Quad/Graphics Inc (QUAD) 2005 Q3 法說會逐字稿

Welcome to the Quebecor World Conference Call. I would like to introduce your chairperson the Executive Vice President, Corporate Affairs, Quebecor Media Inc. Mr. Luc Lavoie.

Thank you very much operator. Good afternoon and welcome to the Quebecor World, Quebecor Inc., and Quebecor Media Conference Call for the third quarter 2005. My name is Luc Lavoie. I am the Executive Vice President, Corporate Affairs, Quebecor Inc. and the moderator for today’s call. This call is being webcast and forward-looking statements are subject to Safe Harbor provisions. Again, this quarter because we released the results of Quebecor World and Quebecor Inc. on the same date, we are holding a combined press conference call.

The process will be the following. We will begin with the presentation of the results of Quebecor World followed by a question and answer session with analysts. This should last approximately 45 to 50 minutes. This will be followed by a presentation of the results of Quebecor Media and Quebecor Inc. and a question and answer session.

Joining me today from our offices in Montreal for the first part of this call are Pierre Karl Peladeau, President and Chief Executive Officer of Quebecor World and Quebecor Inc., Jacques Mallette, Executive Vice President and Chief Financial Officer, Quebecor World and Quebecor Inc. and Philippe Cloutier, Quebecor World’s Director of Investor Relations. Pierre Karl Peladeau will now provide some introductory remarks and give us an overview of our market.

[Inaudible] Luc. Good afternoon everyone. Thank you for joining us this afternoon. As was noted in our third quarter press release, our result this quarter are based on continuing operations. We will discuss the financial results in detail in a moment. I will say off the top that we’re not satisfied with our financial performance. To improve our results, we are taking a two-pronged approach, invest in new equipment and fill it with volume. The new presses are beginning to come on stream and our sales team is having greater and greater success in filling them up. This is a companywide approach across all our business groups.

In the last two months, we have had many successes. In our U.S. Magazine Group, we recently won a renewed contract worth more than a billion dollars. They include Time, which I will talk more about in a minute, Prime Media, Wenner Media, Ascend Media, Morris Communication, [Verizon Spin Ventures]. And rebate catalogs, wins and renewals include [Chicos], Boston Proper, Wal-Mart, Chicago Tribune, TV Channel Guide, School Specialty and Children’s Ware Digest. In book and directory wins and renewals include Yellow Book USA, [Illson] and Microsoft Press. In direct, Pier 1, Banc of America, and Sam’s Club. In Canada, [Coab] Atlantic, Scoop Magazine, Staples, Business Depot, Tribune and My Travel. That’s a big list. I would like to pick up two of those customers to demonstrate our investment plan support and reinforce our sales effort.

Time Inc., Time Inc. has been a customer for ours for more than 30 years. Our Magazine Group, which is the largest in the U.S., is led by Chuck Miotke. Chuck and his team including Dave Bear (ph) start talking with Time about their future needs, how we could help them, and received more volume. The answer was that our investment in new 64 basis technology on the west coast was a perfect fit. We would produce their magazine more efficiently than the competition, reducing their costs and cycle times. The result is a new long-term agreement with a volume increase of 25% in weekly magazine. This was the goal of our retooling plan, to convince the largest publishers and retailers that they can achieve significant savings by utilizing the full scope of our asset base. They can leverage this platform to produce a uniform quality product in multiple locations. They can produce closer to the end user, reducing distribution costs. With recent increases in fuel and postal rates, these represent important savings.

The other example I want to highlight is our contract with Yellow Book that was also agreed in the third quarter. Our book and directory group is led by Kevin Clarke. Kevin is Senior Sales VP [inaudible] and the rest of the team worked extremely hard to put together a comprehensive proposal to print all of Yellow Book’s USA. Yellow Book will utilize our directory platform in the U.S. and in Canada.

As part of the plan, we announced that in partnership with Quebecor Media, we will be installing three new presses in the Toronto area. This state-of-the-art equipment will bring approximately 42 billion pages of additional one, two and four color short cutoff capacity into the directory market. Combined with our long cutoff plants, we operate a network of 7 North American directory facilities. The long and short cutoff offering together with the geographic reach of these facilities is unmatched in the industry. It allows directory publishers like Yellow Book to benefit from additional paper savings and lower freight costs. These new presses in Toronto will be used to print directories for special World customers and newspaper for Sun Media Corporation.

This is another example of how Quebecor companies are able to work together to rationalize costs, increase our business, and provide better service to our customers. We’re also continuing to leverage this value-added advantage with our print customers. For example, current potential print customers are being introduced to Quebecor Media properties as a way to expand their business. They can work under one supplier umbrella. We can service their printing needs, build or enhance their website, help them with multi-channels marketing, including e-commerce distribution, television and newspaper advertising and other media services.

In these coming quarters, we expect to be able to announce partnerships with new customers who are placing their print program with us and leveraging other media services to grow their business. One recent example is Circuit City. That’s one more factor that helps separate us from the competition.

Now for a quick overview of our financial results. In the third quarter, Quebecor World earned $.28 per share before restructuring compared to $.36 per share in the third quarter of last year. Year to date, EPS on the same basis is $.77 compared to $.86. Revenue in the quarter was essentially flat at $1.58 billion and year-to-date consolidated revenue was $4.6 compared to $4.5 billion last year.

Operating income before restructuring was $97 million compared to $112 million in the third quarter of 2004. Year to date, operating income was $270 million compared to $310 in the first three quarters of 2004. Operating income in the third quarter was lower due to higher energy costs, lower prices, the poor performance of our French operation, and the loss of volume in the UK. Because we’re dealing with what seems to be recurrent problems in Europe and because this had been the subject of a number of analyst comments recently, we believe it is important to give you more of the regional breakdown then we have in the past.

There are significant differences in performance from one region to another and I will try to shed more light on this when I get into the European operational review. We do intend to announce a comprehensive retooling plan for our European platform in the first quarter 2006. That will address the operational issues that we’re currently facing. It will be based on the same principles that our North American investment program. That is installing the right mix of technology where it can best service our customers and where it can be the most productive.

Our North American retooling plan is on schedule. New 48 presses have been up and running in Dallas and Merced, California for three weeks now. Again, I realize that some of you on the call have concerns about the efficiency of start-up new presses. I can tell you that we have experienced few start-up issues with these presses. We have received excellent support from our suppliers and essentially everything has gone according to the plan. The same is true with the new 64-page running in Versailles, Kentucky, and we expect a similar story when we start up our 64-page press in Taunton, Mass. and Jonesboro, Arkansas later this month.

Now I’ll give you a brief rundown of our operation beginning with North America. In the Magazine and Direct Mail in the quarter, volume decreased 2.5% primarily due to the loss of one customer from the third quarter last year and reduced volume for another. The third quarter U.S. magazine market saw continuing overall trend of higher pages revenue with generally ad page growth. The number of new weekly magazine continued to track negligibly to the last year. Despite the challenging market, the Magazine Group had some significant sales success during the quarter which I already mentioned.

