Rogers Communications Inc (RCI) 2007 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Rogers Communications' third quarter 2007 results conference call. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. (OPERATOR INSTRUCTIONS) I would like to remind everyone that this conference call is being recorded today, Thursday, November 1st, 2007, at 12:00 p.m. eastern time. I would now like to turn the conference over to Mr. Bruce Mann of the Rogers management team. Mr. Mann, please go ahead.

Great, thanks. Hi, everybody. Good afternoon. Welcome to Rogers third quarter earnings teleconference. We know it is a busy day for everybody on the street, so, we'll crank through this as crispily as we can. On the call today Ted Rogers, our Chief Executive Officer; Bill Linton, our Chief Financial Officer and Nadir Mohamed, the President and COO of our communications division. Also some of our divisional presidents, specifically Rob Bruce from wireless, Edward Rogers from cable and Tony Viner from media, along with a couple folks from the respective teams. Just quickly you should have a copy of the earnings release that we put on the wire before the market opened this morning along with our full year 2006 MD&A and have reviewed them because the cautionary language and risks discussed in those documents will apply equally to the dialogue we'll have on the call today. So, with that let me turn it over to Ted Rogers and then I believe Ted wanted to have a couple of other folks on the management team also say a few words this quarter in advance of the questions and then the team will take your questions. Over to you, Ted.

Well, so just a few brief remarks and then we'll hear from the people on the team who delivered the results which is Nadir and Rob and Edward and Tony and Bill. I'll start by saying that frankly, while the results were excellent, overall this was a quarter that some of you might consider to be a bit on the boring side. It's generally more of exactly what we've said our core focus for this year would be, execution, integration, profitable growth, nothing fancy, just roll up our sleeves and get it done. We're continuing to add subscribers while driving good financial results, in fact double-digit growth in revenue operating profit and free cash flow. So, a good balance of profitable growth and I believe also a reflection of the benefits of how we are increasingly operating as a single company. My congratulations to the operating team. It's also a quarter where frankly there wasn't a lot of news flow for me to comment on today. That includes that there haven't been updates yet on two of the items. I know you're interested in the AWS spectrum auction and what that might look like on the wireless side and secondly we don't have any updates for you around the capital structure. That will come later in our board meeting in December. On the spectrum auctions I wish I had more to report to you, but I don't and what we know is that Industry Canada has said they hope to have the auction rules out this year and are still targeting an auction for 2008, probably the first half. In terms of our own financial planning here at Rogers, we're in the midst of our budgeting and three year planning cycle right now, strategic planning. My own objectives are that we come out of that process with a balance of three things. First a plan that includes continued double-digit increases in subscribers and operating -- in revenues and operating profits and cash flow. Second, that we're well positioned to continue many of the important initiatives around strengthening our systems, networks and capabilities. Third, to have a view of the capital structure that is appropriate for Rogers as we go forward. I'll just say that you -- as you've seen what we've done with our dividend over the past several years and I would like to see us continue down this path -- or up this path. So, hopefully on our next call we'll have more to speak about all of these fronts and I'm going to stop here and ask for our Chief Financial Officer, Bill Linton to take over.

Thanks, Ted, and hello, everyone. I think it's clear from the results that we're continuing to maintain our growth really right across the board with consolidated revenue of $2.6 billion which was up 13%, our adjusted operating profit was up 23%, consolidated margins up almost 300 basis points and our free cash flow up 91% and that's essentially all organic growth driven by double-digit top line and operating profit growth at both wireless and cable. So very good growth financially with continued positive operating leverage and importantly, with continued strong subscriber results at the same time.

