&A portion.

However, as usual before we begin, I'd also like to remind all listeners that today's presentation and remarks by both George and Siim will contain certain forward-looking statements that represent our expectations as of today and accordingly are subject to change. We do not undertake any obligation to update any forward-looking statement except as may be required by Canadian securities laws.

A number of assumptions were made by us in preparing these forward-looking statements which are subject to risk. Results may differ materially. Except as may be required by Canadian securities laws, we do not undertake any obligation to update or revise any forward-looking statements.

For additional information on such risks and assumptions, please consult BCE's 2013 annual MD&A as updated and our Q1 and Q2 2014 MD&As, as well as our news release of today announcing our financial results for the second quarter of 2014, all of which are filed with the Canadian securities commissions and are also available on our website. So with that, over to George to begin a review of the quarter.

Great, thanks, Thane. Good morning, everyone. Thank you for joining us today. Let me turn to slide 4 and just start with a quick overview of the quarter.

The Company certainly had a good quarter and we are on plan for the year and met our expectations. The EBITDA growth of 4.9%, obviously supporting our growth model, but importantly from my perspective, is holding our consolidated margins by a consistent year over year at 39.4%.

The strong 5.7% wireless service revenue growth drove the 9.5% EBITDA growth that we saw in the quarter. And based on all results, now the leading EBITDA growth in the industry in Canada. So really pleased with that.

The Wireline EBITDA decline continues to improve year over year as we grow the residential services side. We expect that improvement in Wireline EBITDA to continue through the second half of this year.

It was the third consecutive quarter of positive residential service revenue growth. We also continue to see significant cash flow contribution from our Bell Media division with an increase of 27% year over year, driven of course, by the inclusion of the Astral acquisition. The strategy continues to be to expand our fibre footprint and launch as many new LTE markets as we can, as quickly as we can.

As everyone on the call knows, we announced a privatization plan for Bell Aliant on July 23. This transaction, as we mentioned, will be accretive to BCE earnings and our free cash flow and supports our dividend growth model for 2015 and forward.

Important this morning, we want to announce that we've received Competition Act clearance. That was obtained on August 5. As you may recall, because it is a company that we already controlled, there was no Industry Canada or CRTC approvals required. The one approval required was the Competition Act, and we have now received that clearance.

Turning to the next slide, from the wireless perspective, the net adds of CAD66,000, representing about 36% of the market share in the quarter against our incumbents. Growth of 3% year over year in terms of market share, and consistent with our objective of obtaining at least a third of the postpaid market.

The metrics were very strong, some of the best we've had in years. Churn on postpaid, the lowest we've seen in over six years. The ARPU growth the highest we've seen in seven years and been able to maintain retention spending and cost of acquisition fairly stable on a year-over-year basis.

Also in new revenue sources, we continue to lead the country in mobile TV subscriptions of 1.5 million now. And working with now four Canadian banks who have moved towards mobile payment systems, where using your smartphone and tapping it, etc., are part of the technology going forward, which will obviously over time drive some incremental revenue for our wireless business as well.

Turning to the next slide, just a few comments. Our LTE build-out continues across Canada. We now cover 82% of the Canadian population. Our focus now is in the rural communities and starting to deploy our 700 spectrum as well.

As noted a few weeks ago, we did announce a real focus in Atlantic Canada, where over 100 communities will see access to LTE by the end of 2015. We now expect our 700 rural build-out of LTE and all of our LTE coverage to be completed by the end of 2015, one year ahead of our government commitments on 700, and we'll reach over 98% of the Canadian population. Also over the next two to three, four weeks we will announce, through spectrum aggregation of AWS spectrum, that the speed on our LTE network will increase by approximately 50% for our customer base.

Turning to slide 7. On the residential side we continue to see an improvement year over year in residential RGU losses, an improvement of 12% year over year. The Internet add was up slightly over last year, but quite frankly as you saw our competitors' results in our territories, the quarter is traditionally soft, as we see the student outwards, quite frankly, driving that number. So although up slightly, clearly not at the growth rates we want to see going forward.