As for our direct business, volume increased 5% in the quarter but pricing was lower. This business has suffered from mergers in the banking and telecom sector resulting in fewer events. For example, we used to be the principle supplier for Fleet Bank, which was purchased by Banc of America. We are building new relationship. Last quarter, we did work for Banc of America and we will be doing more for them in the first quarter next year.

The promotional game business, which we produce at our Atlanta facility, increased in the quarter. And we printed promotional games for McDonald’s and several large newspapers. Our U.S. retail group increased volume and revenues in the quarter and year to date. Volume increased almost 4% and helped offset lower prices. Competition remained fierce in this sector especially with our two principal competitors. We are noticing an increasing trend of retail customers to more versioning of their insert programs. Fortunately, this supports our competitive advantage of having offset and [inaudible] presses under one roof so that customer can take advantage of long run and shorter run or multi-versions options. This dual process offering can’t be matched by our competitors.

In the quarter, we have four offset press lines up and running in our new Pittsburgh, California facility that serve the west coast market. Earlier, I mentioned our extension with Wal-Mart that includes additional volume. We are now the largest insert supplier to Wal-Mart and we are recently awarded their bi-weekly grand opening circular program. We now print for them in 6 facilities in the U.S.

In catalogs, we are adding success with a multi-channel model of supporting our customers’ printed catalog with added media services including new run, our incomers and new media company. As I mentioned earlier, Circuit City is such one customer. Volume per catalog increased 2.3% in the quarter, although prices were lower. Our co-mail and postage programs are attracting new catalog customers who want to reduce postal costs and better target their customers.

Revenue in our Book and Directory business were down 6% in the quarter and volume in the quarter was also lower. Much of the volume shortfall is related to moving two presses in one facility to make room for a new one and lower directory volume. The directory volume is attributed to the loss of [VerizoneWord] that was announced two years ago. However, with the Yellow Book contract we’re poised to be the industry leader in directory printing by 2007. We should note the competitive efficiency in the book group with the startup of our new press in Versailles. In fact, this new press will do the work of three older ones, allowing us to produce the same volume with significantly reduced manning because of highly automated equipment. A similar press will be online in a couple of weeks in our Taunton, Massachusetts book plant.

Quebecor World manufactures over a 100 titles that appear on the USA Today Bestseller List during third quarter. Reprint activity for Harry Potter titles continue in the quarter. Demand for one and two color trade book printing has been extremely heavy throughout the quarter. Capacity in the US is sold out. Work moved to Quebecor World Mexico to offset capacity constraints in the U.S. manufacturing plants. Capacity and utilization rates across the North American book and directory manufacturing platform are up over second quarter 2005 and over a third quarter 2004.

In Canada, our results year to date were ahead of last year. In the quarter, volume was relatively flat but we were seeing gains in the retail sector. Pricing continues to be very competitive in all our product group but operating income and margins increased for the quarter and year to date due to effective cost control and operating efficiency.

I said earlier the main issue in Europe are France and the lack of volume in the UK. Revenue and volume were down for the quarter and year to date. France report negative operating income in the quarter and year to date. In the third quarter, we took action to further reduce costs by announcing workforce reduction at our Corby facility. Excluding France and the UK sales, were essentially flat for the quarter. Operating income and margins increased in the third quarter year to date in Spain, Finland, and Austria. In Austria, we have had good success in our cross-selling initiatives. In Belgium, [inaudible] from Sweden came into production in September. Some of the volume is being shipped to this facility which is one of the most efficient in Europe and one of the most efficient in our entire [inaudible] platform. Our focus is in improving our business in Europe and getting the right investment at the right place.

In Latin America, revenues were up in the quarter and year to date. Volumes are up year to date but down in the quarter partially due to our timing issue with the printing of directories. Prices in the region, regionally remained stable year to date but increased in Argentina. Our Latin American book platform continued to perform well as a low cost alternative to Asia for North American and European publishers. Book revenue in Latin America increased 59% in the quarter and 47% year to date.

I will be back with some closing remarks but first Jacques Mallette will give you a more detailed review of our financial results.

Thank you Pierre Karl. My remarks will also be limited to results from our continuing operations. As Pierre Karl mentioned, third quarter revenues were $1.58 billion and $4.6 billion year to date. This is an increase of .5% and 2% respectively. Excluding the favorable impact of currency, revenues decreased 1% for the quarter and were flat year to date. The operating margin before restructuring for the quarter was 6.2% compared to 7.2% in the third quarter of last year. Year to date it was 5.8% compared to 6.9%.

The third quarter results include impairment of assets and restructuring charges of $17.2 million or $.12 per share compared to $12.8 million or $.08 per share in the third quarter of 2004. The non-cash component of $7.7 million is primarily related to the impairment of assets in the UK. The cash items of $9.5 million involved workforce reductions in France and across the company.

The 2005 restructuring initiatives will result in the reduction of 995 positions with 774 already completed. The company expects 83 new positions will be created in selected facilities. SG&A expenses including the unfavorable impact of currency were lower by $15 million in the quarter and $32 million for the first nine months of 2005. SG&A as a percentage of sales was 6% in the third quarter compared to 6.9% in the same quarter last year. The reported tax rate before restructuring was 29.3% compared to 28.7% in 2004. Year to date, the tax rate is 26.8%.

Net income before restructuring for the quarter was $47 million compared to $56 million in the third quarter of last year. EPS before restructuring was $.28 compared to $.36 in the third quarter last year. On the same basis, earnings per share for the first nine months is $.77 compared to $.86 last year.

I’ll now cover segmented results. In North America, revenues in the third quarter increased $25 million to $1.25 billion but were down 2% excluding the increase in paper sales and favorable currency impact. Operating income for the quarter before restructuring was $100 million compared to $110 million and year to date it was $264 million compared to $284 million last year. The operating margin for the third quarter before restructuring was 8% compared to 9% last year. For the first nine months, it was 7.4% compared to 8.2%.

In Europe, revenues were $271 million for the quarter compared to $296 million last year. Year-to-date revenues were $886 million compared to $921 million last year. Before restructuring, operating income in Europe was negative for the quarter and year to date.

In Latin America, revenues in the third quarter increased 21% to $54 million. For the first nine months of ’05, revenues were up 13% to $177 million. Operating income and margins before restructuring increased to $2.8 million or 5.1% in the third quarter and $9.3 million or 5.2% year to date.

With regard to our financing activities and liquidity position, the company has recently renewed and extended its U.S. securitization program through to September 29th, 2006. This is a $510 million program of which $417 million was outstanding at the end of the quarter. The company continues to benefit from a one-year term out option under the program which now expires September 29th, 2007.

The program has been renewed at terms which are more favorable then they were previously reflecting the quality of our receivables portfolio and the strong market for this type of capital. The company maintains significant liquidity through its committed revolving bank facility in the amount of $1 billion. This facility matures in November of 2007. At the end of the quarter, it was $611 million available or un-drawn on the facility leaving ample room for the refinancing of upcoming debt maturities in ’06 and ’07.