Now, a couple of administrative items. First in the MD & A this quarter, we've more clearly separated out stock comp related costs so you have more visibility into exactly the impacts that changes in the stock price might drive in terms of our operating profits. Secondly, as you can see on page four of the release, we've reversed approximately $18 million, the majority of that at cable and a smaller amount at media, of previously accruals relating to regulatory fees which the courts have ruled are not payable. We've separated this out from adjusted operating profits and have stopped accruing these amounts going forward effective with this quarter. Thirdly, as we said in the release, we were able to close the acquisition of the Citytv network yesterday. So, we'll be including their results for the last two months of Q4 and you can expect in round numbers a revenue contribution of approximately $25 million with no meaningful impact on operating profit for that portion of the quarter. Lastly and looking forward, as we said in the release this morning, we're feeling good about achieving our full year guidance and may exceed the higher ends of certain of the guidance metrics, but given that we're at Q4 which is generally the most unpredictable of the year for us, we're going to leave the high end of the ranges intact for now, but I think you can get a good sense of where we are given the positive bias we laid out for you in the release. I'll end it there and I'll turn it over to Nadir Mohamed.

Thanks Bill and hello everyone. As Ted said this is a quarter focused on bread and butter execution delivering profitable growth. I'll quickly share a couple of my own perspectives starting with the wireless side. I want to congratulate Rob and his team for another strong quarter. On the subscriber front net additions were up 20% year-over-year and we surpassed the 7 million subscriber milestone during this quarter, so an important number that we have now crossed. We had good success in the back to school push and generally see the overall market continuing to grow at a healthy pace. From a subscriber mix perspective we also had good success in both attracting and retaining high value post-paid subscribers, with out post-paid pre-paid mix coming in at 80% postpaid and our post-paid churn coming down to 1.12%. On the innovation front two weeks ago we successfully rolled out the second phase of our HSPA third generation wireless network to 22 more Canadian markets. This significantly expands our service from the southern Ontario market to now covering about 60% of the Canadian population. Rogers is the Canadian leader in wireless data at 13.6% of network revenue and growing at a 50% clip in this quarter. So, a significant growth driver already and the largest contributor to our 7% ARPU growth this quarter and our new HSPA 3G network enables even richer and more intensive data applications, so we're very bullish on wireless data continuing to being a powerful driver for us going forward. As we move forward we look opportunistically at where the economics indicate we should expand our current HSPA footprint and we're already trialing the next evolution of HSPA which doubles the download speeds from 3.6 megabytes per second to 7.2 megabytes per second. We're feeling good about our network position generally and even more so in the larger markets with this HSPA launch which very much solidifies the Rogers' position as Canada's most advanced and most reliable wireless network.

On the cable side Edward and his team also had a solid quarter. Good RGU growth with particularly strong performance in Internet helped push the cable operations revenue up 13%. We also made progress this quarter on expanding cable operating margins which were up 300 basis points year-over-year, a trend I know Edward and his team has focused on continuing to improve. Going forward we have some more opportunities on content and programming costs, on delivering more efficient support of our home phone business and in ensuring we have a more integrated marketing approach so we have a more effective spend across all of the cable products. Comparatively we're at or near the top end of the range of our North American peers in terms of RGU's per homes passed and revenues per RGU and we realize that we need to translate more of this top line success through to the bottom line. Our margins are diluted somewhat relative to the Canadian cable companies by the base of switched circuit local and LD business that we acquired in 2005 and are included in cable's results. Having said that, most importantly we are focused on improvement and on that note I want to compliment Edward and his team on the new Yahoo deal. Edward, if you want to quickly comment on the changes on the deal that we announced this morning.

Sure. Thank you very much. You'll see in the cable section that today we've entered into a new agreement with Yahoo around our e-mail platforms and Internet portal and this should help on the margin side of the business as we go into 2008. So, we had a great partnership with Yahoo for four years and as a result, have been able to offer our customers a better broadband product. In case you weren't aware, we utilize our e-mail functionality including their hosting and storage for our Internet service as well as many of their tools such as pop-up blocking, content, photos, music and gaming. The economics of the Internet portal and services evolve differently than when we had signed our original agreement in 2004 and this new agreement reflects the future business for both Rogers and Yahoo to continue working as a team under a mutual beneficial model. So, we're making a one time payment to terminate our old agreement and we move off a model of paying on a per sub basis and onto a model of sharing advertising based revenue model. In the numbers as I mentioned, this will help our margins for 2008 and I think you'll get a better sense of those exact numbers as we release our Q1, 2008 numbers later next year. With that I'd like to turn it over to Mr. Viner.

