BCE Inc (BCE) 2014 Q4 法說會逐字稿

Good afternoon. My name is Rob and I will be your conference operator for today. At this time I would like to welcome everyone to the MTS Allstream Q4 annual conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions). Thank you. Paul Peters, Vice President of Tax and Investor Relations you may begin your conference.

Thanks, Rob, and hello, and thank you for joining us today for review of our 2014 Q4 and annual results. The news release (inaudible) financial statements can be found on our website at www.mtsallstream.com. Today, our Board of Directors approved the 2015 first quarter dividend which has been set at $0.425 per share. This call consists of comments by our Chief Executive Officer, Jay Forbes, our Chief Financial Officer, Wayne Demkey, followed by a question-and-answer period. Also on the call today are Kelvin Shepherd, President of MTS, Mike Strople, President of Allstream, and Paul Beauregard, our Chief Corporate and Strategy Officer.

Before we start, I would like to remind all listeners that today's presentations and remarks may contain forward-looking statements. A number of assumptions were made by us in preparing these forward-looking statements which represent our expectations as of today. As such, they are subject to the risks and actual results may differ materially from conclusions, forecasts or projections of such forward-looking information.

Therefore, forward-looking statements should be considered carefully, and undue reliance should not be placed on them. We disclaim any intention or obligation to update or revise any forward-looking statements whether it's a result of new information, future events or otherwise as required by law. For additional information about such material factors and assumptions, please refer to our 2014 fourth quarter and annual MD&A released this afternoon. I will now turn the call over to Jay.

Thanks, Paul. Good afternoon, everyone. As this is my first earnings call since joining MTS Allstream, I want to begin by saying what an honor and a pleasure it is to step into this role. I have long admired the innovative spirit and the deeply held customer ethic of the organization and feel quite privileged to have the opportunity to guide MTS Allstream through the next phase of its evolution. Before turning the call over to Wayne for discussion of our 2014 results, I would like to take a few minutes to share some initial observations with you, as well as my plan of action for the remainder of the quarter.

I view MTS Allstream as a great company with even greater potential. From a well established brands derived from a long and valued heritage of delivering reliable, trusted communication services on solid operating platforms, to our unparalleled customer reach and through to a workforce comprised of energized employees committed to delivering the very best possible customer experience. There's a strong platform in place. As importantly, we have a wealth of hidden gems that can be mined to take advantage of the rapidly changing landscape of the Canadian communications services industry.

One such gem is our expensive information and communication technology capabilities, or ICT, that contribute to MTS Allstream being recognized as the 15th largest ICT company in Canada. Our position of trust with an extensive customer community also provides us with additional opportunities to introduce new service offering. The nature, extent and timeliness of our customer data is second to none. And our steady stream of cash flows allows us to reinvest in the business, acquire new businesses or provide returns to our investors ensuring continuous, low cost access to future capital. And yet, despite this wealth of proven capability and enviable potential, MTS Allstream has failed to perform in line with our expectations.

And this is clearly evident in our share price which has badly lagged behind our peers. With this as a backdrop, I'm using my first 90 days to lead the organization through a truncated strategic planning process. The executive team is in the midst of conducting an in-depth situational assessment that will form the basis of the refreshed strategic plans we are targeting for completion by quarter-end.

The outcome of our strategic assessment will be shared with you in the second quarter of this year. Consequently, I am not in a position to speak to much more in the way of detail. I will now turn the call over to Wayne to review our annual, and Q4 results. Wayne?

Thanks, Jay, and good afternoon, everyone. I would like to start off by welcoming Jay to MTS. It's been great working with him this first month which I can assure you has been a busy one. We are diligently reviewing our opportunities and challenges as we refresh our strategy and I look forward to sharing with you the future direction for our Company next quarter.

This afternoon I intend to focus only on the key point from our fourth quarter results, a more complete analysis can be found in our Q4 MD&A and news release. For the year consolidated revenues were CAD1.6 billion, down 1.3% from 2013 resulting from .7% revenue growth at MTS offset by a 4.4% decline at Allstream. At MTS our broadband services were up 6% over the prior year with strong Internet revenue growth of 9.2% in 2014 driven by a 4.3% increase in high speed Internet subscribers. We also had a 3.9% increase in IPTV revenues driven by 3.1% subscriber growth for the year.

