BCE Inc (BCE) 2017 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the BCE second quarter 2017 results conference call.

I would now like to turn the meeting over to Mr. Thane Fotopoulos.

Thank you, Mode. Good morning to everybody. Joining me here today, as always, are George Cope, our CEO; and Glen LeBlanc, BCE's CFO.

As a reminder, our second quarter results package and other disclosure documents, including today's live presentation, are available on BCE's Investor Relations webpage. An audio replay and transcript of the call will also be made available later today or tomorrow morning on our website.

However, before we get started, I would like to draw your attention to the safe harbor statement, as always, on Slide 2. Information in this presentation and remarks made by the speakers today will contain statements about expected future events and financial results that are forward looking and therefore are subject to risks and uncertainties. These forward-looking statements represent our expectations as of today and accordingly are subject to change. Results may differ materially.

We disclaim any obligation to update forward-looking statements except as required by law. Factors that may affect future results are contained in these filings with both the Canadian Securities Commissions and the SEC and are also available on our corporate website.

With that, over to George for our Q2 overview.

Great, thanks, Thane. Good morning, everyone, and thank you for joining us in the middle of the summer.

This morning, we reported a 7% service revenue growth and 5% higher EBITDA growth. This was driven by the strong financial contribution of MTS and the excellent wireless results we've reported this morning. We added 106,000 broadband customers, which is traditionally for us a soft quarter in terms of overall broadband net adds. The company continued its track record of strong wireless postpaid momentum and best-in-class financial results. Wireline EBITDA was up 2.6% year-over-year, and our North American leading margin continued at 41.8%.

Strategically, we now expect to service more than $3.7 million FTTH locations by the end of this year, up about 100,000 households and businesses, and resolving in approximately 40% of our entire long-term fiber program being completed by the end of this calendar year. Also on the strategic side, a new innovative app-based live TV streaming service was launched on May 15, branded Alt TV, targeting cord-cutters and cord-nevers.

Bell Media produced stable financial results in the quarter with 2.2% revenue growth and positive EBITDA. MTS is meeting all of our financial expectations. In fact, on the good news side, we now expect the MTS EBITDA in 2018 will surpass the presale of the TELUS wireless business that would've been 2016. So the synergies are really significant across our wireline and wireless business. The 17% free cash flow growth in the quarter continued to support our strategy of investing in broadband wireline and wireless networks.

Turning to wireless -- we saw an approximate 27% increase year-over-year on our postpaid additions and as well reported churn of 1.08% on the postpaid side. And that is our lowest reported quarterly churn rate in 11 years. Also on the churn side on our overall LTE network, we saw postpaid churn at 1.03%, so clearly moving the right direction on that metric. It was the strongest absolute dollar service revenue growth in the history of our wireless business. Of course, that is combined with the strong organic growth at Bell Mobility and the MTS Wireless acquisition.

Average revenue per customer is up 4.6%, and that is driven again by the continued high usage we're seeing of our LTE-A network, as over the entire base we saw 26% year-over-year increase in broadband usage on our wireless network. Our investment, clearly, in the Quad Band network is paying off. We're now in 47 markets, 8 provinces -- combining that with the 256 QAM technology, enabling customers to see speeds on average of 25 to 220. If anyone does a speed test any day, in any one of the major cities in the country, you'll see sometimes you're getting 90, 120 services or higher on our wireless network.

Also, pleased to report and quite to report that Virgin topped every wireless carrier from a J.D. Power ranking perspective this year, surpassing our competitor, Rogers, Telus, Fido and Koodo as the number-one service in the eyes of the customer. So a very strong result from Virgin Mobile.

On the wireline side, we had $16,400 IPTV net adds. We saw a decline in our satellite losses of about 10% year-over-year. I would expect our satellite loss to continue to improve now that we have MTS selling the satellite services in their footprint. Alliant is actually seeing some positive growth as well in some of their rural footprint. And the significant growth of the IPTV footprints by the telcos is obviously slow. So hopefully, we'll see that trend continue there.