Thanks, Edward, first the media drove solid growth and operating leverage in Q3 with revenue up 6% and EBITDA up 12%, so, good results year-over-year and good results sequentially from what was a soft second quarter for us. We're pleased to report that our acquisition of the five city television stations from CTV was approved during the quarter and as Bill said, we closed the transaction yesterday. Combined with our existing television properties we created a strong TV platform with the scale needed to succeed and also to solidly complement our radio specialty, publishing and other media assets. I know we can find a number of ways to make our entire TV business at Rogers operate more efficiently given that we'll have both OMNI and City stations and in all of the markets we'll be in except Winnipeg. In fact, we already have plans which you may have heard underway to co-locate our city and OMNI television operations in the Toronto market which are broadcast across Ontario and we intend to collocate in other markets where we have City TV and OMNI stations as well. It will take some investment and time to reinvigorate the City TV business but we believe this is going to be a terrific business for us. On the Rogers SportsNet side, during the quarter we signed an eight year deal to become the official broadcaster of the Toronto Maple Leafs giving SportsNet Ontario primary broadcast rights televising more than 20 games annually. SportsNet also acquired broadcast rights for the 4:00 p.m. Sunday NFL games and along with our local rights for NHL hockey in every Canadian market except Montreal, SportsNet is on a solid footing for the year ahead and will be moved into our new state of the art HD studios in Toronto before the year-end as well. So, good momentum there. With that I'll pass it over to the operator for questions. Operator?

Thank you. Ladies and gentlemen, we will now conduct a question-and-answer session. (OPERATOR INSTRUCTIONS) One moment please for you first question. Your first question comes from John Henderson of Scotia Capital. Please go ahead.

Thanks, guys. Great quarter. I have a question on, you know, use of free cash. I know you're going to talk about it in December. I just wondered if there's any potential interest in expanding outside Canada?

Well, I think we're, it's Ted here, we want to finish the job here in Canada. We want to finish the job of fixing up what we have and maximizing our strength, fixing up areas where with increased competition in the future we'd be very wise now to increase our defenses and make the company stronger. So, we're not looking at this point to be out of the country and frankly, we're not looking at acquisitions, maybe a tuck-in or something like that, but we're not interested in big acquisitions at this point certainly. We're over our heads in work to improve what we have.

That's great. Thanks very much. I'll let others ask.

Your next question comes from Jeffrey Fan of UBS Securities. Please go ahead.

Thanks very much and good afternoon, everyone. My question is on the wireless side, you know, great quarter in terms of subscriber adds and when we look at the -- on the cost front retention spend continues to go up as, you know, one would expect and also costs of acquisition per sub is up as well, but I'm just wondering as you go on to the second half of this year it looks like there's been some increase if we look at that as a percentage of the revenue, looks like the spending wasn't as strong in the first half but looks like things have picked up in Q3. So, I'm just wondering if you can just comment a little bit on maybe the current competitive behavior of your other competitors in the market. Telus started to, I guess, spend a little bit more Q2 and probably continue through Q3. Is that what was driving what we saw this quarter? And then how do you look at -- you know, I know the rules aren't out, but as you look into next year as you do your planning, what if the rules are favorable for new entrants, does this preempt a little bit more action on your part even before the spectrum auction takes place?