Wireless data revenue growth was also very strong, up more than 16% over last year. Postpaid subscriber growth of 2.3% in 2014, along with the growing number of customers with data plans is expected to continue to drive strong growth in this area. Our total wireless revenues were down 2.6% due to the loss of wholesale CDMA revenues which we have talked about in the past.

If you exclude wholesale wireless revenues wireless was up about one-half percent as the growth in wireless data was partly offset by a decline in voice revenues. This wireless wholesale issue is mostly behind us with only CAD9.1 million in revenues generated in 2014. There isn't much left to loose. While I am on the topic of wireless revenues, I also wanted to mention that we are most of the way through the transition of three year contracts in our customer base to two-year contract. We have less than 30% of customers remaining on three year plans at the end of 2014 and should start to see improvement in the ARPU pressure once the remainder have moved to lower price two-year plans.

At Allstream we saw strong growth in revenues from converged IP, up 8% over 2013. Which partially offsets the decline in legacy revenue. Increased EBITDA is mainly attributed to restructuring and transaction costs incurred in 2013. At MTS, EBITDA had decreased by 1.1% primarily due to declines in wireless wholesale revenues.

Excluding wireless wholesale MTS was up slightly in EBITDA as our emphasis on cost reduction and growth in the internet IPTV and wires data revenues offset the decline in legacy revenue. Allstream's 2014 EBITDA increase was mainly due to transaction and restructuring costs which were incurred in 2013.

When adjusting for these 2013 costs, EBITDA was down 7.3% due to legacy revenue declines partly offset by growth in converged IP revenues and by our continued focus on reducing costs. Over the past several years we have continued to improve our cost structure through headcount reductions, real estate consolidations and supplier negotiations. Resulting in substantial cost savings that have offset inflationary pressures and costs associated with the growth of certain lines of business.

Our free cash flow was up CAD34 million, mostly due to the scientific research and experimental development or SRED tax credit received in 2014, and lower transaction and restructuring costs. MTS continues to generate strong free cash flow while Allstream was basically free cash flow neutral in 2014. This free cash flow increase was in spite of a fairly intensive 2014 capital expenditures program which included us powering up new 4G LTE network connections.

I want to point out how the accounting for one time REIT investment tax credits impacted our earnings-per-share, CapEx and free cash flow results in 2014. The favorable audit adjustment of CAD23.6 million decreased our CapEx and increased our free cash flow by that amount. Otherwise, our CapEx would have been CAD311.9 million, and our free cash flow would have been CAD130.9 million. The downward adjustment in CapEx had the impact of subsequently lowering our depreciation expense, a favorable impact on earnings-per-share was about $0.26 a share. In other words, our EPS would have been lower at $1.44.

Construction of our new data center is on track and we anticipate for it to be up and operating in mid-2015. This facility is unique being the first and only commercial tier 3 data center here in Manitoba. Sales activities are ongoing with interest from Manitoba customers along with organizations across North America. We expect the data center and cloud services will provide a new and important growth opportunity over the next several years.

The implementation of the pension plan settlement agreement approved by the court in November last year will be substantially completed this week. Of the approximately CAD28 million to be paid by the Company directly to current MTS employees who are members of the MTS Defined Benefit Pension Plan, CAD15 million was paid in December, and the remainder will be paid by the end of this week. The remaining CAD112 million is being distributed from the pension plan to retirees and other persons with interest in the plan.

I want to remind you that the CAD112 million is already included in our solvency requirements and is funded over time. The Company's pension plans performed strongly and generated an average return exceeding 10% in 2014. However, falling interest rates have increased our solvency deficit.

Our total estimated solvency deficit will be determined once our actuarial evaluations have been completed in April. However, based on our internal estimates, we believe the solvency deficit is approximately CAD395 million as of January 1, 2015, with an estimated 2015 cash solvency funding requirement of approximately CAD60 million. Our process for managing these pension fund requirements and other aspects of our business will all be scrutinized as part of our refreshed strategic review.