On the internet side, we added a little over 1,000 in the quarter in what is a seasonally slow quarter for us with the university outs at the end of the quarter. However, from a strategic standpoint, very positive. We added 17,400 net internet additions in our fiber footprint. As we go forward the second half of the year, we'd expect stronger internet additions, particularly as our fiber footprint continues to roll out. On the residential side, we saw an improvement in losses year-over-year. I thought the most interesting thing to me of the quarter was where we actually had the fiber footprint, we literally had no NAS losses. So it's really quite interesting what the power of that is. And of course, it's probably a little bit where that geography is as well.

And the one call which we don't do very often on the business side -- small business had a good quarter. We're seeing some momentum from an RGU perspective there, and also probably a little bit of the stronger Canadian economy helping our small business wireline group.

Turning to our product page on IPTV -- the product continues to be the most innovate in the marketplace. Just in July, we launched another addition to, or product enhancement, where our customers can watch their PVR recordings on a laptop, smartphone or tablet if they have access to our Fibe TV app. And so for anyone who's in our footprint, particularly on the investment side, if you're not familiar with the app, you really should download it, use it, to understand what a competitive -- for us how competitive this product is in the marketplace. Also coming in August, we'll integrate Google's YouTube app into our 4K PVR, and no set top box upgrade will be required for these additional features.

I think the most strategic thing we undertook in the quarter was the launch of Alt TV. As I mentioned, it's a new app-based live TV streaming service that was launched late in May, targeting cord-cutters and cord-nevers. It's available in our Fibe TV footprint, so it's a licensed service. But it requires no set top box. It's limited to two streams per location via laptop, smartphone, tablet or a smart TV. It's the identical content of Fibe TV. But the monthly price is at a discount, basically reflecting the fact no truck rolls required and no set top box required.

In some cases, customers can save up to 40% on a traditional TV service with this service. And we're indifferent between the two from a cost perspective. And also, when we step back now and look at these two portfolios, it also opens up additional revenue streams for our media assets and, quite frankly, other Canadian companies' media assets, because we'll be able to monetize advertising dollars through streaming services on Alt TV. And over time, we'd expect to see competitive responses to that as well in the marketplace.

Turning to Bell Media -- we had an excellent strategic quarter. CTV once again was the number-one network in the country for the 16th year in a row. We secured a strong lineup going into the fall. We extended NFL broadcast deals. So now on a linear TV, we have all of the linear rights across all the NFL and, of course, have the digital rights as well on those games that we carry.

Also happy to welcome the Montreal Canadians back to our English network on TSN for 50 regional games next year. We will obviously have the games on RDS on the French side. Very important for us in the Alliant footprint, where TSM will then have access to those games; and a number of other key strategic things in the quarter driving, I think, quite good financial results given some of the challenges in that particular part of the industry.

With that, let me turn it over to Glen.

Thanks, George, and good morning, everyone. I'll start on Slide 10 with our consolidated financial performance for Q2.

As George said, but certainly worth repeating, service revenue was strong, up 7%. This represents a significantly higher year-over-year growth rate than previous quarters due to the acquisition of MTS completed on March 17th. In addition to MTS, financial contribution revenue was up this quarter on strong organic wireless top line growth, higher wireline residential revenue and improved year-over-year performance at Bell Media. Adjusted EBITDA increased 5%, again benefitting from the inclusion of Bell MTS as well as our excellent wireless financial metrics.

Margin was down year-over-year but remained a very healthy 41.8%. The decline was largely a result of $25 million in CRTC-related impacts absorbed in the quarter from the wholesale internet [tariff re-rates] and the mandated customer refunds for canceled services.

Despite higher EBITDA, statutory and adjusted EPS were down $0.05 and $0.06 per share respectively due to the mark-to-market equity derivative gains realized in Q2 of 2016 that was driven by a rather sharp increase in BCE's share price that year, and a number of MTS acquisition-related impacts that I will detail later in my presentation.

We generated approximately $1.1 billion of free cash flow in Q2, $160 million higher year-over-year. That stellar performance was achieved even with a planned step up in CapEx spending this quarter.

So on balance, a good quarter of consolidated financial performance, consistent with full year guidance targets including MTS, as we continue to face intense levels of competition and pricing pressure across all lines of business.