Yes. Thanks, Jeffrey. Maybe I should start with just commenting on the numbers. I believe a year ago we hit an all time high -- an all time low rather in the last 10 or 12 quarters in terms of our cost of retention as a percentage of revenue. I believe we're down at about 6.3. In this quarter if memory serves, we're around 7.5 or 7.6. If you took the average of the last 10, 12 quarters, we'd be about 7.5. So I would say, you know, this quarter our view was, we're in kind of a normal place. So, then the obvious question is so why was last year so low? We had kind of revised our handset upgrade program pretty significantly and kind of ground things down to a level that we didn't feel was the right level. As time has gone on, we've refined the programs more targeted, more focused. We feel very good at where we are at the sort of 7.5, you know, 6 -- or rather 7 to 8 range, 7.5 being kind of where we are now. So, the other thing that we have changed and that has been a bit of a change, is we've really put a focus on Fido, specifically the Fido rewards program. We stepped up our efforts on retention on the Fido brand and we think there's significant leverage there. So I don't know, I think I got most of your question. Did I get it all?

Yes. And then just maybe I know the rules aren't out for the spectrum auction, but how do you -- and it's a hypothetical, but, you know, how would you react to favorable rules for new entrants? Would you try to get as many subscribers locked up as you go through the next year, that sort of thing?

Yes, I think those are probably the kind of things that I don't really want to comment on right now, Jeffrey.

Okay. Fair enough.

Thanks.

Your next question comes from Bob Bek of CIBC World Markets. Please go ahead.

Hi, thanks. Just some media questions for Tony. You've given us some background on the City assets now that you've closed. Since you've got approvals I'm sure you've been out talking to advertisers. What sense do you have or what kind of sense do you feel out there from the advertising community as far as supporting the acquisition and what you say a revigoration of City at some point? Are you surprised at all by the response?

Bob, the advertising community was hugely supportive of our acquisition, as you may or may not know. Clearly they want a strong third competitor in the market, so the advertisers are very positively inclined towards us and so that's been most positive. I think they also like the array of media assets that we can bring to bear for their clients. I'm sorry, the second part of your question?

That's actually -- but related to that, though, do you think it's too aggressive to assume that you could start to put together some of the benefits of your platform by next fall into the TV season or is that expecting too much?

I think we can begin by next fall, but you're quite right. I mean this fall's looked in. We didn't buy the programming or do the schedules this year, so, you know, it's going to take us in, there's screenings in L.A. in May and we'll see what we can acquire then, but it's -- so we can start in September of '08, but it will take us a couple of years I think for us to really -- for this to make a significant positive impact.

And a related media question, if I may. There's been a lot of speculation in the press regarding the pursuits of an NFL franchise. It's still my understanding that a corporation can't own an NFL team but can you elaborate at all as to where Rogers and its sports properties are as far as NFL participation?

Well, it's Ted and I'm going to let Tony start the answer.

Well, Bob, you're right. A corporation can't own it and so this corporation wouldn't. Ted, it's up to you.

Well, I mean what started with this was we have the Rogers Centre and we'd very much like to have it with some NFL games here and Phil Lind has been the great leader in this and deserves all the credit. Buffalo is a declining market somewhat relatively economically across North America and it's questionable whether an NFL franchise just in Buffalo would survive and so the owner there has agreed to a program where I believe we'd have two games a year up here in Toronto in the Rogers Centre and that's pretty well all that we've agreed at this point, but when you start to figure out how to implement that, you're selling boxes and you're selling seats and so on and if you want a season's group, how does it work between Toronto and Buffalo, et cetera, et cetera? So, I think it's very exciting for our company and for media in particular. If there is any follow-through from that and there's nothing at all now, but if there is ever any follow-through on an ownership basis, then Larry Tanenbaum and myself have agreed to work together to pursue that, but that is not the act to file. The act to file is to try and have some shared games and to work together to make it more viable.

Okay, thanks for that. I'll leave it there. Thank you.

Your next question comes from Simon Flannery of Morgan Stanley. Please go ahead.