It is the company’s intention to further reduce drawings under the facility and increase flexibility by accessing the public debt markets in 2006 in the amount of $250 million to $300 million in connection with the upcoming maturity of private notes in March 2006. In addition, we are currently in the process of implementing a very attractive financing relating to our new equipment retooling program in the U.S.

Our application for insured export financing was approved by [Elmays] on behalf of the German government for approximately 110 Euros. This provides us with a new source of long-term, low cost capital with a final maturity in 2015 and an average term of 5 ½ years. We intend to finalize this transaction before year end and may look at similar transactions on future CapEx initiatives.

So as far as you can see, our financing and liquidity situation remains very strong. Our credit ratios also demonstrate improvement. Our debt-to-EBITDA ratio stands at 2.6 times compared to 2.9 times last year. Our EBITDA coverage ratio was 6.3 times compared to 5 times last year. And our debt-to-capitalization ratio was 44 to 56 compared to 46 to 54 last year. We’re also well within compliance of all of our financial covenants. We’re also expecting to close the sale of our discontinued operation in the fourth quarter. This should cover a large portion of our CapEx program for the fourth quarter, which will be unusually high at around $150 million.

For 2006, including the impact of our European retooling program, we expect CapEx to be around $350 to $400 million. Finally, to date, the board of directors declared a dividend of $.14 per share, which is the same as the previous quarter as well as our regular dividends on preferred shares.

We’ll be happy to answer your questions in a few moments but first I will turn the call back over to Pierre Karl for his closing comments.

Thank you Jacques. Well we continue to face significant challenges ahead, especially in Europe. Prices are and will likely remain extremely competitive in the foreseeable future. In North America, our new equipment is being installed and will continue to come into service next year and the year after. We are aggressively selling the state-of-the-art platform as well our complete Quebecor World service offering demonstrating to our customers in a competition that we can help them and grow their business.

We will now take your questions.

Question please.

[OPERATOR INSTRUCTIONS] Our first question comes from Jess San (ph) from UPS. Please proceed with your first question.

Hi, thank you very much. I wanted to ask a question about the retooling program in Europe. Jacques you mentioned and just wanted to make sure I got the numbers down correctly, you said 110 million Euro in terms of financing planned in place?

Yes, 110 million Euros and that will be finalized and put in place during the fourth quarter. And that financing relates to our North American retooling program.

Okay, so I guess my question then is on the European retooling program and what does that mean for CapEx in 2006 and when they start to come in? And then stepping back from that maybe just an overall CapEx question for ’06, you know you spent I think about $115 or $120 million of the ’04 investment program. I think there’s still another $159 to go. Is that all going to come in, in ’06? That’s part one. Secondly, the Yellow Book contract whether there’s any CapEx related to that that will come in through ’06 or whether that’s covered by the current retooling program in North America? And then lastly I guess circling back on the retooling program in Europe, what that means for CapEx? Thanks.

All right, well we in my remarks I just made earlier, you know we did comment on the expected CapEx for Q4 which would be around $150 million. That includes some lease buybacks. We also mentioned that we expect between $350 to $400 million of CapEx for next year. And these figures include everything that we have to do regarding expected retooling in Europe. Again we provide you with overall numbers. So it’s an all-inclusive number.

Okay.

We will not provide specific details on the composition on the numbers however.

Okay that’s helpful.

Thank you. Next question.

Operator. Thank you Mr. San. Our next question comes from Vince Valentini from TD Newcrest. Please proceed with your question.

Yes, thanks, first thing just to stay on CapEx for a second, what percentage of the European retooling would you expect to be completed in ’06 and how much of that plan flows into ’07? Is it about half of it gets done next year do you think?

Well there is, there is obviously some amounts that would be spent on 2007. But it’s too early for us to provide any guidance on CapEx ’07.

Okay. The second time is pensions. You put up $46 million out of the $50 million you’re required to this year. So should we expect only a $4 million contribution in the fourth quarter? Or you might over contribute this year? And at this point, do you have any visibility as to how much you think you may need to contribute to those pension funds in 2006?

We will review all of this during the next month or so, so I can’t provide specific information at this point in time.

Okay. [Inaudible] the sale of your commercial assets, I think you say in the MD&A that you expect to realize more than the book value. The book value I believe is $96 million. Can you confirm that that’s what you’re indicating and you’ll get more than $96 million in proceeds for those sales?

That is correct.

And the speculation been out there of $112 million or so that that’s being sold to a management group. I think that was in the Quebec press about a month ago. Is there any merit to those numbers?

We don’t provide any comments on speculative information. All we can say is that, all we can say is that we announced at the, expect to receive more than book value. So and we expect some of these transactions in the fourth quarter. In fact, we expect to close them in the, in the coming weeks.

Okay last question for me. There seems to be a lot of uncertainty around some of your input costs and combine that with pricing pressure. You talked about in some contract losses and then these new presses going in. Given everything you know at this point, can you give us any comfort that with these presses coming on line and starting to get more efficient that you’ll maybe see earnings go up in 2006 versus 2005? I know you don’t want to give specific guidance, but in general terms can you talk about which direction you see earnings going next year?

Certainly obviously we had the chance to explain that a few times and this is what the manufacturing logic is all about. You know and I refer to that a little bit also in my previous conversation regarding retooling in the book group. So there’s I guess a ratio between 3 to 1 to 2.5 to 1 regarding the output of paper that we are able to produce, I mean printed pages out of the new equipment compared to the one that we’re running right now. So certainly ’05 had been impacted by the fact that we’ve been running work at a lower price with the same manufacturing platform. And this new manufacturing platform kicking in and therefore, we could see our costs starting to be reduced and headcount in the same way because I also mentioned that we are putting all the appropriate automation in the equipment that will be up and running and that will help us reduce our costs even further.

But Pierre Karl I guess the uncertainty is when does that happen? Is that a 2007 reduction in your costs or do you think you’ll see a material improvement in 2006?

Given that the equipment is starting running now, as I mentioned we got three, two presses running in the Magazine Group. And we got two machines that will start running in the Book Group, one of them at start about two weeks ago. We should see improvement in ’06 in terms of EBITDA.

Okay, thanks.

Next question please.

And thank you Mr. Valentini. Our next question comes from Megan Anderson from RBC Capital Markets. Please proceed with your question.

Hi, thanks. Three questions. First in terms of your interest-- interest rates going forward, with the downgrade in your debt and your intentions to refinance debt, can you give us any guidance on what you expect your average interest rate to be going forward and/or your interest charges for ’06? That’s the first question.

Second, Pierre Karl you ran over a number of accounts in terms of renewals, extensions, volume increases and what not. I’m wondering if you can characterize the renewal pattern whether a lot of them were coming early or whether you saw a lot of distinct competition for those contracts and what the renewal schedule kind of looks like for ’06?