With that overview, let's turn to the detailed results of our Bell Wireless segment for Q2 seen on Slide 11. Another great set of financial results, with service revenues up 12.8%, driven by continued strong postpaid subscriber and ARPU growth, as well as the incremental contribution from Bell MTS.

Adjusted EBITDA was another major highlight of the quarter, drawing an exceptional 10.2%, which yielded a very healthy service revenue margin of 46.6%. More impressively, this was achieved even with the $75 million year-over-year increase in total combined spending on customer retention and new subscriber acquisition.

Lastly, wireless EBITDA less CapEx provided continued strong contribution to BCE's overall free cash flow, increasing 12.1% year-over-year. And although we maintained a low capital intensity ratio of 9.7% this quarter, we did not slow down investment on advancing mobile coverage and data speeds through expansion of our Dual, Tri and Quad Band LTE Advanced Network footprints.

Moving to wireline segment on Slide 12 -- service revenue growth accelerated in Q2, increasing 5.3% year-over-year. This was driven by a combined impact of internet and IPTV customer base growth, together with strong 5.5% increase in household ARPU, improved year-over-year business markets performance supported by Q9 and a full quarter of the financial contribution from MTS.

Once again this quarter, overall wireline top line growth was moderated by the regulated impacts totaling $22 million as well as the competitive pricing pressure across our residential business and wholesale markets and lower year-over-year data product sales.

Wireline adjusted EBITDA was up a solid 2.6%, reflecting the flow-through of strong service revenue growth, even as operating costs increased 6.4%. The higher operating cost was due mainly to the addition of the incremental expenses from the acquisition of MTS, increased marketing spend to support residential subscriber acquisition and retention and higher year-over-year customer service support costs. Excluding the regulatory impacts in the quarter, wireline EBITDA in Q2 grew a very healthy 4.3%.

Turning to Slide 13 and Bell Media overall -- a solid quarter of results with positive revenue, adjusted EBITDA and cash flow growth. Revenue was up 2.2%, reflecting both higher year-over-year advertising and subscriber revenue. And although advertising demand in conventional TV and radio remained soft across most sectors, total advertising still increased 2.3%. This was driven by growth in outdoor advertising at Astral Out of Home and higher year-over-year revenues from Bell Media's digital properties.

Sports specialty TV was down year-over-year. As a result, Q2 of 2016 benefitted from higher audience levels for TSN and RDS, given the Raptors deep playoff run and Euro Cup soccer. Subscriber revenue in Q2 continued to reflect steady CraveTV and TV Everywhere growth, increasing 1.4%, as the year-over-year upside we have enjoyed from the past from the TMN national expansion into Western Canada lapped on March 1.

Lastly for Bell Media -- despite ongoing CraveTV programming expansion, increased HBO and Showtime content investment and higher year-over-year expenses at Astral Out of Home from acquisitions and outdoor advertising contract wins, which all collectively drove a 2.9% increase in operating costs, Bell Media generated positive EBITDA growth of 0.4% this quarter.

Slide 14 provides the key components of adjusted EPS, which was in line with plan for Q2 at $0.88 per share but down $0.06 compared to last year. Higher adjusted EBITDA reflecting Bell's -- MTS's incremental contribution in the quarter drove $0.10 of EPS growth in Q2. Also contributing positively to EPS this quarter was higher other income reflecting a pickup of equity income from one of our minority interest investments. However, these favorable impacts were more than offset by higher year-over-year depreciation and net interest expense related directly to MTS, dilution from the higher share count due to the issuance of 27.6 million new BCE common shares for the MTS acquisition, which negatively impacted EPS by $0.03 per share this quarter. And as I mentioned earlier, mark-to-market equity derivative gained a $0.03 per share realized in Q2 of '16 which did not occur this year. Through the first half of the year, adjusted EPS stands at $1.75 per share, which keeps us comfortably on track to achieve our full year 2017 guidance of $3.30 to $3.40 per share.

Let's move to Slide 15, free cash flow -- strong cash generation of approximately $1.1 billion or 17.1% higher compared to last year. This was driven primarily by higher EBITDA and the improvement in our working capital position. This quarter's results also reflected accelerated capital spending, as I mentioned earlier; higher cash interest paid due to more than $900 million in MTS debenture, and short-term debt assumed with the acquisition; as well as year-over-year step up in cash taxes consistent with our guidance assumptions for full year 2017.