Okay. Thank you very much. Good afternoon. I guess this is for Bill probably. Strong appreciation of the Canadian dollar, how does that help you in terms of lowering your -- say your handset costs or general CapEx and any impact on the balance sheet in terms of unhedged borrowings or whatever and if you can comment on Apple and the iPhone, that would be great as well, thanks.

Well, I'll do the first part and Rob will do the second part. The dollar doesn't have a huge impact on us. Unfortunately we're 100% hedged on the debt, so anything we win on the debt we lose on the hedge. On the CapEx side we do buy boxes in US dollars, especially on the cable side. Probably we're talking less than 10 million a year based on our '07 volumes and we might get a couple million dollars out of roaming fees for every penny movement. So, it's not significant to our quarterly numbers.

Just picking up on the iPhone part of the question, I think, you know, my comments would be almost identical to the ones I made on the last call, that we think iPhone is a unique and appealing product. Apple clearly has a schedule and a plan for their roll-out on a worldwide basis and, you know, clearly some customers and others have hacked versions of the phone. Neither Apple or Rogers endorse this kind of behavior on the phones and when we have any more news specifically on the Apple front, we'll let you know.

Thank you.

Your next question comes from Vince Valentini of TD Newcrest. Please go ahead.

Thanks very much. One cable, one wireless. on the Yahoo would you be able to tell us any more ballpark terms of how much margin benefit you could be seeing there and can you tell us how you'd be accounting for that $52 million charge? And on the wireless side would you be able to comment at all on your willingness to offer more aggressive wholesale terms to some of your partners like Videotron depending on what the rules for the spectrum come out as?

Vince, it's Bill. I'll take the first part. The $52 million charge is going to be expensed into fourth quarter. We are not disclosing an amount of savings and you'll have to wait and see what it is in the first quarter when the new agreement takes effect.

Bill, just to follow on that, sorry, would -- so your guidance, I'm assuming you would adjust for that $52 million as a nonrecurring charge.

Yes.

Vince, on the second part, no interest really in commenting on that right now.

Okay. Thanks.

Your next question comes from James Breen of Thomas Weisel Partners. Please go ahead.

Thank you very much. My question is regarding the wireless segment. Your net adds went up considerably from the second quarter to the third quarter of this year and your margins were down a little bit but not a lot and I was just wondering, you know, I would have expected a larger margin drop given the incremental net adds. Can you talk about what's holding the margins up there? Thanks.

Good management.

Thank you, Ted. Listen, you know, we continue to add a higher mix of higher value customers giving us a stronger ARPU. There's a certain amount of seasonality of revenue that's also involved. Both of those things are propping up the numbers, but again we're happy with the revenue, happy with the margin and just for us a quarter that we're delighted with overall.

And then just one follow-up on the cable side. Can you talk about any traction that you're gaining into the small/medium business space on the voice side?

Sure. I'll take that -- small business, our strategy is basically to replicate the consumer product expense in small business and so it kind of means increasing the number of adjustable homes passed if you think of it. I think we've done okay over the last three or four years on the data side and we're trying to put more of a push on the telephony side and on the television side. We're still making some investments to offer cable as part of the package. A cable, you know, a cable business phone product which will roll out through the first part of 2008 and the numbers will be embedded in the numbers that we put out.

Great. Thank you very much.

Your next question comes from Greg MacDonald of National Bank Financial. Please go ahead.

Thanks. Good afternoon, guys. Another question on cable, if I might, on the cable margin improvement. I forget whether it was Nadir or Edward that talked about the 300 basis point improvement margin, very good. If I could just ask two questions breaking down between the operating costs and the sales costs. On the operating side 8% growth, very nice relative to the sort of 11% average for the year. Other than good management I wonder if you might comment on what's going on there and the sustainability of operating cost improvements because I know that was one of the areas that you were wanting to focus on this year and then secondly on the sales and marketing side again, good control on sales and marketing. I guess there's a bit of a mixed message there since some of the subscriber stats underperformed. I know Telephony in particular in what I would have thought would have been a stronger quarter with back to school was a lot lower than what I was estimating. So I wonder if you might comment on the message there. Is this a decision to pull back on promotional activity? Is that a decision that's going to be recurring or should we expect something in the future closer to what you were doing in the first half of the year? Thanks.