And then the third question, can you just remind us what your debt covenant thresholds are?

All right in terms of interest rates, as you know, we are most of our debt is through notes that are issued and outstanding. There is no change to the interest rate on these notes in terms of our securitization program and the cost to debt is included above the line in our financials. You know it is subject to movement in banker’s acceptance for LIBOR. I would say that your guess on that is as good as mine for next year. In terms of the margin spreads, they’re the same as they were before. So no real impact on that. And on our bank financing, where we borrow typically between 0 and $400 million on average, it’s really there for seasonality. You know the, again this is at floating rate with a spread, which is similar than what we had before. And it all depends on the movement of the LIBOR rate. So that’s my answer on interest rates.

So the debt downgrades had no impact on any of the spreads?

Well the only impact was with regard to securitization program. You know we had an initial increase, but we have renegotiated this transaction and brought the rates back more in line with what we had before.

Okay.

On your question Megan, I should say that the kick in of the different customers and contract I was referring to earlier, it’s spread out throughout the 2006 and depending the nature of the work, if it’s a catalog, direct read, or a magazine, it will spread, you will be-- it will be spread out throughout the year and certain volume will be bigger in certain part of the year, first half or back half. So saying that you know everything have a specific nature.

And your last question on the debt covenants, our covenants are not public so we, they were not disclosed. But I did mention though earlier in this conference call that we are well within all of our covenants.

Okay, so just back to the renewal question, I was less interested in where the ones kick in that you talked about. I was more interested in whether those deals were normally due to expire say 2008 and you just sort of wanted to get them wrapped up a lot earlier. And the second part really was what would normally be renewable in ’06 and ’07, can you see maybe trying to expedite those?

I guess that there is some of you just described on the first part and there is also other things that you’ve been referring to in the second part. So, sometimes we early renew and sometimes we are closer to the end of the contract. It depends of the contract. And there is specific strategy or policy there. I think that what we will say here is that we’re listening to our customers and trying to master or respect their expectation and their needs as best as possible.

Thank you.

Next question please.

Thank you Ms. Anderson. Our next question comes from Tim Casey from Nesbitt Burns. Please proceed with your question.

Thanks. For Karl, I’m wondering if you could comment on a trend that seems to be going across the industry where to retain and attract some of these big customers, a lot of printers seem to be rebuilding their plants as you are. I’m just wondering if you have any commentary you could share with us as if you think this is just a cyclical issue that’s going to sort of ride out over ’05, ’06 or if you expect to see continued pressure from your key advertisers to continue to put in new, faster machines because of pressures they’re seeing in their business for faster turnaround times and things like that? Thanks.

Well there’s no doubt that printing is quite different than it was a few years ago. Certainly with the additional fragmentation of the media landscape, obviously we didn’t have as much as internet other than the internet bubble. And that kick in and changed the landscape of the media industry.

You know we can also think about the-- let’s say that you print a map. I mean a roadmap. I’m giving you this as an example because I think it illustrate well the way that this business is mature and face certain challenges. So for instance as an example, the roadmap, well roadmap will still be as strong in five years down the road when we can think that you’ll have in each of as an option or not as a standard a GPS in your car. So this is probably something that makes outlook for printing dying but I guess that obviously not all of the printing industry in, is in this situation.

You know on the weekly side, for instance, will you read Henry Kissinger piece in, on in a news magazine forever in this news magazines or you’ll read on the internet. But I guess that if you want to have the latest picture of, I don’t know, Brittany Spears being pregnant, you will read it in the People magazine. So and we can go on and on because in each of the business that we’re operating, that we have challenges that we’re facing and making sure that we will have the appropriate equipment to face those challenges and operate as with the lowest cost platform as possible. And this is why we’ve been asking a significant upgrade in our platform to face those challenges in the future. And therefore be in a very strong position against competition to service our customers as well as possible.

Thank you Mr. Casey. Our next question comes from Adam Shine. Please proceed with your question.

Thanks a lot. Pierre Karl, North American operating income has been declining by a greater extent each of the past three quarters. And I think we’re looking at operating income almost at near the same level. It’s not a bit better than it was Q3 ’98 before World color was done. Can you comment a little bit in terms of your level of satisfaction with the North American management team and whether any efforts are being made to maybe add any additional executive to the mix, let alone a head of ICW North America?

Well as you all know we’ve been facing for the last quarters and I guess now it’s more behind us than ever, but we’ve been facing some management changes and I think that our management team now is quite stable. I think that all member of your management understand well where we’re going. We’re all on the same page regarding our investment plan and not our desire but our obligation to service our customers as well as possible, again, with the most efficient platform.

So I see with the recent successes that we’ve been able to get in the marketplace some positive sign that what we mentioned earlier throughout the quarters and the announcement we made is getting where we were looking to be. And I guess that we see future despite the fact that it’s true that we will remain with challenges mainly in Europe. But I see that as quite positive and I’m optimistic that we will be able to have better sets of figures in the future.

Thanks for that. And just as a follow-up, if we were to isolate some of the contracts that came off during the course of the year or let’s say earlier in the year and look to the growth that you achieved ex-paper or maybe even including paper if you don’t want to differentiate. I’m looking at potential revenue growth around 5% or so including paper sales. Do you see that as in reasonable ballpark level? And at the same time, do you see reasonable revenue growth going into Q4 acknowledging the contracts that did come off earlier in the year and also acknowledging the fact that you did benefit to about $90 million for the 53rd week last year?

Well I would tend to say that our growth should be mostly coming next year rather than this year. We still are experiencing some of the losses that we incurred earlier as Pierre Karl has explained. We’ve been quite successful in extending our business and securing additional volume. Some larger contracts will kick in, in the last part of next year. So that’s what we can report at this point in time. And other than that we can’t provide, we cannot provide more guidance as the case every quarter. We do not provide guidance on our results or sales.

Okay and just, and just lastly, just in regards to the tax rate which has moved around quite a bit during the year, should we be looking at a range of around 29 to 30% for Q4?

It’s always a difficult one as you have seen in our results and in one of the explanation for the movement in income tax rate is the fact that we had losses in Europe, in which we could not account for tax assets. So when we can turn around the operations in Europe, you should normally see a reduction in the income tax rate.

Okay, thank you very much.

Okay, last question and then we will move to the portion of Quebecor, in Quebecor Media conference call.

Our last question comes from Andrea Horan from Genuity Capital Markets. Please proceed with your question.

Thanks. Can you talk a little bit about Europe and I know you’ve got plans to reinvest and restructure, but at what point do you, do you ever consider throwing in the towel on Europe? Is it part of-- how important is it to the North American operations that you have a European presence? And secondly, as you’re adding this equipment to your facilities, can you, can you tell us what you’re doing with your old equipment?

Okay, I guess that it’s, you’ve been using something that I don’t think it’s reasonable that we can even consider because throwing a towel when you are a corporation I don’t think this is something that we should consider. And again I was trying in my earlier presentation to segregate a little bit of our operations because I guess that it’s not true that all our operations are to the same kind of picture.