With respect to cash taxes in Q2, we realized a $10 million benefit from partial utilization of MTS tax loss carry-forwards in the quarter. And we expect a further $60 million tax benefit to be monetized in the second half of this year. Finally, given the Bank of Canada's recent move to increase interest rates and the market expectation for further hikes over the medium term, I'd like to remind investors that BCE is uniquely positioned and naturally hedged in a rising interest rate environment.

As I've said in the past, BCE's solvency deficit would be eliminated if the discount rate increases a further 75 to 100 basis points. Should that happen, there would be an opportunity to significantly reduce our annual pension funding requirements by as much as $200 million to $250 million through a contribution holiday, as we would not be obligated to pay annual service current service costs of our plans. This would occur once the surplus position of our plan exceeded 105. And that would add meaningful upside to our annual free cash flow generation.

The funded status of the aggregate of BCE's defined benefit pension plans remains strong. The end of Q2, our solvency ratio was above 95%. In the past, we have been very prudent in making voluntary contributions to address the potential DB pension plan funding risks as a result of historically low interest rates. In fact, we've used nearly $4 billion of excess free cash flow over the past 8 years to prefund future obligations. However, given the pension plan's current strong valuation position and the market's expectation for higher interest rates, I don't anticipate further material deficit funding going forward.

And lastly, I would like to add that BCE's $1 billion in annual U.S. dollar-denominated spending has now been economically hedged through Q2 of 2019, effectively insulating our free cash flow exposure from U.S. dollar purchases until that time.

So to wrap up, on Slide 16 -- with the financial performance we reported in the first half of 2017, the addition of MTS, which is performing in line with our acquisition expectations, and a business that is competitively well positioned and getting stronger with growing scale and rapid deployment of advanced broadband fiber and wireless technologies to drive better subscriber acquisition and retention.

We see good momentum to take us forward for the remainder of 2017 and into next year. As a result, we remain confident in our ability to deliver our financial plan, with strong free cash flow generation in the back half of the year that fully supports higher planned capital spending, all of this providing a strong foundation for continued execution of our dividend growth objective going into 2018. Given this outlook, I am reconfirming all of our 2017 guidance targets.

That concludes our formal remarks. I'll now turn the call back over to Thane and the operator to begin the Q&A portion of the call.

Thanks, Glen.

So before we do start the Q&A period, I just want to keep the call as efficient as possible. So I'd please ask if you could limit yourself to one question and a brief follow-up. If then we have time, we'll circle back at the end of the call for more questions.

So with that, Mode, can you please let the participants know how to queue up?

(Operator Instructions). Our first question is from Richard Choe from JP Morgan. Please go ahead.

Two quick ones, one on wireless ARPU -- it continues to be strong, with speeds and usage going up. Should we expect that to continue? And then, in wireline, not quite a follow-up, but the quick one in terms of the build-out increase -- what are you seeing that is enabling the build to be a little bit faster? Have there been any negative hiccups in that build?

Thank you. On the ARPU side, obviously a very strong quarter and driven, really, almost all through (inaudible) in usage of customers, as opposed to some type of price increases in the marketplace, so people are using the product more. We would expect increased ARPU throughout this year. At that type of number, that's probably pretty high, which the analysts would model in those type of numbers for the rest of the year. But [to see] ARPU growth from us the remainder of this year, we would certainly expect that. I'm not going to talk about the following year on this call. In terms of the fiber expansion -- it's just we're on a pace, and the pace now looks like we're going to be able to be ahead of where we thought we'd be at the end of the year, which is very good news. And our capital intensity ratio will stay within the capital intensity ratio we've outlined. So we're just getting a little bit more done than we expected. And sometimes, some of the markets that are a little more aerial are just a little easier to do. And so if we can get those done quicker, we're just working as fast as the team can go to get this program executed. And obviously, the quicker we go based on the results, the better the outcome will be for investors in our company.

Great, thank you.

Thank you.