Sure. I think I wrote down all your questions, but let me know if I missed some.

Okay.

Just on the general costs side obviously we're trying to, you know, do a better job to drop more of the revenue gains to the profit line. A couple of things that are impacting, one, in our markets we're able to still put through fairly decent rate increases on television. We've moved up ultralight for new customers in 2007 and in some markets we've moved up a quarter of the SAP on Rogers home phone. So, I think there's some good pricing metrics that help us. Rogers home phone is now two and a half years old and obviously you've got some start-up costs that you incur as you start into that business and we're seeing some scale as we ramp up the customer base. That's having an improvement to the overall bottom line and on our cost of sales, we've managed to do a pretty good job. So, you know, you don't see the difference of those two line items but I think we're seeing a lot of some of the improvements are actually in the cost of sales line on both TV and on data. And when we look at our sales and marketing costs I'd say it's definitely not a pullback in terms of trying to acquire new customers. The overall net growth of RGU's, when you include circuit, was just over 200,000. So, comparatively, you know, in Canada I think that's on the higher end against other cable companies. We always love to do much better. We're pushing home phone as fast as we can. Obviously as the base gets bigger, you know, with a normalized churn in there you've got to get more customers and lastly, we're trying to do a better job at selling multiple products at the same time and so that allows us to have some synergy in the marketing and sales costs because we're trying to add two and three products, not just one product at the same time.

Okay. That's helpful. Thanks a lot.

Your next question comes from Ric Prentiss of Raymond James. Please go ahead.

Good afternoon, guys. A couple questions for you. One, I guess we put you down as a no for buying Sprint based on that first answer, but this morning on the Sprint call they talked about the cable joint venture down here in the United States and the pivot going very slow and they mentioned complex provisioning difficult to kind of talk through the sale process. Your in a unique position of having wireless and cable. Talk to us a little bit about where you guys are seeing success and how you guys might be able to experience a different trend than what Sprint and the cable guys in the US are seeing.

Well, in essence, we're consolidated. We're trying to operate as one and down there they've really got a resale agreement with all these different cable companies and as I understand it, they all call their product -- if you move from one city to another, they cancel the Comcast when they move out to Cox and then they have to resell Cox, but I don't know Nadir, if you've anything to add on that.

Just a couple of points. I think from an operational perspective we're definitely seeing and have seen it empirically over a period of time that the churn results are better where we have multi-products. A combination of factors, I'm sure the brand weight that's given in the market through to the relationship with customers. We have a specific program called better choice bundles which is an up-sell cross sell program that essentially says the more you buy from Rogers, the better the package looks like for you and that's been a relatively -- I'll say easy understanding point about systems behind, but it's an easy thing for distribution to get behind, it's an easy proposition for customers to understand and we've seen great traction from that. So I think, you know, there are definite benefits. To the extent of packaging, no question our focus right now is on triple play because that's a purchase around a home as opposed to an individual. So those are learnings we've had, but I'd say that we've definitely seen traction in terms of being able to get more of the wallet share of our customer. Just one last thing just as an aside because it is about customer relationships. When we launched our home phone, it was incredibly valuable to have, you know, a base of 7 million customers somewhat less at the time to go after in terms of up-selling home phone to a wireless base.

Okay, and the second question, with you guys now having 60% of the Canadian population with 3G, what are your thoughts as far as the demand prospects for air cards and where you see the pricing plans going kind of in the early stages of 3G out there?

I think air cards is one area that's going to be profoundly affected by the kind of speeds that we can provide because I think it will create an experience that's very parallel to the experience that customers are having at home with the utility of being mobile. So we see it as potentially one of the growth areas of data going forward.