On the Fibe prospective 46,000 net adds, pleased with the number. Down a little bit, particularly down in the province of Quebec. Up in the province of Ontario. In Quebec there was some very aggressive pricing by one of our competitors and we chose not to match it in the quarter. Quite frankly, we're pleased with the growth that we're seeing in Ontario and we expect to see an acceleration of Fibe TV as we move forward.

Overall, NAS loss is improving on the consumer side. On the business side, up a bit again as we continue to migrate our corporate and mid customers to IP. Also, believe it or not, some of our small business clients moving from dial-up to different Internet services now having some impact on that as well.

Most importantly in the quarter from my perspective, is in our IPTV footprint. Where we have that, we continue to be RGU positive. That's the most important metric for us. The strategy is keep growing that IPTV footprint.

Just thought I'd make a quick comment pro forma Bell Aliant. You can see the strong metrics of the combined organization with 59,000 IPTV net adds pro forma and 18,000 Internet net adds. And importantly the decline on a combined basis, of the RGU net losses as well. Also worth mentioning that the net adds for wireless would go up just slightly as we integrate one of the smaller wireless parts of the Bell Aliant pro forma the acquisition when that takes place.

From the media perspective, continue to see some softness for sure on the advertising market. I think our numbers would say that we are competing very well in the Canadian marketplace.

In terms of audiences, four the top five shows between the ages of 25 and 54 are carried on our media assets. We've secured 11 new series for next year. We will have again, the leading number of top 20 hits in the country going into the season in September.

On the TSN side, as we announced earlier, we are expanding from two to five national feeds to recognize the consumer demand for more and more sports content. We continue to add more sports content to TSN and RDS, recognizing that demand by our customer base.

In terms of our overall mix, again our growth services, quite frankly, really driving some top-line revenue growth for us. CAD300 million or 7.8%, even pro forma the acquisition.

You can see our mix does changed slightly as I said on the call a few weeks ago from 81% of our revenue from gross services to 79%, because of the increase in our local access lines as a result when we closed the Bell Aliant transaction. Of course, the offset to that is our rate of Wireline decline will improve because of the competitive Fibe footprint that's been put in place at Bell Aliant.

So with that, let me turn it over to Siim.

Thank you, George. Good morning, everyone. I'll begin with a review of our consolidated second-quarter financial results. I'll first bring to your attention a terminology change in our financial reporting starting this quarter.

Consistent with the recent requirement of Canadian securities administrators, going forward you will see us replace the term EBITDA with the new term adjusted EBITDA. There's no change, however, to how we calculate or define that term, and no change to previously reported numbers. Just that we will now refer to it as adjusted EBITDA.

Beginning on slide 12. In the second quarter we grew service revenues at Bell by 5.8%. That was driven by our growth services which collectively increased 7.7% year over year.

Revenue performance was led by Astral's contribution to Bell Media, accelerated wireless revenue growth, and as George said, a third consecutive quarter of positive Wireline residential service revenue growth. Bell adjusted EBITDA increased 4.9% this quarter, reflecting the inclusion of Astral. A strong contribution from Bell Wireless as well, which delivered year-over-year growth of 9.5%.

Our Wireline segment had a fifth consecutive quarter of year-over-year improvement in the rate of adjusted EBITDA decline. Bell's consolidated adjusted EBITDA margin remains stable at 39.4%, as the contribution from wireless and Wireline growth services offset the decline in higher-margin Wireline voice business and the lower-margin media contribution from Astral.

The higher adjusted EBITDA drove 6.5% growth in adjusted EPS to CAD0.82 from CAD0.77 in the second quarter of 2013. That was the key contributor to free cash flow generation of CAD815 million this quarter.

Consistent with our plan for the year, capital spending stepped up in the second quarter as we continue to expand our IPTV footprint, increased Internet and wireless network capacity to support customer and usage growth. And we began deploying advanced 4G LTE mobile services to rural communities and small towns across Canada. So overall it was a very good financial quarter with healthy results across all our segments.