Operator: The following question is from Simon Flannery from Morgan Stanley. Please go ahead.

George, good churn performance again across the industry, across North America. Any perspective on whether you think we're seeing a little bit of -- I think Tim Cook had talked about maybe a pause, a lull, ahead of that potential iconic device launch. Is this looking like a normal cycle? Or do you think we might see a bigger cycle here, and hence a little bit of a calm before the storm and more activity in the latter part of the year?

Yes. Well, it's obviously hard for us to comment on a product launch (inaudible) companies and the timing of that. But there's no doubt the duration of the handsets is extending because the products do so much now with the ones that people have. And a part of that is being created by a pent-up demand for some new products coming from our suppliers. Absolutely, you could then see some expectation for probably retention spending, [be it] our retention spending was fairly high in the quarter. Now we left this quarter the 2-year double-cohort issue, so clients who had come on on that 2 year. So we saw some jump in upgrades in June. Whether or not all of our peers are there are not, we can't be sure till other folks have reported. But clearly, the churn number is quite positive. And we'll have to just see when the new products come. But typically, when that's happened, you do see some jump in churn in the industry because of those new products.

But generally, people will hold their phones longer than they have done in the past?

Clearly. We're clearly seeing that.

Great. Thank you.

The following question is from Phillip Huang from Barclays.

Question on the fixed line side -- you mentioned in the press release that there's been increased [turn] from intensified competition in areas where you don't have fiber to the premise yet. First, I was wondering if you could maybe provide some color around which regions you're seeing the most intense competition or the delta on the competition. And then, secondly, was wondering if you could provide us any details on how the subscriber performance differs in your fiber to the premise versus non-fiber to the premise footprint, and how quickly we're going to start to see the subscriber growth reaccelerate if the current intense cable compensation sustains. Thanks.

Yes. There's a lot in that question. I would say this -- one of the things we are doing, we are doing some bonding in some markets where we don't have the fiber to the home on the map as quickly as some of the other markets are going to. So that's allowing us to have speeds of up to 100 in some of those areas. That's part of our strategy. In terms of geographically -- it's funny, it's so different market-by-market. So it's hard to call out Quebec over Ontario. I mean, my [monum] view, we're seeing some maturity in the growth on the East Coast strong numbers, but not as strong a growth as we would've seen in the past there, because we're so well penetrated there on the broadband side, because we've had the fiber there for a number of years. That might be one area to call out. But I think it really is just about the footprint expansion. Caught a little bit, quite frankly, in the quarter. We had some real tough weather issues here in June. And frankly, the wet weather across our footprint had quite an impact on the repair side. And so we think that pushed out some of our install work near the end of the quarter that we had to catch up on in July. And we saw a little bit of that come back in July. So that may've had a little bit to do with the quarter. Because moisture on the copper side is not the easiest thing to deal with. So it was particularly a tough spring that way for the industry, certainly on the telco side. So a little bit of that. But we are extremely bullish on what we're doing on the TV side and what we're seeing on the fiber side. So it's just this pace of investment. And I think the thing I'm most pleased with this morning is the Alt TV in the place now, which will help drive broadband; and also the acceleration on the fiber -- even an extra 100,000 households drives it quicker than where we thought we would be.

Thanks. And in terms of the actual -- in every neighborhood in Toronto, for instance, as you're passing for fiber to the premise, what types of uptake are you seeing initially? Can you maybe provide some color around that ...

We'll [come back to you] more on that. But I would say, when we go pass a home, we do ask people do they want us to pre-connect or do they want us to come back. And we're getting a much higher take rate on people saying connect now. That doesn't mean they've taken the service, but it means we've run rate to the home on a much higher rate than we initially anticipated. Makes our capital a little higher at the beginning going in. But I mean, as we come back, we can just turn the service on versus have to run the line right into the home. And so that's been more positive than we had anticipated. But we'll start coming back with some results. We've given you our total fiber results in this resolve to try to let investors understand the distinct differences we're seeing.

Great, thanks, that's helpful.

(inaudible).

Our following question is from Greg MacDonald from Macquarie. Please go ahead.