We have sufficient balance sheet strength to meet these funding requirements should that be the way that we choose to address them. As Jay noted, the strategic review work has commenced and we will unveil our refreshed strategy in Q2. Thank you. We would now be pleased to answer your questions.

(Operator Instructions). We'll pause for just one moment to compile the Q&A roster. First question comes from the line of Greg MacDonald, from Macquarie Securities. Your line is open.

Thanks, guys. I have a question for Wayne first and then a follow-up one for Jay. Wayne, pension solvency, your calculation roughly, call it, CAD395 million. Can you help us understand what a likely annual funding requirement profile might look like? I know I can just do rough math and divide 395 by five, but you've got some smoothing issues and what not that might not make that calculation accurate so if there's anything you can help us with, that would be helpful.

Well, I can tell you, I did mention what our expectations are for 2015 at about CAD60 million. The way that it's calculated is based on a three year average solvency deficit. So, in 2016 we would take the solvency deficit as of January 1st of that year, add it to the two previous years and then divide that by five and that would be your funding requirement for 2016. So it will depend on what interest rates are at the end of this year, then averaged over that period.

But assuming there's no change in interest rates it sounds to me like the 60 might even grow a I little bit more all other things being equal. Is that a safe assumption?

No. I don't think so. The other thing that you would be missing is that as the assets grow we would have additional letter of credit rooms so the cash requirement would be net of any letters of credit that we choose to use.

Okay. And second question is for Jay. First, welcome Jay. It's been a long time. I wanted to ask you about the strategic review period. The language suggests to me that it's going to include pretty much everything, business outlook, capital structure, asset disposition potentials, all that stuff. Is that the reason why, I want you to hopefully confirm that, and is that the reason why there's no guidance for 2015 being provided? Presumably, that, I guess, is coming in March or after March when you come out with your results?

Greg, nice to talk again. As you say, the scope is rather you will encompassing. We're going to be looking at all facets, of MTS, Allstream and shareholder proposition go-forward. And hence, kind of the commitment of the executive team to this as our primary area of focus going through Q1. Based on the outcome of that we look to be in a position to share the results of that with you in the second quarter.

So it will be the second quarter result release that you're going to share that with or is it some point in the second quarter?

Some point in the second quarter.

Okay. Thanks very much and good luck.

Thank you.

Your next question comes from the line of Drew McReynolds from RBC Capital Markets. Your line is now open.

Thanks very much. A couple for me here. First, on just the Allstream performance in the quarter just on margins certainly a little lower than what that business had been tracking the last couple of quarters. So I'm just wondering if there's any one time impacts there? And then also, just on Allstream, it was breakeven free cash flow. As you look forward, and maybe you can't comment yet just due to the review, but do you have flexibility to begin to generate positive free cash flow from Allstream, or are you going to continue to invest at a breakeven basis or is all of that up for review and we will wait and see?

It's Jay. Maybe I will take the second question and flip Mike the first one. As you have recognized, Allstream is obviously going to be a focal point of our review that we undertake this quarter. When we think about the assets of this organization, the fiber loops and the GTA, the backbones, transport and export, and truly a customer service experience second to none in the marketplace, again, this is an organization with outstanding assets and yet we have not been able to realize their full potential.

So with that in mind we're going to kind of do an end to end. Mike and team are heavily engaged in that with us and are looking at, again, understanding the full capabilities of this asset as we go forth and maybe Mike can speak to the margins in the last quarter.

Sure. Thanks for the question, Drew. On margins, there's nothing particularly unique in Q4 on margins on IP. You see them in the range that we expect in that 70 to 75 range as we have seen throughout 2014. And on our legacy revenues which are declining, they continue to come under some amount of price pressure and so what you are seeing there is the changes related in price as opposed to cost. And on the IP side, we continue to add more and more on our own network which comes with higher and higher margins.

Okay. That's great. One last one for me. On the opening of the new data center, can you just remind us what kind of revenue capability that new data center will have and also, just perhaps a timeline to ramp-up to fill that to whatever capacity level you're targeting?