I will now turn to the highlights of each of our operating segments. On slide 13, wireless service revenues were up 5.7% this quarter. That was driven by 4.6% higher ARPU.

This is the 18th consecutive quarter of year-over-year wireless ARPU growth. The increase reflects a greater mix of postpaid subscribers in our customer base, higher rate plans and strong data revenue growth of 21%.

Wireless adjusted EBITDA grew 9.5%, yielding a revenue flow-through to adjusted EBITDA of 76%, and a 1.6 percentage point increase in service margin to 47.5%. So that was our best wireless margin performance in at least 10 years.

Bell Wireless continued to make a strong contribution to Bell's overall free cash flow, with growth in adjusted EBITDA, less CapEx of 5.9%. Another overall excellent quarter of wireless performance on financial results and with solid postpaid operating metrics.

Moving now to the Wireline segment on slide 14. The rate of Wireline revenue decline continued to move closer to achieving breakeven, with a year-over-year decrease of 0.8% in the quarter. Residential Wireline revenue grew 1.3%. As George referenced, this reflected improvement in net subscriber losses and higher ARPU across all our consumer Wireline services.

TV and Internet combined delivered 6.1% higher revenues year over year. Voice erosion continued to slow with fewer NAS line losses over last year and higher sales of international long-distance minutes.

In business Wireline, the rate of adjusted EBITDA decline improved, which was supported by cost control actions. Business IP connectivity saw good growth in the quarter of 3.4% on revenues. However, overall business market results continue to be impacted by repricing and slow economic growth.

Total Wireline adjusted EBITDA in the second quarter decreased 2.7% year over year, which represents improved performance over both the first quarter of this year and the second quarter of last year. Bell's Wireline adjusted EBITDA margin was on plan at 38.4%. As we look forward to the second half of the year, we do expect the Wireline segment to deliver positive revenue and adjusted EBITDA growth, benefiting from continued acceleration in Fibe, pricing discipline and cost control.

On slide 15 for Bell Media, the second quarter marked the last quarter of incremental year-over-year contribution from Astral. So beginning with the third quarter, Astral will be fully reflected in our results year over year.

On a pro forma basis for the second quarter, when including Astral in last year's results, Bell Media revenues were down approximately 2% year over year. That's excluding a one-time CAD10 million retroactive video-on-demand revenue that we recognized in the second quarter of 2013, which was from broadcast agreement renewals with certain BDUs.

Total reported advertising revenues were up 29% over the second quarter of last year. Again, pro forma Astral advertising revenues for conventional and specialty TV in aggregate were down approximately 5%.

That reflected the generally soft advertising market as well as fewer NHL hockey playoff games, which were broadcast on TSN and RDS. The quarter was also impacted by a movement in advertising spend to the 2014 World Cup coverage.

Subscriber revenues in media were up 5% year over year on a pro forma basis. That was on specialty TV rate increases, growth in Bell Media's expanding array of TV Everywhere products and growth in mobile TV subscriptions. Reported second-quarter Bell Media adjusted EBITDA growth of 34.6%, pro forma Astral and before the CAD10 million nonrecurring items that I mentioned, Bell Media adjusted EBITDA was stable year over year, reflecting higher content cost for TV programming and sports broadcasting.

On slide 16, adjusted EPS of CAD0.82 per share this quarter was a solid 6.5% increase year-over-year. The growth was driven primarily by higher adjusted EBITDA which reflected a strong contribution from Bell's growth services.

We recognized the mark-to-market gain of CAD0.02 per share this quarter on equity derivative contracts, resulting from the appreciation in BCE's share price. That compares to a CAD0.06 loss on equity derivatives that we recorded last year.

Depreciation expense for the quarter increased CAD0.03 over last year, consistent with our higher capital asset base and the asset base from the Astral acquisition. Higher year-over-year interest expense that you see is due to the Astral acquisition.

With the Canadian dollars depreciation in the second quarter, we recognized a CAD0.02 per share foreign exchange loss on currency hedges entered in to manage the financial exposure on our US dollar capital purchases. Those hedges on capital expenditures did not qualify for hedge accounting.