George, just talk a little bit about the slowing IPTV adds in the quarter. And the press release references the high number of customers with expiring price promos coming off. What's interesting is also Rogers has also promo-priced the market. I'm wondering if you can talk a little bit about the dynamic there. Is this a new overall pricing level that we can think about here relative to the sticker prices that we see advertised? And this is an issue that could have an impact on subscriber growth going forward as well. So just trying to define the risk profile here a little bit more. And if you could add some color on that, that would be good, thanks.

Yes. We're actually quite pleased with the -- when we look at the relative TV performance of our cable peers, we're really pleased with the IPTV growth. We think the Alt TV product is going to be a nice addition to our TV portfolio, because it does focus on part of the markets that clearly, where we've seen declining overall TV subscriptions, this product is targeting that. So hopefully we'll see some pull-through from that. And of course, that'll hopefully be as IPTV has been as a pull-through on the internet side. On the pricing side, it's hard to comment on the promotions and impact of them, clearly. And our focus has been to try to have the promotional pricing a short period of time, so they're not confusion with the consumer that after 90 days of 120 days, then they go to normal pricing. Where we think the industry puts itself under problem is when it gives things like 12- and 24-month promotional pricing. Well, to a consumer, in fairness, that becomes, well, that would be my normal price in the marketplace. So some of that has happened in the past. And so we're trying to get, certainly from a Bell perspective, get the promotions to be 3, 6 months people see. Then they know there's a price increase that comes after the promotional period. And so that's been a little more of strategy. A little different than some of our cable competitors in that area, so maybe that's what you're commenting on.

Yes, I am. So you're suggesting, then, the die is not cast. Rogers has another relatively high-end product coming out in 2018, so you still think there's an opportunity to maintain these relatively high prices. Is that true?

Well, I don't know. Relatively high prices are -- it's a tricky question. Because if you look at our financial results, we saw some reasonable residential revenue growth on a year-over-year basis. But it is important to remember that in Canada, the average TV pay subscription is about CAD 60. And in the U.S., it's about an $85 to $90 U.S. So there's quite a significant difference already on pricing in Canada on TV. I think that's maybe one of the reasons we've seen a little less cord-cutting here. And I think why I'm so positive about that is if you take CAD 60, you put that in U.S. dollars, and then you look at our Alt TV offering in Canada, I like how that's positioned Canadian companies vis-a-vis any of the other OTT services we may see come to the country. I think it gives us a significant opportunity here, given that traditional TV services in Canada have been less expensive than south of the border.

Great. And quick follow-on -- the FTTH product, plus 17,000 customers in the quarter -- you recognized that as a positive. That's a relatively low number to the 3 million or so homes that you're marking to, or you might be marketing to less than that. Can you give us -- I think that's the first time you mentioned that number. Can you give us some color on that?

Yes. Actually, we're thrilled with the number. So don't think it's low. And frankly wish I had 9 million households covered with that type of footprint, you multiply it out by three. So no, we're really pleased with that. I think what's more important is the IPTV pull-through we're getting, as I talk about. And I thought one of the more interesting things is the NAS losses seem to be significantly less than that footprint as well. I mean, it's just clear that it's just so vastly the superior product that we're going to have in the market. And the speed issue goes away for customers, and we just think it puts us in a competitive position we've never had as a telco before (inaudible).

Thanks for the context.

Operator: Our following question is from Maher Yaghi from Desjardins Capital Markets. Please go ahead.

I wanted to get back to wireless ARPU, and wanted to see just your view on the potential continued growth in that number, with 85% of your postpaid subscribers on LTE now. How much more uptake can we expect from subscribers on the LTE to continue to take higher and higher data buckets? Can you talk about the momentum you're seeing in your LTE customers with their ARPU, and not just take the whole subscriber base, just on LTE base subscribers?