And kind of pricing plans, what are your thoughts as far as the pricing umbrella for those kind of plans?

Clearly as people have the capability and the utility to use more, you know, we see price moving down. I think there have been some early indications of that already in the market and I think we'll probably see a lot more of that and, you know, ideally not taking it all the way to flat rate but making sure that we provide packages that are large enough to not become barriers to customers using the product.

It's Ted, I'd like to just add one thing so we're all clear. GSM has the advantage that it can go to higher speeds than CDMA. CDMA has reached their peak. They can't go any higher and so this gives us an advantage until they finally learn the lesson from their past and convert over to GSM, they will not be able to match the speeds that we have and that gives us a tremendous competitive advantage, that plus the fact that our wireless network is undisputably the finest in this country.

Great. Sounds exciting. Good luck, guys.

Your next question comes from Dvai Ghose of Genuity Capital Markets Please go ahead.

Yes. Thanks very much. If I can come back to Greg's question about the home phone, Edward I accept that obviously the growth gets more difficult as the base improves, but the net adds were down 23.5% year-over-year and you referred to churn in your answer to his question as perhaps being a contributory factor. Has the win back changes or deregulation at Bell, et cetera had an impact here or was this a conscious decision to throttle growth?

Well, it definitely wasn't a conscious want to lower our numbers of home phones that we're adding. You see obviously the net numbers versus the gross numbers, the number of people choosing Rogers home phone in our markets did go up quarter-over-quarter, year-over-year. Bell was definitely pushing harder in the market. They launched, since last year in the third quarter, their bundles and, you know, recently in the last few weeks we've seen a lot of marketing spend on the home phone products which I'd say traditionally they wouldn't have done much of and we've converted a bit less from the circuit platform to the cable platform in this quarter versus a year ago which would have had an impact on the results on cable.

Okay.

We're still planning to push as hard as we can and be as effective as we can.

Okay. If I could also come back on the wireless side to a comment Mr. Rogers made about GSM, I'm not quite sure why people are afraid of the competitive threat in the moment. I'm not sure whether it's your surging ARPU or your great subscriber numbers or your record low churn but my issues on the GSM side were, fully you have some in-built advantages and perhaps your competitor sellers in Bell are considering conversion. Would you see that as being a significant threat or do you think your embedded GSM advantages having been on the technology for many years is a sustainable one?

I'd like to think and, you know, Ted's very generous on the benefits of GSM, but I think more broadly we have sort of a broad based competitive advantage. Some elements are rooted in GSM. I think some of it is in our segment focus, some of it is in the way we go to market, some of it is inherent in our distribution. So clearly having our competitors on the same technology will change the landscape somewhat. We like to think, as Ted pointed out, that beyond the technology itself the way we've deployed the network, the kinds of speeds that we have, the tower density and all of those things combined kind of roll up to a broader competitive advantage that we will work hard to sustain as the situation with our competitors changes over time and potentially we have new entrance in other things, so --

And, of course, CDMA in Canada, would you convert to GSM unless in the United States Sprint and Verizon also converted to GSM. Would you do that? That's just a question.

Well, I guess that's a question for Darren Entwistle and George Cope, thanks very much.

Your next question comes from Peter MacDonald of GMP securities. Please go ahead.

Thank you. I want to ask a clarification on free cash flow and then I have a question on media. On the free cash flow is it fair to say that the lack of return of additional cash to shareholders is simply the fact that you want to complete your budgeting and we should not contemplate or consider that you're going to deploy cash elsewhere and you're waiting for that?

I don't know what to say, Bill.

I think you should conclude that we're in the middle of our planning process and that we are going to provide you some more guidance on that when we complete that planning process and as you know, there are a whole variety of issues in front of us, things like the spectrum auction and the variability of that, so it is a complex subject and it's just taking us some time.

And should we expect that in January with the subs or February with the financials?

I think you should expect it when we tell you to expect it and we haven't made that decision yet.