Yes, Drew. If you wouldn't mind, I think we would like to wrap that up in the larger discussion of the strategy and the priorities that we have laid out and the opportunities that we see from an ICT point of view. So if you will kind of shelf that for the interim we will give you a fulsome response in the second quarter.

Okay. Fair enough. Thank you.

Thank you.

Your next question comes from the line of Glen Campbell, from Bank of America. Your line is now open.

Yes. Thanks very much. So first a clarification question for Wayne. The CAD60 million in pension solvency funding was clear, but in the MD&A there's reference to an CAD85 million figure. Can you help square that for us?

Yes. The difference is the normal funding which is the annual cost that is included in our, or the expense portion, of which would be in our EBITDA. So CAD25 million is the normal funding. What we normally talk about is the solvency funding, which is the 60.

Okay. That's great. Thanks. And maybe just asking Greg's question a slightly different way. You know, if there are no changes to assumptions, and taking into account what you can do as letters of credit, would that CAD60 million be a straight-line figure, or all things being equal would it rise in 2016?

Actually it would be the opposite. It would come down every year as it is amortized out.

Okay. Okay. Great. Just looking at the Q4 financials, there's a big sequential increase in OpEx in the MTS business from Q3 to Q4. Seasonally, that usually does happen, but it was a bit bigger than we were expecting. Were there any true-ups or anything unusual in the quarter?

In the fourth quarter, I don't know exactly whether there was anything that would be out of line with just sort of the normal Q4 cleanup or those costs being slightly higher than what they were in the previous quarters. So mostly that's just timing or some amount of seasonality that typically happens in the fourth quarter. I think if you look at costs overall year-over-year, the increase there is primarily due to the addition of EPIC where we had one quarter last year versus three quarters of this year.

So that actually our overall operating expenses for the year are probably more meaningful than what happened in Q4 and in that respect we're down just slightly so that the cost reduction efforts that are undertaken by MTS each year have in fact in 2014 more than offset the pressures from inflation and the growth of our broadband wireless and other strategic services.

Okay. Thanks. Then maybe one last one for Jay. I appreciate your not wanting to talk about what the plans for this would be at this stage. That makes perfect sense. But looking backwards at Allstream, I mean the performance hasn't been what one would hope and the attempted sale didn't go through. Are there any sort of working hypothesis that you have about what went wrong?

Glen, nice to be working with you again. It's been a few years. Actually, that is exactly the level to which we're taking this back, if you will. Peeling this back to kind of understand the root causes that have impaired us from realizing the value that again, all of us I think recognize in this collection of assets by the name of Allstream. So Mike and the team are knee deep in this already, paring it back and trying to get the insight as to the root causes and with that in mind the solutions that we can put in place to go forward.

Okay. We'll look forward to hearing about it next quarter. Thanks, Jay.

Thank you.

Your next question comes from the line of Vince Valentini, from TD Securities. Your line is open.

Thank you very much. A couple things on the MTS side first. The local access revenues were flat year-over-year in Q4 which, obviously, is surprising given the trends have been our because of the CAD3.4 million CRTC item last year or is the underlying trend actually improving?

No. It's Kelvin here, Vince. Yes. You're right it's really related to that CRTC regulatory adjustment. The underlying trends are still there, but they're stable.

Okay.

We're not seeing an acceleration of any sort in local revenue decline but we do continue to forecast a decline.

Okay. Thank you, Kelvin. Also, the TV segment ARPU looks like this is the second year in a row that the ARPU actually came down. Is that because of competition from the cable companies, or is this some element of cord shaving that you are seeing? Can you talk about that at all? And, can you remind us, did you put in any rate increases in 2014 so that the ARPU decline is even more extreme as you adjust for that?

We did do some pricing increases, but I think there's three things to look at in the ARPU. Cord shaving is probably there, but I would say it's the smallest and least significant component. The most significant pieces that when we did pricing increases where historically we might have taken a flat rate price increase on the basic subscription. We have really started now to price more on a individual feature package or content point of view to line up pricing with cost. And so what that motivates subscribers to do often is to optimize their packaging. It may reduce our revenue but because that is then more closely matched to our cost structure it actually improves our profitability.