Yes, it's hard to break it down. But because we imagine that 85% of our postpaid subs are on LTE, and you can rest assured the ARPU growth we're seeing is on LTE, you can probably do some math there on the analyst side to realize that the overall ARPU at LTE would be higher than the 4.6. But what we're seeing -- one of the great things from an investment perspective for us is we know now that the investments in the speed on the wireless side, giving us really, I think, other than maybe now -- think, other than South Korea, the fastest wireless network maybe on the globe, or one of the fastest -- that consumers will use the product and use it for a lot more video. And as a result, that's what's driving the need for us to increase in usage. So I think it's really important, because it's not a pricing issue, it's the marketplace using the product. So we would anticipate average builds to continue to grow as people use it more, but not at that pace in the second half of the year. It may happen, but as certainly the analyst, I would not model that in. Because those are -- let's face it, 4.6 is an extraordinary number and 26% usage. It's hard to imagine that pace continuing at the pace we've been on. If it does, that's fantastic for investors and obviously impacts for the customers, because they're using the product more. But I wouldn't model the 4.6.

Thank you. And just a follow-up on wireline -- even though in Western Canada, companies didn't usually charge for overage on wireline internet access, removing this maximum allowable download bandwidth from [decletion], do you see the potential for that to happen in Eastern Canada now that somebody has set a mark in the marketplace here with this removal? And maybe can you talk about your exposure to this unlimited internet access bandwidth if it were to happen?

Well, I would say this -- we have many of our customers today who purchase unlimited bandwidth. Literally, I'll have Thane share the number with some analysts later on, I don't have it top of head. But there's no reason not to disclose. A lot of our customers take the unlimited number. It's over 60%, he just handed me a note, of customers purchase unlimited already. And then, there are packages out there from quarter to quarter from our competitors and from us that sometimes have unlimited if you take more of a bundle, et cetera. So we've seen both. Generally, people pay $5, $10, $15 for an additional and unlimited usage package. And a lot of consumers find that the way to purchase. That's why we made that product available. But that's been in the market for a number of years here. We do definitely have metered billing for folks who don't want to purchase through that. But a lot more people now are just buying the unlimited packaging. As do our competitors offer that as well in the market. So I think it's already here.

So if I compare, removes this impediment or data cap from [his] product line, why would somebody continue to pay that $10 or $5 unlimited usage with BCE?

Well, first of all, if there's no -- it's just a competitive pricing issue. And you're really asking just a pricing issue in the marketplace, what's included in the packages. That's really what you're asking us. And in our packaging, we have unlimited available for customers who pay a premium for that. And that gives them the insurance on users. That's really what we've done in the market. And I think you're seeing the market evolve more and more to that. So I think our exposure on it is actually quite limited, because as clients are operating to higher speed, sometimes it includes more usage, and naturally protecting the consumer that way and protecting us financially.

Okay, thank you.

Yes, thanks for the question.

Our following question is from Jeff Fan from Scotiabank. Please go ahead.

Just very quick follow-up on ARPU on wireless -- one of the key drivers, I think, for you and for the industry is the prepaid/postpaid mix. This continues to go up on the postpaid mix side. How far do you think this can go maybe for BCE or even for the industry? You're sub-10% now, I think, on prepaid. Wondering if that can continue. And then, the second quick question is really just on the fixed internet side. With the wholesale market kind of going through a bit of a change with some of the tariffs from last fall, wondering if you're seeing any changes in the reseller ISP market, whether activities have picked up. Wondering if you can talk a little bit about that.

Yes. The first question was on the -- yes, there's no doubt. Because on the math issue, clearly, because we're stronger on the postpaid side than prepaid, and the ARPUs are so distinctly different, if your mix of postpaids is higher, then your blended ARPU growth is just that much stronger, that's a certainty. I think the prepay market for us, we play in that market. I think we'll probably look over the coming months, too, and I want to pick that share up a little bit more. We think there is some growth there, we don't plane it to any real significant way. But sometimes it's a nice way to migrate customers from pre- to postpaid if you have a base there. So we kind of paying attention to that space. But overall, you're right, it's a denominator/numerator math issue, and because we're so postpaid-focused. But clearly, to have that growth in ARPU, it's postpaid ARPU growth that's happening overall. And the second question -- not really dramatic change in the market, other than a very unfortunate re-price just handed to organizations who weren't investing any capital. But obviously, you've seen it in our financials. And then strategically, from our perspective, we're in the market with the Virgin Internet, which is really a product that really competes, if you will, in the discount area of the internet market. And I think one of our competitors on the cable side has a brand as well in the market, competing there. And so we're making sure that we, through our assets, are able to serve all customer requirements across different pricing portfolios.