We’ve been highlighting the fact in France and I guess that there’s no doubt and we’re not the only North American company or even European company facing some concerns about their operation in France. We all know that legislation is much more heavier than elsewhere in other countries. So we’re meeting our obligations there.

In the meantime, I guess that our obligation at the end of the day is to make sure that we will have the appropriate platform that will deliver with the proper equipment decent return. So at this stage as we mentioned earlier, we intend to announce this retooling program that we were talking about in ’06. It’s not finalized yet. We have some homework to do there. And we intend to keep this timeline as we agreed on earlier.

Before we get to the next one, given that I understand that the problems are really isolated towards France and the UK, but given that you’re not unique in having difficulties in France and it is just a very difficult market in which to operate, how important are your French operations to your European operations? And could you, not talking about just shutting everything down and walking away, but is a sale a possibility I guess?

It’s a sale possibility. Well we mentioned earlier that we have negative operating results. And if we were to sell, certainly that would not going to be the appropriate time to do so. I guess that we have again, as I mentioned, homework to do there. You know we have a significant operation in France. We have many plants. We employed around 3,000 employees and with the proper equipment that we believe that despite this heavy environment I was referring to earlier, there’s room with the appropriate manufacturing platform to have decent return.

Okay thank you.

All right everybody. Thank you ladies and gentlemen. We will now be moving on to the second part of this joint Quebecor World/Quebecor Inc. conference call. For those of you just joined us in progress, I would like to welcome you to the Quebecor conference call for the third quarter of 2005. My name is Luc Lavoie, Executive Vice President, Corporate Affairs and I am acting as your moderator today.

Joining me in Montreal for the Quebecor Inc./Quebecor Media portion are Pierre Karl Peladeau, President and Chief Executive Officer of Quebecor Inc., Jacques Mallette, Executive Vice President and Chief Financial Officer of Quebecor, Pierre Francouer, President and COO of Quebecor Media and President and COO of Sun Media Corporation and Robert Depatie, President and CEO of Videotron.

We will begin with the presentation of our third quarter results followed by a question and answer session. I would remind you that you can download the financial statements of Quebecor as well as the supplementary disclosure in the MD&A from Quebecor’s website at www.quebecor.com. I should also mention that you will be able to listen to the conference call on tape until December 3rd by dialing 1-877-293-8133 or 1-403-266-2079 and an access code #294645. I repeat the code #294645. This is also available on our website. I now turn the call over Pierre Karl.

Thank you again Luc and good afternoon to those of you who just joining us for this conference call. So many of you have heard my comments on training operations during the first part of this call. As a result, I will introduce this portion by saying that Quebecor Media continued to show progress in its operating performance during the third quarter. And in order to support its future growth, it has also recently announced major investment for its newspaper segment as well as the strategic acquisition in new interactive technology and communication in the leisure and entertainment segments.

As for Quebecor World, I continue to develop strategies that will increase the productivity of its operating facilities and reduce its operating costs. Quebecor World already is installing new printing presses in 6 North American facilities. We expect that these new presses will be starting up during the last quarter of 2005. In Europe, we are working on an important retooling plan which we expect to disclosure during the first quarter of 2006.

As usual, we will be focusing this part of the call on our newspaper, cable and telecom operations since the results of most of our other operating had already been publicly disclosed. I will now ask Jacques to present a review of our financial performance. Jacques?

Thank you Pierre Karl. On a consolidated basis, Quebecor Inc. reported a net income of $23 million for the third quarter of ’05 or $.35 per basic share compared to a net income of $41 million or $.63 per basic share in the same quarter of 2004. Net income is impacted year over year by a $60 million loss on the retirement of high yielding debt at Quebecor Media and lower operating income at our printing operations, partially offset by lower depreciation and tax expenses and a larger unrealized gain on re-measurement of exchangeable debentures.

For the nine months ended September 30th, the company reported net income of $55 million or $.85 per basic share compared to $53 million or $.82 per share in 2004. Lower depreciation, financial and tax expenses and a larger gain on re-measurement of exchangeable debentures more than offset our lower operating income and the loss on the debt retirement.

Compared to the third quarter of last year, Quebecor Inc.’s revenues were down 4% at $2.5 billion, express and reporting currency all components of the family exhibited revenue growth but the appreciation of the Canadian dollar affecting the conversion of Quebecor World’s U.S. dollar revenues more than offset this improving performance. For the nine months ended September 30th, revenues were down 2% in 2005 at $7.5 billion again as a result of the appreciation of the Canadian dollar.

Consolidated EBITDA for the third quarter was down 10% year over year from $422 million to $381 million. As had been announced two weeks ago, EBITDA at Quebecor World declined year over year. This decrease was amplified by the appreciation of the Canadian dollar. However it was partially offset by Quebecor Media where EBITDA improved by $6 million year over year. For the nine months ended September 30th, the company reported EBITDA of $1.1 billion down 8% from $1.2 billion reported in 2004.

Focusing on our media operations, Quebecor Media reported a net loss of $10 million in the third quarter of ’05 compared to a net income of $27 million last year. This unfavorable result is entirely explained by the $60 million loss recorded on the repayment of $150 million USD of our high yielding 11 1/8 and 13 ¾ % senior and senior discount notes. This repayment coupled with the full retirement of our CF Cable notes yielding 9 1/8 percent is already resulting in lower ongoing interest expense.

For the nine months ended September 30th, Quebecor Media reported a net income of $38 million in 2005 down only $1 million from the $39 million reported in 2004, despite the loss on debt repayment. Revenues were up 10% in the quarter, growing from $590 million in 2004 to $651 million this year, with all segments exhibiting revenue growth. Revenues from our cable operations experienced notable growth at 13% as a result of the continued success of digital TV and high speed internet services as well as the enthusiastic market acceptance of our residential telephony services.

Our internet portals and business telecom segments also performed well with solid growth of 51% and 16% respectively. For the nine months ended September 30th, Quebecor Media’s consolidated revenues were up 10% in 2005 with revenues amounting to $1.9 billion. Again, all segments exhibited growth for the period.

Quebecor Media’s EBITDA for the quarter increased to $175 million from $170 billion in 2004. New product launches impacting operating results of our broadcasting and newspaper operations partly offset the solid operating performance of our other segments. Our cable operations recorded EBITDA growth of 6% while our business telecom and internet portals operations exhibited growth of 67% and 92% respectively.

For the nine months ended September 30th, Quebecor Media’s consolidated EBITDA is up 6% year over year from $493 million to $520 million. Cash flow from operations prior to changes in working capital was up $14 million in the third quarter of ’05 at $124 million. This cash flow as well as cash on hand and proceeds from our U.S. $175 million debt issue at Videotron was primarily used to repay $150 million USD of notes at QMI and fully repay CF Cable’s senior unsecured note-- senior secured notes for a combined cost of $316 million including premiums and swap on lines and to fund $103 million of CapEx. Also noteworthy is the repurchase by TVA of 3.5 million of its common shares for a cost of $76 million using proceeds from drawings under its revolving credit facility which rebalanced a sub-optimal capital structure.