So that was a strategy we implemented in our pricing increases in 2014 and I think that has had some impact on the ARPU but actually it is actually not unexpected. It's kind of what we wanted to encourage. The other thing that's going on is that as you know we've had a base of what you would call classic TV subscribers. These are subscribers on our service that date back from 2003 and those subscribers have been declining and in fact our plan really is to churn those out and sunset them over the next roughly year or 18 months.

Many of those have lower ARPU and when they convert to the new service in some cases they're a little dilutive to the ARPU that we would have gotten from earlier subscribers. So I think those are the three underlying things, but the bigger factor really is how we have done our pricing to try to motivate customers to pay for the content costs that they're getting.

Okay. That's great. Thanks. And last one for Wayne. Sorry to go back to the pension, but the CAD60 million, you said that's the cash funding you inspect in 2015. Does that imply that you would also be expect to go use more letters of credit to make up part of the solvency obligation this year? And can you remind us where you stand on letters of credit? How much you have outstanding and what percentage of total assets you're at?

So the CAD60 million is a net number so that's the cash requirement that we expect. And in terms of letters of credit, our, I guess, strategy in terms of funding, has been and continues to be for the time being to utilize letters of credit to the maximum allowable, which is 15% of assets. And the reason for that is really that at some point interest rates are expected to rise and so the letters of credit really become a cushion to help you to protect against trapping capital within the plan and so you can take those letters of credit down as interest rates grow over time and your deficit reduces.

Okay. Thanks.

Your next question comes from the line of Jeff Fan from Scotiabank Your line is now open.

Thanks very much and good afternoon, everyone. A few clarification questions. Again, just back on to the pension. Just on the last point, Wayne, so 15% of assets. How much availability do you still have under the letters of credit to use for funding?

Yes. I don't know that offhand, but I mean if you take the total assets of about CAD2 billion, you will find the letters of credit amount that are outstanding somewhere in our note and you can probably calculate that.

I understand the math gets you 366. I guess the question is how much have you used up?

Yes. The amount that we have of letters of credit that we have outstanding is in the note somewhere. I don't have the number committed to memory, but you can find it in the notes to the financial statement. Okay. We'll look it up. [multiple speakers]

Okay. And on the funding side just to clarify specifically back to the Supreme Court case. So in 2015 it looks like there's still CAD85 million that has to be paid out and about CAD13 million of that is going to come from the Company to the members and the rest, I guess, CAD72 million is going to come from the plan. Is that correct?

I don't think so. So, the part with respect to the Company you have right. So we estimated that we're going to pay about CAD28 million from the Company of which CAD15 million was in December and you can see that on the cash flow statement.

Yes.

So about CAD13 million left there. All of the rest would be paid out of the plan.

Yes.

And whatever that number is, it will all be paid out by the end of this week and so our funding requirement with respect to that is included in the CAD60 million that we've talked about for 2015.

But the CAD70 million, sorry, the remainder, is coming from the plan assets to the members?

Well, to the extent that it hasn't already been paid, yes.

But the total amount is 140, right? Like, I mean, that's the settlement?

Yes. 140. 28 from the Company and 112 from the plan.

Okay. And I guess 40 was paid out from the plan in 2014?

Sure.

Okay. So the remainder is roughly 70 still coming from the plan this week?

I guess, approximately. Sure. I'm not sure where you're going with that.

Well, I'm just trying to figure out what other assets have been coming out of the plan as a result of that. And so the next question is, of the CAD395 million deficit, does that include the remainder that has to come out for that settlement? I.E. does the deficit go up another CAD70 million as a result of more assets coming out of the plan?

Well, the deficit would be calculated once a year at January 1st.

Okay.

So there's a whole bunch of things that are going to happen and the CAD70 million, or the full payment requirement, was already included as a liability so it would have been included in the deficit (Multiple Speakers).

Okay. Thank you. And then a couple questions quickly for Jay. In the past I think the the impression that the Company has given to shareholders is that the dividend is sacred and the management team was going to work around with that dividend in mind. The question for Jay, I guess for you, has the Board of Directors sort of given you the flexibility to sort of change that constraint that may have been there in the past? Are you given the clean slate to assess that dividend?