Okay, thanks.

Our following question is from Vince Valentini from TD Securities. Please go ahead.

Hopefully I can get a clarification in before my question. The Alt TV, did you count those as IPTV subscribers?

Yes, absolutely.

Okay. Is it material yet in your ...

We just launched, so it's immaterial now. But overall, yes, it'll be totally in our TV sub-satellite; Alt TV and IPTV will be in our TV subs, the BDU license TV service for us. I think the most strategic thing for that service is it's clear how we're going after the cord-cutter market. And also, as you probably -- I called out the limit of two streams per billing, which obviously maintains what we're really trying to target here versus our traditional IPTV.

Okay. Thanks for that, George. The other question, MTS -- I was, to be honest, a bit disappointed. I thought there might be a bit more clarification in your MD&A or the call on what was organic versus MTS in virtually all your numbers. So if you're able to parse out at all about wireline/wireless revenue and EBITDA growth if you didn't have MTS in there, and also some of the key metrics? And one specifically is you said COA and COR costs combined are up $75 million. Is that an organic number, or is that partially driven just by adding in the whatever MTS, COA and COR would've been. Thanks.

It's all adding in MTS. It is, actually, a pretty small number in terms of there, but would've been in the numbers. There's some disclosure in our financials, I think, on a couple things that you guys can go back to the notes on. But we've done 15 acquisitions over the years, and we always report our combined results going forward. And one of the other reasons is, quite frankly, the synergies that we're getting across the two business are across both businesses, not across the unit we only acquired. So that's kind of our view. And frankly, the investors see the free cash flows, and our competitors see the specific separated details. So we're not going to provide it to our competitors. That's why it's not out there.

Okay. Thanks.

Our next question is from Tim Casey from BMO. Please go ahead.

George, you called out your SME success. I'm wondering if you could give a little more color there, I guess, on two things -- how much of that do you think is attributable to a pickup in economy in the overall economy? And I noticed you didn't reference that for enterprise. So could you just talk a little about business conditions there? And as a follow-on, could you maybe talk a little bit about the competitive landscape from the perspective that the Canadian cable companies just don't seem to be moving the dial on SME like U.S. companies do. I'm just wondering, what is Bell doing to combat that threat that theoretically has been out there but doesn't seem to have materialized? Thanks.

Yes. So I'll separate both. So let's go to the tougher side of that, which is on the large enterprise side. Continues to be a challenging business for us. Market share continues to be stable. But re-price and substitution technologies and what have you for us really I don't think look any different than any other global trend you're seeing at the other telcos. So strong market share, nice cash flow; but still not a growing business for us. And that's continued. And I would say no real change in that, even with a little stronger economy that we've seen here in terms of that asset. Little better results than last year, but helped a little bit, in fairness, through the Q9 acquisition as well. On the small side, because we are seeing some better results. We did some restructuring a year ago in that group in terms of they've started to work much closer with our consumer business on the wireline side. I think that's helping from a packing perspective. And what we're starting to do is recognize, with products like Alt TV and IPTV -- many companies obviously have TV services -- adding that into our portfolio gets us the relationship on TV, therefore disconnects the cable and helps us protect the internet. And so that's really our focus. And starting to see a little better results there. I mean, it's not a victory lap. But any time that trend starts to get a little more positive, given we've been on the phone for years telling investors we're seeing nothing there, we thought we would highlight it, and feel more positive about that. Hard to comment on the difference between the U.S. and Canada market. But clearly, the economic conditions in Canada -- if they do continue to strengthen, that's one area that we might just start to see a little bit of positive growth on as we go into '18. Let's hope so. I wouldn't say we're planning on it yet, but we're hoping for it.

Thank you.

Thank you. We have no further questions to register at this time. I would now like to turn the meeting back over to Mr. Fotopoulos.

Thank you, Mode.

So once again ...

Thank you, everyone.

Thane Fotopoulos ... thank you, everybody who participated this morning. As usual, I'll be available throughout the day for follow-ups and clarification.

So with that, have a good rest of the day.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.