Lastly, tax adjustments contributed CAD0.02 to EPS in the quarter compared to CAD0.05 a year ago, resulting in an effective tax rate of 25% in the quarter versus a statutory rate of 26.6% for the current year. We see minimal tax adjustments of approximately CAD0.01 per share for the balance of the year.

Year-over-year adjusted EPS of CAD1.63 per share represents growth of 5.8%. That's on a year-to-date basis. That's in line with our plan and remains on track to meet our guidance for full-year EPS growth in the range of 4% to 7%.

Turning to free cash flow on slide 17. We generated CAD815 million of free cash flow in the second quarter, driven by growth in EBITDA and a year-over-year improvement in our working capital position.

This quarter's results also reflected higher planned capital spending, as I discussed and a step up in cash taxes in line with our full-year 2014 guidance assumption, and higher cash interest payments. All of that is on track with our guidance for the year and our plan, which calls for accelerated cash flow generation in the second half of year.

So to wrap up, I'd say we see no changes in our outlook for the second half. The operating performance of all our segments is tracking well to deliver our guidance targets.

Wireless financials and postpaid operating metrics remain strong. We expect to see good improvement in Wireline financial performance through the third quarter and the fourth quarter.

In Bell Media, Astral's contribution as I said, will be reflected in both 2013 and 2014 results. So year-over-year performance in media will normalize in the second half, but with the impact of increased programming costs.

Given that outlook, I'm affirming all of our 2014 financial guidance targets. Lastly for your reference on slide 19, I provided an updated summary of our key financial assumptions.

As you will see, the only change is on net interest expense, which we now expect to be approximately CAD25 million higher for the full year. That's because we see less capitalized interest on the 700 MHz spectrum that we acquired earlier this year, which we've begun to deploy, and which was at a favorable cost relative to our expectation.

Notwithstanding that impact, we are maintaining our adjusted EPS guidance range. So with those comments, I'll turn it back to Thane and the operator to begin the question-and-answer period.

Thanks, Siim. Wayne, if you can now provide instructions to the participants, we're ready to open up the queue to questions.

(Operator Instructions)

Simon Flannery, Morgan Stanley.

Great, thank you very much. Very nice results, particularly on the wireless side. Impressive churn reduction, wireless margins. Can you talk through the sustainability of that? Because we've seen it at other carriers, both north and south of the border.

Is this really reflecting the fact, as you said, that there's no new devices? We've got a big iPhone upgrade coming here, or do you think we've got a maturing of this industry where some of these churn gains are going to be more sustainable? Anything you can add on tablets or other broadband devices, and what they're contributing here as well would be great. Thanks.

On the second point, the tablets are a very, very small share still of our net adds. Ours are literally almost all smartphone net add penetration. So that's also what's driving the improvement in our ARPU.

On the churn side, part of it from our perspective is an enormous investment in the last six years in our service agenda to the customer base. We see it in our customer service satisfaction metrics. They're just improved dramatically on our wireless business. And the tools we've put in our customers' hands has also, in terms of service applications, has really helped us on the service side.

The other point, I think, the part of the structure -- I mean the LTE networks that we're offering in the Canadian marketplace are second to none in the world. And I think customer satisfaction's probably at a high level. And structurally in the industry, I think that's also what we're seeing. Hard to forecast where the industry will go in churn, but our expectations is that churn will continue to be quite positive on the postpaid side.

Great, thank you.

Richard Choi, JPMorgan.

Great, thank you. On the Wireline side, wanted to confirm you think that revenue and EBITDA is going to be up in a second half. Given a little bit of a slowdown both in high-speed Internet and video, what makes you confident in the re-acceleration of that growth?

Yes, I think it is important to note, in the second half of year we do expect, as Siim said, both Wireline revenue and EBITDA to break through positive. In my own instincts, you'll see it build in the third quarter into the fourth quarter. So the second half will be positive.

Frankly it's just the continual growth of our TV and Internet business, that growing, against that NAS base being a smaller proportion. Some improvement, as Siim talked about, on our business side, where we are seeing the rate of improvement on EBITDA. Although even still there's work to do there. There's been improvements there.