Good afternoon, Jeff. As you know, the dividend decision is the decision of the Board of Directors of an organization and so the policy will vest with them and I shouldn't offer any commentary with regards to that. You know, in terms of the strategic assessment that we're undertaking now, the Board is very supportive of that and very encouraging of the leadership team to explore all aspects of the organization in recognition, again, of a great Company with even greater potential.

So for us we're kind of (inaudible) deep into the strategic assessment and will migrate those into strategic plans and performance management system in the third month such that we will be able to communicate that with you shortly thereafter.

And is the sale of Allstream a part of one of the possibilities out there that you would be assessing?

When you look at a sale or retention of Allstream, for us that's a decision that needs to be made in the context of a deeper understanding of the business. As I mentioned before, you look at this rare collection of assets that they have, the deep history that they have enjoyed, customer connectivity best on a service ethics second to none, this is an organization that should be doing better than it is and for Mike and the rest of the team this is about really rolling up the sleeves, getting a very clear understanding of that which has kind of impinged upon our ability to realize the full potential of that organization and addressing it. So that's really going to be the focal point for us, Jeff, as we go through these few months understanding those root causes that have impaired us to this point in terms of realizing the full potential of Allstream.

Okay. Thanks, Jay.

Your next question comes from the line of Philip Wong, from Barclays. Your line is open.

Hi. Thanks. Good afternoon. A quick question on the wireless side. In the prior quarter you guys mentioned that there's been a more aggressive pricing in the market in the near-term. I was just wondering if you could give us an update on whether any of those pricing pressures have eased since, or whether you have seen any visibility to that easing off?

It's Kelvin here, Philip. Certainly we still have some robust competition going on in the market and that hasn't eased off, but we did see some improvement in pricing through the fourth quarter. Certainly we made some adjustments to our plan pricing in the October time frame, and we sustained those. So those are positive. But, I think we will have to wait and see through 2015. We certainly see opportunity when you look at the pricing level in Manitoba compared to pricing in some other markets. We think there's certainly opportunity there for pricing to continue to firm up.

Great. And a question for Wayne. Back to the pension. I just wanted to have a quick clarification on the process of calculating the (inaudible). I know that it's based on, the CAD395 million is based on January 1, 2015 but in terms of the rate cut that we've had, would that be incorporated into the calculation when the formal calculation is actually done later on this year?

Well, the discount rates are calculated as of January 1st. So any changes since then those would be incorporated into the next year's deficit and, of course, it really is based on where interest rates are only on January 1st of the year. So what happens during the year is interesting but not impactful in any way unless that continues to be the interest rate as of January 1st of next year.

Got it. No. That's helpful. And then, final question for Jay. I know it's a bit early given it's only been a month, but I was wondering if you felt any part of the business deserves greater attention or maybe earlier focus from your team? You certainly mentioned earlier Allstream in your comments. I was wondering if any part of the MTS side of the business that you saw particularly bigger opportunity low-hanging fruit in terms of things that you can address over the next 12 months or so.

You have to leave me a little bit of fun for the second quarter and the big reveal here. No. Listen. You know, the more I come to know this organization and through my years of the organization from afar the more I get to this organization the more belief I have in the potential go forward. So whether that's within MTS and Allstream, again, wonderful opportunities that the team is recognizing and looking to capitalize as we go forward. So without being too mysterious we will leave it at that and look forward to a further discussion in second quarter.

Thanks very much.

Your next question comes from the line of Dvai Ghose, from Canaccord Genuity. Your line is open.

Thanks very much. Jay, first of all congratulations on the new position. You're clearly in the hot seat here. My question for you is this. This is a third strategic review at MTS since 2006. Now, that is quite a long time but in every previous occasion, all the excitement as to what may or may not happen. There's been attempts to sell assets you were unfortunately screwed by the regulators on the Allstream sale. When it comes to the incumbent division, I think we all realize has to be controlled by Canadian's and (inaudible) and Rogers and (inaudible) MTS Mobility under the current environment of the Government. So, what actually drew you to this organization? Because operations are worse today than they were in 2006. I think, to be fair to prior management, they tried, and they have failed. What makes you think you can be successful and what attracted you to the position? Is it the weather in Winnipeg or is there something I'm missing here?