I thank you for your attention and I will now let Pierre Francouer QMI’s operations.

Thank you Jacques and good afternoon everyone. Before reviewing some Media’s business operations, I would like to draw your attention to some highlights from initiatives taken at QMI and some of our other business units. During the third quarter, QMI announced plans to invest $220 million to modernize and relocate the printing facilities in [inaudible], Toronto Sun and London Free Press and new plants to be located in near [Alba], Quebec and [Islington], Ontario.

These investments are being made by QMI with the strength in investment being a joint venture with our sister company Quebecor World. These investments will introduce state-of-the-art technology to our printing process as well as for our inserting and shipping operations. In addition to improving productivity, these investments will have the capacity to produce a full column newspaper for readers and advertisers and will be better suited to print commercial work out of which will enhance revenue generating opportunities.

Last September, Nurun signed a binding letter of intent to acquire China Interactive, one of the China’s-- China’s leading interactive marketing firms. The acquisition will expand Nurun’s service offerings to international customers in Asia and open the door to new business opportunities.

In the leisure and entertainment segment, on October 12, 2005, Quebecor Media announced an agreement to acquire Sogides, a major Quebec book publishing and distribution group. The closing of the transaction is subject to certain conditions including regulatory approval.

During the third quarter, TVA group announced the change of name of its Toronto television station from Toronto One to Sun TV. The new name reflects the closer ties that will be established between Sun TV and Quebecor Media’s properties in Toronto market especially the Toronto Sun, our affiliated 24 hours and our Canoe.ca internet portal.

This work promoted development of the Sun brand and enhanced cross promotion opportunities. In October 2005 our Archambault group opened a 18,000 square foot retail outlet in [Bushaville] on the south shore of Montreal. This new store is the 14th under the Archambault Music and Book retailing banner.

As for Sun Media, revenues increased in the third quarter to $221 million from $208 million last year. The revenue growth was mostly due to an 8% increase advertising revenues and a 15% increase in flyer insert revenues. This was partially offset by declines in circulation and printing revenues.

Here are some revenue highlights during the quarter. Our community newspaper revenues increased by 10.7% and are urban dailies increased by 5.5% led by a robust performance from our other the franchise. Revenues from the 24 hours franchise in Toronto, Montreal, and Vancouver almost tripled for year over year. Circulation revenues in the quarter were virtually flat compared to last year as we continue [inaudible] marketing strategies [inaudible] which as, which had resulted from factories such as the RT Stripe and the launch of competing free dailies.

Our EBITDA declined slightly in the third quarter from $51 million last year to $49.5 million. Double digit EBITDA growth from our community newspaper operations and our western urban dailies were just short of offset cost, costs offsetting the impact of some of our strategic initiatives such as the launch of Vancouver 24 hours in March of this year which is off to a strong start and is currently ahead of revenue and pick up grade trends set at the launch of both our free dailies in Toronto and Montreal. Additional redesign promotion and marketing costs to include our redistribution in Toronto and Montreal. Investment in our distribution network to facilitate the integration of the contract for TVA’s replications. As a result of this contract, Sun Media is now the market leader in distribution of magazine publications in the province of Quebec.

And last but not least, redesign of our urban daily websites. These sites are growing rapidly and currently we have over 1.1 million unique visitors per week with over 7.9 million page views on a weekly basis. We have already secure an up on line revenue over the next 12 months to cover the costs of this redesign.

Operating margin in the quarter was 22.4% compared to 24.6% in 2004. Excluding the losses of the free dailies, the comparable margin will have been 24.9% compared to 25.9% last year. The margin declines can be attributable to the pre-mentioned investments combined with lower margin advertising, higher energy prices, and higher newsprint consumption.

Year-to-date revenues increased 5% to $673 million from the $649 million generated last year while year-to-date EBITDA of $153 million is $2.7 million or 1.7% less than last year. Year to date, EBITDA margin is 22.7% compared to 24.2% in 2004. Year to date, we have increased our market share in ROP advertising line H for our urban daily newspaper in all 7 of our competitive markets as local advertising revenues increased 8.6% due to gains in virtually every local category.

Our 24 hour free commuter dailies continue to add a significant impact in their respective markets. Total circulation is currently over 500,000 in our three markets. Based on the most recent in that bank survey, readership is up 23% in Toronto and 20% in Montreal compared to last year on a five-day communicative basis. Pickup rates continue to be at 97% in Toronto and Montreal and have exceeded 90% in Vancouver after only six months of operation.

In Toronto, we are making significant investments into our operations in order to secure the long-term growth of our assets. We have redesigned the newspaper and added several new columnists to differentiate ourselves from our big three competitors, who have successfully converted the Toronto Sun from a single copy to on delivery, on delivered newspaper from Monday to Friday in some regions and will roll out the strategy throughout Toronto over the next several months. Also our free cost slide program has received strong response which should strengthen our readership in future advertising revenues.

We have good convergence programs in place in Toronto to leverage existing Quebecor operations with a re-branding of Sun TV, the Toronto Sun has benefited through cross promotions and joint branding. The Sun editorial staff now participate in TV programming and the two sales teams had a lot integrated offers to service advertisers.

Finally, Quebecor Media has announced the creation of an advisory board for its Ontario assets. We are optimistic that this will create new opportunities for our operations in Toronto and the surrounding areas. In Montreal, readership and circulation numbers remain strong in spite of the [Dearkey] strike and the departure of baseball from the city. Based on the latest MapBank survey, [inaudible] Montreal which over 1.2 million readers weekly in the metropolitan region increased readership by 13.6% on Sunday, 6.4% on Saturday and 5.2% on weekdays compared to 2004, gaining market share over its main competition.

The investments in the paper’s redesign, aggressive promotion and marketing programs and a strong management teams have paid dividends in this market. While we are realizing overwhelming successes in our redesign websites. We’ve increased a number of unique visitors by 47% and increased page views by 75% since the last quarter by leveraging existing brands of our print products with those our online sister company Canoe, we have tapped into new non-traditional revenue streams which are providing promising top line growth for the company.

Other small investments that were made during the quarter relate to our small community markets, where we want to capitalize on the positive momentum. For example, we have added a Monday addition to our previously twice weekly free newspaper in [Longmister], Alberta, with 14,500 circulation. This publication was immediately profitable in that they were, they were a gap in to fill the market there. Chatham and [Sarnia], Ontario we have launched free single copy dailies with circulation of 3,500 in each market from Monday through Friday. Early indications are very positive and we expect these products to break even within the first year of operation. As always, cost control continues to be a priority for us. We have secure preferred pricing from major supplies such as newsprint, ink and plates for the remainder of the year. Despite investment for future growth, Sun Media continues to deliver industry leading margins on the LTM basis and to deliver stable cash flow to its stakeholders.