We believe in a second half of the year -- it's important for the analysts between quarter to quarter, second half of year that Wireline EBITDA will break through and be positive. Part of that is, as I say, the growth we're seeing. And the seasonality in the second half of year, you see on ins, on what you see in the second quarter on Internet you see the benefits of on Internet and Fibe TV in the second half of year on the student return market.

The build, if Fibe TV slowed a little bit, are we still on pace to hit that 5 million number by year-end?

The household coverage we're on. The Fibe TV definitely a little slower in Quebec than we had wanted. And part of that quite frankly was tactical, given what saw, some pricing responses.

Once people saw our previous quarter results, we were positive growth in Ontario. And the ARPU, of course between the provinces, are little bit different. And we will continue to see the footprint expansion.

Great, thank you.

Dvai Ghose, Canaccord Genuity.

Thanks very much, George. As you know, you've had 10, I think, dividend increases since you became CEO, which has been really positive. The concern going forward is that you're overly reliant on acquisitions incrementally, so free cash flow and dividend growth and overly reliant on wireless.

It's encouraging to hear your Wireline comments. I assume you believe in 2015 you should produce some pretty decent Wireline EBITDA growth.

My questions really are on wireless and media. On the wireless side, as you know, there's significant concern amongst my peers that you may not be able to increase wireless EBITDA if there is a fourth recapitalized player. Do you believe that?

And last but not least, do you consider media still to be a growth asset? Do you think there is room for pro forma EBITDA growth next year with Astral and CTV combined?

Okay, thanks, Dvai. I'm not going to get into 2015 guidance, but let me give some context to your question. I think, if you look at the mix of our portfolio and the growth on the free cash flow we've talked about, the integration of Bell Aliant and investing in telecom assets to grow that. And that's the privatization of Bell Aliant, which will be free cash flow accretive next year.

I think our track record on free cash flow generation, keeping our payout ratio at around 70%, speaks for itself. I think the Street's expectation for our ability to manage that is our responsibility and we expect to continue to do that.

In terms of the wireless marketplace, I think the one comment I will draw out for investors, it's important to note that 18 of Canada's top 20 markets today have four carriers. So there is some confusion here, at least I pick up, people keep writing that we're suddenly going to have a new fourth carrier.

We've had a fourth carrier in those 18 markets for six years. The results that we are reporting reflect that. How they're capitalized, how they're not capitalized, how they're successful in execution will remain to be seen in the market place. But I did want to mention that. I think it is important that there are four players in those markets in what we've seen.

That's really the one comment on that. And then overall, the media business as we go forward, we've talked about for sure there's some challenges there in terms of the rate of rapid growth we've seen historically.

We don't think we'll see that pace on the Wireline side. You'll see improvement in a second half. We'd like to see that continue to drive the cash flow. And on the Wireless, I think the results speak for themselves.

Thanks, George. Congratulations.

Maher Yaghi, Desjardins.

Yes, thank you, good morning. Follow-up question on the wireless. More on the long-term perspective here. Overall, we're seeing continued declines in growth activations in the sector, especially on postpaid. This is not just seen by Bell but also by Telef and Rogers.

So you have been benefiting from the lower churn rate and improving ARPU, which continued to build into probably next year, and that's going to help you next year. But when you look longer-term, what can you do as an industry to increase penetration of wireless in Canada? If you can't, if that wireless growth is coming down, how will you be able to replace that growth to help your consolidated results?

Part of it, of course, is the portfolio we have of assets. But specifically on the wireless industry side, my own opinion and we're seeing it, is the Canadian consumers' adoption of smartphone and usage of those devices. And as I mentioned, the improvement in our speed of our LTE by 50% over the next four or five weeks, that is only going to drive a more and more demand for usage of the product.

The ARPU that we're seeing in the marketplace is not from price increases, it's generally from pricing discipline, but also just increased usage of the product. So I think that provides for the growth.