Well, listen, we've worked a long time alongside together, and you know I like a good challenge and I think honestly I think that's exactly what we have here. As you have noted, the inherent logic behind having three strategic reviews since 2006, that indicates that a lot of people see a lot of opportunity here and yet have not been able to perhaps release it to its fullest. With the full commitment of the Board, and I can assure you we the executive team have the full commitment of the Board, we're going to look at this organization from end-to-end and, again, preserve all of that and there's a whole lot of that which is truly valuable and truly additive to the future of this organization.

We're going to stiffen that underlying platform so that we can utilize what we refer to as some of the hidden gems innate to an organization of this nature. And for those aspects of the business that just don't warrant our time, energy and consideration for the future, we're going to come to the difficult decision that they will no longer be part of the this organization. They will no longer be a contribution or a drag in terms of what we need to accomplish. So I think what's going to be different this time around is a unified approach by the Board and management in terms of taking a realistic appraisal as to where we are and opportunistic assessment as to possible and where we might be able to get to as a newly configured organization.

That's great. I'm really glad you're up to the challenge. Obviously I wish you every success. Two other quick ones, if I may. One on Allstream. Obviously we have seen the price of oil fall from $100 to $50 in a very short period of time. There are concerns about exposure to Alberta. Maybe more for your peers who are more Alberta focused. But are you seeing any weakness in the oil patch as a result of declining oil prices? Obviously people are slashing their capital programs there. Is that having any impact on Allstream?

It's Mike, thanks for the question. We're not overweight in resources or particularly overweight in Alberta so we don't see that as a particular risk for Allstream.

That's great. And then last one for Wayne again. Sorry there's been a lot of questions on pension. I just want to make sure I've got this right. The CAD60 million of assumed pension solvency for funding for this year includes the CAD13 million of residual from the Supreme Court decision is that right?

No. The CAD60 million is the funding for the plan. The CAD13 million would be funding that we would be paying directly to the employees. So those are separate.

Got it. Sorry. Thank you very much.

Your final question comes from the line of Tim Casey from BMO. Your line is now open.

Thanks. Just one for me for Jay and then, regretfully back to pensions. Jay, I know you're taking a strategic review, but can you talk about your willingness or abilities right now to continue to fund the business? I mean, presumably, there's capital projects that are long-term in nature. Is everything on hold right now or is it more of a business as usual and then things will be decided in three months or so?

Good afternoon, Tim. Great question and actually this is very much business as usual and with a twist and the twist being obviously that, you know, the extra effort that is required to undertake a stem to stern strategic assessment is being done as we continue to keep the lights on and continue to deliver the service offerings that we do here in Manitoban across the country through Allstream. So, yes, it's that challenge of being able to take the resources of the organization and carefully redirect some of those to the analysis that is required to better understand where we are as well as that possible that I referred to earlier.

And, Wayne, just back to the letters of credit. Looking through the notes it looks like you've through a couple of facilities you've got close to CAD360 million worth of LCs outstanding and if I take 15% of the plan assets, I get around CAD360 million and I guess where I'm going is what are your options to fund this? It looks like you're tapped out on LCs by these references?

Not all of those LCs would be for the pension plan so you want to look in the financial statement notes in order to get the amount that is related to the pension plan and if you have any trouble finding it, certainly give us a call and we will.

I'm looking at the notes now.

I don't have the number offhand.

You don't have, you can't tell us what your options are for funding the pension deficit in 2014 as we stand now?

Well, first off I think you mean 2015.

Pardon me. Pardon me.

Our funding in 2015 is estimated to be CAD60 million. That's net of letters of credit that we will be using.

Okay. Thank you.

That concludes the question-and-answer session. Mr. Peters, please continue.

Ladies and gentlemen, we have reached the end of our 2014 Q4 and annual results conference call. Once again, thank you for joining us today.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.