Okay. On the media side would it be possible if you provided us the breakdown -- the segmented breakdown that you used to do -- and offline is fine for that obviously and basically the reason why I'm looking for it is the changes with CityTV and the more materiality of the business, it just can make it a little bit easier for me to forecast it and can you also refresh for me the acquisition price plus all the additional costs around it like buying a building, et cetera and any other integration costs associated with it?

Well, as to the first, we stopped providing the detailed information because our competitors were enjoying it even more than you did, Peter, but we'll always take it under advisement. The total cost of the transaction --

It's going to be disclosed in the fourth quarter. We have to do valuations about intangibles and tangibles, you know. There's a bunch of different things that go in that. So it will be disclosed next quarter.

And we haven't closed on any buildings yet. We haven't completed the integration plan yet and as soon as we do, we will certainly give you the information you need so you can understand the television part of our business and how CTV is affecting that. All right?

Okay. Thank you.

Ladies and gentlemen, at this time we have time for two last questions. Your next question comes from Marianne Godwin of Octagon Capital. Please go ahead.

Hi, gentlemen. I just was curious, because I get a lot of questions comparing Canada and worldwide developments on the wireless front. Any thoughts in terms of what you've heard or seen out there that could affect what you do on your platform going forward?

I'm not 100% sure what you're driving at, Marianne. Could you be a little more specific?

Well, with the developments on Wi-max and where it's going in Europe and just from that perspective whether you think there's more that we could do here?

I think we find ourselves in kind of a unique position because we have all four products of the quad play and I think Nadir touched on this earlier, so I think one of the things that effects us positively is that interaction and being able to create a deeper relationship with customers that cuts across products. Beyond that I think the opportunity to go from what Nadir talked about is our success with BCB, to creating products where we have true integration between some of what would be considered cable products today and wireless products today, to create hybrid products tomorrow. I think the other advantage and difference from a platform perspective is, while we have the advantages that Ted articulated in terms of the speed and the pervasiveness of HSDPA, we also as you know, have a Wi-max play as well and the ability to be able to leverage both, you know, portable Internet and mobile Internet also give us some significant advantages and opportunities that probably not too many other people have.

Great. Thank you.

The last question comes from Rob Goff of Haywood Securities. Please go ahead.

Thank you very much. Could you give us a bit of a profile on the new gross post-paid subscriber in terms of is there ARPU accretive or dilutive? Is your mix shifting towards business or consumer? And in terms of length of contracts taken.

Yes. So we continue to be focused on our target market. I think we stated it a lot publicly. It's youth and young adult. They tend to be heavy users of data, early adopters. Their ARPU's continue to be strong. We've had some significant success over the past number of years of driving up our business mix more on the -- you know, with more focus on the small and medium end of the continuum. So, from a mix perspective we've seen mixes in both of those directions and we continue to work hard to be successful in those areas and have programs lined up against it.

This is Ted. Youth and young adults is what he mentioned is we're focused on in wireless, youth and young adults, and so when we buy the CityTV stations, we're not -- it's not just the question of the profitability to Tony. That's critical, but it's also in the overall company with a one company viewpoint. It will be of magnificent help to wireless in helping build the wireless brand for young people, young adults and so on. That's one of the main factors why we bought it.

The other thing is just coming back, Rob, and giving you specifics, the new customers that we're seeing in consumer are not dilutive, nor are they in business.

Great. Thank you very much.

First of all, operator, thanks for conducting the call and more importantly, thanks, everybody, for participating. We know it's a very busy day for you. We appreciate your ownership and of your support and coverage and so thank you for that and if you have any questions that weren't asked or if you were in the queue and we didn't get all the way through it, if you call Dan Kunte or myself, both of our numbers are on the release this afternoon, we'd be happy to help you out. That concludes today's call. Thanks very much.

Ladies and gentlemen, this concludes our conference call for today. Thank you for participating. You may now disconnect your lines.