In terms of penetration, I think one of the interesting things for Canada of course, is because we still have penetration in front of us, probably haven't been as aggressive in things like the tablet market and what have you. I think you'll see that evolve and over time start to look probably a little more like the US. So there's incremental revenue there.

And I probably am as optimistic today on wireless growth as I have been over the last 10 years. I still think it is early days for this industry.

Thank you.

Jeff Fan, Scotiabank.

Thanks and good morning. Perhaps two quick ones on both wireless. The installment plan we're seeing in the US seems to be very popular. Wondering if you have any of renewed thoughts on whether you see that as an opportunity for Canada?

And the secondly, the BYOD, the bring your own device. Wondering if that's becoming a bigger portion of your activations, if customers bring their own device and going on to month-to-month plans?

Sure. Just to add, the one thing I did mention on wireless that we're seeing in our results, and I'll come back to that, is the tools we're using with our customer service is driving costs out of running the operations as well. Because customers, quite frankly, want to us smartphone for service and not necessarily calling to call centers. And that is driving some of the margin flow-through that we are seeing.

In terms of bring your own device, yes, there is no doubt we've seen some of that in Canada for sure. People moving from carrier to carrier and bringing their device with them. So it's helping the things such as cost of acquisition and what have you. For sure we've seen on that.

And on installment plans, we're watching the developments in US and we'll see. I have no comment on our competitive or a market launch, other than making sure we clearly understand the true cash flow costs of those programs, as opposed to what they might do from an accounting perspective. I really want to know with the costs are from a cash perspective. If it was going to accelerate net present value for our shareholders, we'd obviously take a serious look at it.

Thanks, George.

Glen Campbell, Bank of America Merrill Lynch.

Yes, thanks very much. So a metric that you probably take a look at and we don't get to see, is how the ARPU for your incoming customers compares to your base across your services, leaving aside, say, the temporary promotional discounts. My sense is that in wireless it may have flip-flopped so that your new customers may now be generating better ARPU than your existing.

My sense is on TV that you're probably lower, because your basic package is actually quite a generous TV package. And on Internet I'm not sure. Could you give us a bit of color directionally on what that might look like?

Sure. Yes, we use the term, Glen, the vintage of our customer base, to look at that. Your insights are, frankly on the wireless, pretty accurate. What we're starting to see now, part of that, as you know, we moved from three- to two-year contracts.

Handset prices didn't really change in Canada, but postpaid base entry-level prices did change. So we are clearly seeing customers coming on using LTE, by the way, which drives a higher usage and drives higher ARPU. And seeing as a result of that, new customers coming on generating some better ARPU.

On the Internet side, it's really about people migrating to higher speeds. So what we see there is revenue growth, not as much as you do the base and the net adds for us and for the industry aren't significant. But what we are seeing is customers wanting higher speeds and that is ultimately they migrate up to those higher speeds, that drives ARPU.

On the Fibe TV side, the real answer there is we continue to see a little over CAD60 ARPU on our Fibe TV product. But really in most of that service offering, we do it on a triple or a double and the discount is on the total package. But we're continuing to see IPTV north of CAD60 on the ARPU side.

Okay, thanks. And to confirm that CAD60 would be clean of any discounts? Or is the discount built in there?

That would actually be our monthly ARPU with the discounts in them. And of course it's a bit of a numerator-denominator issue, because the more net new adds you have, so over time that number will grow as those promos, as a percent of our base, come off.

Okay. And a quick follow-up, roughly speaking, what proportion of your Internet subs would be on the 25 and up plans?

You know what, Glen, for competitive reasons I'm not going to give that. But we are seeing a migration to people wanting to use higher-speed products.

Okay, great. Thanks very much.

Drew McReynolds, RBC Capital Markets.

Yes, thanks very much. Good morning. George, just two questions from me. The first one, you've done a great job with mobile TV, with the 1.5 million subscribers.

Wondering if you can shed some light on usage underneath the hood? The types of programming that folks are watching? Do you see any negative effects on usage due to Wi-Fi?