I thank you for your attention and I will now ask Robert to cover our cable operations.

Thank you Pierre and good afternoon everyone. I am pleased to report that during Q3 2005 we continued to deliver industry-leading growth for our digital TV, high speed data services and [inaudible] among Canadian telecom companies offering RP telephone service. We recorded net additions of 44,000 digital subscribers and 40,000 high speed internet subscribers in Q3 2005 compared to 20,000 digital subscribers and 30,000 high speed internet subscribers in Q3 2004.

For the nine month period ended September 30th, 2005, we added 91,000 new subscribers to our digital television service. We also posted a 95,000 increase in the number of subscribers to our high speed data service. This compared to a net addition of 68,000 subscribers in digital television and 70,000 subscribers to high speed data service in the same period in 2004. In fact, net customers adds for these services during Q3 were the highest of any quarter since their launch in 1998 and 1999.

During Q3 we also recorded a net gain of 29,000 subscribers to our cable television customer base compared to a net gain of 22,000 in the same quarter in 2004, our best quarterly performance in five years. For the nine month period ended September 30th, 2005, we realized a net gain of 19,000 subscribers compared to a net gain of 17,000 subscribers at prior year.

We have once more maintained a highest percentage growth in basic cable digital TV, and high speed data subscribers on reported last 12 month basis amongst the large cable companies in Canada.

The launch of our residential telephony service continued to attract a lot of customers. Since our last conference call, we have extended our footprint to cover the entire [inaudible] of Montreal. This brought our coverage to 61% of our home [inaudible] and we intend to progressively roll out the service to the remaining areas until mid-2006. We added 54,000 new subscribers during the quarter bringing the total to 96,000 at the end of Q3 2005. And we continue to find telephony customers create a significant lift in demand for our other services. This is reflected in the record subscriber growth for our other services.

Operating revenues amounted to $251 million in Q3, an increase of $29 million or 13.1% compared to Q3 2004. Operating revenues for the nine month period ended September 30th, 2005, reached $724 million, an increase of $83 million or 13%. The increases in revenues is mainly due to the growth in our customer base and the price increases for cable television.

Our total cable RPU net of programming credits has increased 11.7% from $47.06 during Q3 2004 to $52.55 in Q3 2005. This improvement is due to the price increases and the increase of bundled customers.

These results, particularly the growing number of bundled customers, we believe confirm that we’ve chosen the right strategy to introduce our cable telephony service and encourage bundling.

Videotron recorded EBITDA of $95 million during Q3 compared to $90 during the same quarter of 2004, representing a 5.9% increase. This improvement resulted mostly from the higher number of customers through our various services, but it was partially offset by a larger loss from the sale of digital set top box due to the higher year-over-year growth in Q3 fixed, sorry Q3 2005 and by the operating expenses incurred to support the allowance of our telephony offer.

When excluding the $5.6 million negative variance on the loss of sales of customers’ equipment, year-over-year EBITDA growth would have been 11.8% for the nine months ended September 30th, 2005. We recorded EBITDA of-- sorry we recorded EBITDA of $222 million compared to $254 million in 2004 or an 11% increase. We generate cash flow from operations before working capital changes of $238 million for the nine months ended September 30th, 2005, representing a $13 million improvement over the same period in 2004.

Additions to fixed assets amounted to $134 million in 2005 compared to $94 million in 2004. This increase is mainly due to the $41 invested for the launch of our residential telephony service.

In Q3 Videotron announced a signing of a strategic partnership agreement with Rogers Wireless that will enable Videotron to offer Quebec consumers mobile wireless services under its home brand and consequently a quite a full plate of television, broadband internet, cable telephony and mobile services.

This agreement firmly confirms the Videotron status as a major Canadian telecom provider and positions the company to continue its growth and lengthen its strings of successes in all segments.

I thank you for your attention and will now let Pierre Karl conclude.

Thank you Robert and congratulation for those very exciting results. So Quebecor revenues and operating income were impacted by a difficult market conditions in the print media environment. On the other hand, Quebecor Media continued to show notable progress in its operating performance and to invest in its future growth. [Inaudible] has recorded exceptional subscriber metrics during the quarter as it added a record number of customers for most of its services. Furthermore and it’s poised to further penetration of the telecom field with its recently announced plan to offer a wireless telephony service next year.

Sun Media and TV remains dominate players in their respective markets. Quebecor investment in printing projects in Montreal and Toronto and TVA’s investment in specialty and conventional channels will support growth and profitability in the future. Videotron telecom again performed extremely well this quarter, mainly due to the success of our residential telephony project.

Our leisure and entertainment segment also performed well with Archambault Group recording notable growth of its retail sales whereas our book publishing group will benefit from the Sogides acquisition to consolidate its position in the province of Quebec and enhance penetration in the European market.

Finally, our subsidiary Nurun and Canoe continue to improve their operating results and contribute to the growth of Quebecor Media of profitability.

For those of you who may have missed the first part of this call, we discussed how the impact of weak market conditions in the print media environment is exacerbated by higher energy costs, the loss of an important contract in the UK, and disappointing operating performance in France.

In 2004, Quebecor World announced an ambitious investment program of more than $300 million USD for its North American platform. Indeed this quarter, we are installing new printing presses in 6 of our magazine, book, and directories and catalog facilities. We expect that most of these presses will be in operation during the next quarter.

We are also currently working on a retooling plan to improve our competitive positioning in Europe and we expect to disclose its details during the first quarter of 2006. This initiative will bear fruit and they will contribute to establish a stronger, more productive and more flexible company, better positioned to face challenging market conditions.

On the revenue front, we continue to record commercial successes as witnessed by our recent contract awards from Time among others. Our directory group has significantly increased its market share after being awarded two important 10-year contracts from Yellow Book USA and [Decks] Media.

I thank you for your attention and we’re now ready to answer questions.

Question please.

[OPERATOR INSTRUCTIONS] Our first question comes from Vince Valentini from TD Newcrest. Please proceed with your question.

Thanks very much. Just first to call Pierre Karl, we all listened to the first half of the call and its recorded if people want to go back and listen to it. So we appreciate if you didn’t have to repeat all that Quebecor World stuff in the second half.

But the question I have on Videotron and Sun Media. First on Videotron, can you give us any sense of what the ramp up will be in the telephony operations? I think a lot of investors have a tough time understanding this business cause it does incur startup costs now, but yet you’re seeing remarkable growth? And any guidance you could provide would be helpful to say what the magnitude of the drag on your EBITDA is now and how that’ll swing going into 2006 and 2007?

And on Sun Media, Pierre you can think about this while Robert answered the first question, I couldn’t quite follow a lot of the [inaudible] cultures of growth initiatives. I’m wondering if you can encompass that into a bigger picture type of number? And talk about what type of EBITDA lift you’d expect from all these growth initiatives you’re incurring now? I guess the most notable one is the 24 hours papers. You provide some clues as to what the EBITDA drag is now? It sounds like about $15 million on an annual basis. Do you expect that loss to peak this year and what type of ramp would you see in profitability in those papers heading into next year? I’ll leave it there for now.

Okay Vince, it’s Robert. First of all this year it’s probably a dollar for a dollar, a dollar cost for a dollar spent. But as we said, we don’t provide obviously forecast for the future but we mentioned at the last conference call that our margin will be in between cable and high speed internet. So it’ll be as a business for us.

So there’s no EBITDA drag this year? You expect the revenues to fully offset the costs?

No there’s some drag obviously but it’s, the drag is that I’m generating a bit of revenue but that’s all cost. It’s one dollar for a dollar. So all the revenue that would have generated normally has been offset by the cost this year. But next year it’ll be obviously should be.

Should be positive next year?

It should be positive next year. I have my boss watching me. Very high it should be. It should be positive. Because it’s more successful than we anticipated as you know and we mentioned $41 million of CapEx, which basically all of it $41 million, $31 million’s about fixed CapEx, a variable CapEx, so we’re comfortable that we should generate positive EBITDA next year.

On those margins you mentioned, getting to between cable and internet now, would you expect to be there say by the end of ’06 on a run rate basis or is it taking longer to reach that level?

Look we don’t provide this information but being we are, we’re very aggressive, so our goal is to be profitable.

Okay.

I will stick at that. You can’t understand at this time of the year Vince that we’re in budget preparation and so we’re reviewing all those numbers. Maybe on the second question, you’ve been asking and I’ll let Pierre to make some comments. But before just a quick comment, I think we are marketing our newspaper business with the free dailies in Montreal and Toronto, is it is important for us to make sure that we cover at the largest segment as possible for our advertisers. Certainly at certain point, we can say that was not obvious because somewhere we can say that the free daily was competing against our paid daily. But certainly today what we are offering tied up also with certain printing initiative that we are and our aim is to package and again, to offer the largest exposure or coverage to our customers in different segments. Maybe Pierre you have any, some comments to do on this?

Yes, Vince you were referring that losses will be around $15 million, yes that’s approximately in this region that we are expecting the losses to be. But we are quite excited by the progression of their revenues. For example, in the last quarter, they had triple over last year. Also the [inaudible] figures are quite well versus last year, so we have increased by 40% on a five-day cum basis on, in Toronto. And to add to Pierre Karl’s comments, the [inaudible] readers that we are reaching with those free dailies are very interesting for us because they are complementary to our existing paid dailies in Montreal and Toronto. For example, I think it’s more an 80% of the total readership is being aged between 18 and 14, 49 years old. So it has very interesting as a consumer targeted and also there are more female. So when you are capable of consolidating those readers with the ones with the differ-- [inaudible] is very attracting for advertisers.

We will not, certainly not let our launch being eaten by competition.

Sorry Pierre, just clarify the $15 million approximately do you expect that to be a peak loss for this year and then decrease in 2006?

Yes it will decrease in 2006.

Thank you.

Next question please.

Our next question comes from Tim Casey from Nesbitt Burns. Please proceed with your question.

Thanks. Question for Robert, just Robert you posted some impressive subscriber gains in a couple of categories. Can you comment on the competitive nature of the environment and were any of these additions in the quarter supported by short-term tactical activity or was that more of a sustainable number? Would there have been an impact with the move in Quebec early in the quarter and then obviously back to school? And do you have any commentary going forward as to what you’re seeing in competitive activity? And I guess what would interesting is your perspective if you feel the competition is becoming more benign after Bell removed the $5 bundle and what not or if some of their recent voice initiatives are making, are making sales a bit tougher for you? Thanks.

No we to answer your first part of the question Tim, we haven’t used any sales tactics. We just used our first and most important strategy bundle. And as you saw the results. So it did work cause the least impact on the other products is tremendous. We had more anticipated people would join us and took the triple plate for instance. The majority of our customers took at two or more products with us so obviously it’s purely based on strategies. We haven’t created any price wire. We haven’t touched on our pricing of other products. Actually we have probably reduced it, the marketing activities on a single product basis. We’re focusing more on a bundle strategy.

In terms of, of course, we always said that after the second quarter, you get reconnection. But if you recall last year, the reconnection and it was one of our, it was our best quarter ever last year was 22,000 so we managed even with the pressure from Bell who gave away PVRs, gave away HD terminals, gave away packages at 24 hour [inaudible], gave away $50 purchase of equipment and different stores. We haven’t matched it. We focused on our core strategies, which means strong products, strong USBs, great content, great French content, preferred supplier at retail and finally one-stop shop and it’s been working for us. So we feel that a future should look great, but as you know, Tim we don’t provide any forecast. So we haven’t seen any trend telling us that it should go down.

And how about the level of competitive activity currently and going into the Christmas season?

Well we’ve seen Bell attacking on their terminals, which we haven’t matched. They’ve decided to go with three terminals for two years on HD and four on standard. But as we said many times, we refuse to play that game. We strongly believe that we have a better product, better product offering, great content for our customers, because we’re focusing a lot on content. And more importantly all the retail is supporting us. It’s easier for them to sell. It’s a better product to sell, so currently as I said previously, we are no intention to go in this price activity. We going to stay focused on what we do best, is provide values to our customer.

Thank you.

Next question please. Next and it will be the last question actually.

Thank you Mr. Casey. Our next question comes from Jess San from UPS. Please proceed with your question.

Hi, thank you very much. Robert wanted to ask you about some of the recent changes at Bell with respect to their ability now to price more flexibly in Quebec versus Ontario. You were probably the only party who has strongly objected to this in the CRTC application. So given that, just wanted to get your thinking in how the changing, changes the way you look at things and from a pricing perspective given Bell’s inflexibility in Quebec?

If you look at the past, it’s Jess?

Yes.

If you look at the past Jess, Bell, Jess?

Yes.

Okay Jess if you look in the past Jess, Bell always acted with two different pricing strategy. Ontario was different than Quebec’s. So for us, it’s not something new. The only reason we fight that is because we said they’d be incumbent with 98%. They shouldn’t have that right. But having said that, keeping in mind their strategy will be to offer in Quebec to a total customer base the same promotion. This is very expensive for Bell to decide to go aggressively on a pricing strategy. And so for us, it’s not a loss. Actually we believe it’s fair. Look as we said, 96,000 customers based on millions they have us, we haven’t touched yet their businesses. So we just feel that what’s been voted, won’t give us, but won’t give them an edge more than we anticipated in our business plan.

So it doesn’t really change the way you look at your business going forward in terms of how you--?

No.

Okay, thank you.

Thank you very much everybody.

Thank you very much and we’ll talk to you next quarter conference call.

Ladies and gentlemen, thank you for participating in the Quebecor World Conference Call. On behalf of myself and the rest of the Videotron teleconference team, thank you for choosing Videotron.