The second question, wanted to circle back on a comment you made on the Bell Aliant call, in terms of the benefits of Wireline and wireless integration. Is this about strengthening the wireless backhaul to improve your LTE performance? Or are there other financial strategic benefits that come into play from integrating the networks? Thanks.

Okay, so on mobile TV, let's deal with that first. I don't have a streaming number to give you, but I can tell you the volume was up significantly. Although a lot of it, some of it's starting even in this quarter, when you see things like the World Cup it is very, very event-driven, mobile TV.

So people add it to their base plan. It can be CAD5 for the 10 hours. You'll have a period of time where people aren't using it much, and then there'll be some type of event, a world event. And it can be a positive sport event, it can be some of those political events. And then we see an explosion in usage for those type of events.

So it's and event-driven service, which makes sense given the way we product the product size, etc., in the marketplace. We continue to see that accelerate that growth and it adds to the LTE experience for our customer base. We think it's great differentiation in the market and we now hear some of our competitors want to enter that space. So we're happy to have that leadership position.

In terms of Bell Aliant and Bell. The comments, really what we've said, if you look out and you think about the bundling market on the consumer side in Eastern Canada, although we've been able to do it, it's been a little trickier with two public companies, than the ability to bundle in now IPTV with wireless when it is all one organization. So those are really -- there's an example, one of the strategic benefits that we'll get of that.

You make the point on the backhaul and the access, but the reality is we've always been buying that access from Bell Aliant. So I guess from an integrated perspective it will be there.

And then there were a lot of articles, some people wrote that this was all done as a result of something to do with the fourth wireless carrier. Frankly, that was not any of the strategic intent on doing this. The strategic intent we talked about was the things we took the group through, a free cash flow accretive for our shareholders.

We don't need two public stubs. If you look at the Fibe footprint and now the IPTV growth off that platform that we'll have putting it together, those are really the driving reasons.

Just one number, our streaming for instance, is up 61% year over year on our mobile TV.

6%

They just handed me a note. Up 6% year over year on the streaming. And I know in the month of the World Cup, the guys were really pleased with the results.

Thanks very much, appreciate it.

Vince Valentini, TD Securities.

Yes, thanks very much. Questions on Wireline CapEx. The intensity of 23.9% this quarter, a bit elevated. Can you give me any more detail on some of the buckets of where you're spending and maybe some directional comments for the future? It seems like that number is a bit above where you'd want to be longer-term.

The real issue is it's an annual number with us. We're trying to accelerate IPTV as quick as we can. But the best way to guide is the CapEx guidance that we've given for the year will be right in that range. I think we're in a 16 to -- what's the range, Thane, that we're on the guidance --

Yes, 16 to 17.

Yes, so we'll be raising the 16 to 17 on the (multiple speakers) base. The Wireline side is obviously where the capital is being accelerated as quickly as we can. The lumpiness in the free cash flow, it's just quarter to quarter.

We are really trying to get IPTV done as fast as we can, because it's so present value accretive for us. But there's no change in the outlook of our CapEx.

Okay.

Wayne, this will be our last question.

David McFadgen, Cormark Securities.

When I look at your wireless business, you're lowering your operating costs, increasing in your margins, which is pretty good. In your opinion, is there a theoretical threshold where you could take the wireless service margin to?

No, there isn't. There will be some number, obviously, so I don't mean to say that way. But there's not really -- our goal is as we've said strategically on wireless, is to make sure we exceed the 33% of the postpaid market share, that ultimately we close the gap. And I think we now have with our competitors, and capture a leading position of EBITDA growth in the industry.

If we're doing that, we think we're executing. The margins, of course, can change pretty quickly in this business, up and down, depending on new handsets.

I think one of the things we'll, not so much on margins, but there are some new smartphone devices coming in the latter half of year. Maybe that helps to see some acceleration on the subscriber side for the whole industry. We will just have to wait and see. Thank you for the question.

Thanks.

Very good. On that, thank you so much for participating in the call today. I'm available throughout the day for any clarifications and follow-ups. So thanks again. Have a good day.

Thank you. That concludes today's conference call. Please disconnect your lines at this time and we thank you for your participation.