Telus Corp (TU) 2003 Q3 法說會逐字稿

Ladies and gentlemen, welcome to the TELUS Corporation third quarter results conference call. During the presentation, all participants will be in a listen-only mode and afterwards we will conduct a question and answer session. At that time if you have a question, you can press the "1" followed by the "4" on your telephone. As a reminder, this conference is being recorded today Friday, October 31, 2003. I would now like to turn the conference over to Mr. John Wheeler, Vice President, Investor Relations. Please go ahead, sir.

Thank you, operator. And welcome again to the third quarter conference call and Web cast. Let me introduce the Telus executives online with us today. In Vancouver, we have Darren Entwistle, president and CEO. And Bob McFarlane, CFO. In Toronto, George Cope, president and CEO of Telus Mobility.

We will start with introductory comments, followed by question and answer session. The time of the call today is to be approximately one hour. The news release of our third quarter financial and operating results and the detailed supplemental investor information are posted on our Web site at www.telus.com. For those with access to the Internet, the slides are there for viewing at telus.com investor call. You'll be in listen only mode during executive comments.

Let me direct your attention to slide 2. Given the forward-looking nature of presentation, comments, answers to questions, statements made about future events and future financial results are subject to risks and uncertainties. Accordingly, Telus actual results could differ materially from statements made today. I ask that you read our legal disclaimer and refer to you the risks outlined in our public disclosure in Canada and the United States. Telus disclaims any obligation to update any forward-looking statements. Now over to Darren. .

Good morning. Thanks for joining us for our third quarter review. As shown on slide 4, we are seeing the continuing operational benefits of the strategy we commenced three years ago. Our consistent operational execution is translating into significant margin and bottom-line profit growth and strong cash flow generation.

The strong growth performance at Telus Mobility when combined with operational efficiency program on the wire line side of our business generated 14% growth at the consolidated EBITDA level and margin improvement of 4 points from 38 to 42%. At the bottom line, Telus delivered 32 cents in earnings per share this quarter, which is above analysts' consensus, even after adjusting for the one-time tax benefit.

Of interest to both equity and debt investors, is our continued progress in generating cash flow, up 74% this quarter, and of course as well reducing debt, down over $500 million in this quarter alone. Particularly noteworthy is the increasing cash flow contribution from Telus Mobility.

Using EBITDA, less capex, as a simple but indicative measure of cash contribution, we have Telus Mobility now providing fully 1/3 of our consolidated cash flow this quarter. I'm pleased to report that we are again increasing our 2003 full-year guidance in several key areas. This includes higher average EBITDA and cash flow and as well, higher end of the year targets in respect of high-speed Internet access and wireless subscribers. This is made possible by the strength of our net additions this quarter, including realizing 47,000 high-speed Internet subscribers. The best performance we have generated in more than a year.

The next slide, number 5, which Telus' six priorities for 2003 that will briefly update you on today. We believe that making progress in these key areas drives value for both our equity and our debt holders. We are clearly on track for four of the six priorities and making progress in the other two as I will outline in a moment.

Slide 6, highlights the strong progress Telus Communication is making in delivering on efficiency improvement objectives. With $429 million dollars in cumulative OPEX savings after nine months of 2003, we are 95% of the way towards our year-end goal of $450 million.

Regarding our net reduction in staff positions in 2002 and 2003, we are 92% of the way towards the target of 6500 we set a year ago which is relatively unchanged from the last quarter. With the planned conclusion of scheduled voluntary exits in December, we are confident of achieving this target.

Let me also comment on our customer service challenges caused by both external and internal event that drove service calls to levels well above normal during this quarter. In addition to the external disasters such as the B.C. fires and floods, Ontario power outage and computer virus attacks, we also had some internal challenges, including temporary difficulties with the implementation of new systems in support of our call center consolidation program. We also had short-term staffing issues as we hired and trained 800 new staff to fill the gaps created due to the voluntary nature of the staff reduction program and of course, normal turnover. This combination of events caused temporary problems in respect of consumer customer service.

Let me emphasize the customer service remains a top priority for Telus. We have already turned the corner in our commitment to improve service levels for consumers by December of this year. To the point where service is uniformly superior to the period before we began our operational efficiency program.

Slide 7 highlights Telus Mobility's top quartile operating metrics that are driving profitability and cash flow ahead of plan. This is evidenced by 49% growth in EBITDA and a 9-point margin increase to 39% this quarter. This EBITDA growth in margin expansion is the highest of any major North American wireless provider that is reported thus far.

We also remain on track to improve the economic fundamentals of our business expansion in the central Canada with our guidance of significantly lower EBITDA dilution this year of some $30 million, a $77 million improvement from 2002. Moreover, we expect to move the positive EBITDA in 2004.

Furthermore, I am pleased to announce today a major long-term contract recently won with IBM to serve the TD Bank Financial Group. The contract is for 7 years and worth a minimum of $160 million. This new business is entirely consistent with our data strategy, as Telus will be providing a sophisticated managed IP network solution to over 1200 TD branch locations across Canada. The IP, BPM secured service will ride on our core next-generation network, which is of course operational today.

Turning to slide 8, let me briefly update investors on our task of reaching a new collective agreement with our unionized employees. The federal conciliators, Telus and our union are about to commence a final conciliation progress beginning on November 14. The parties have also agreed to a 30-day quiet period at the start. This process should conclude early in February 2004. Realizing our objectives in this negotiation will provide ongoing benefits to Telus and indeed our employees over the longer term. Telus is seeking to achieve three objectives in a new collective agreement.

Firstly, improved efficiency from gaining the flexibility to outsource non-core functions so that we can recycle these savings into growing our core business.

Secondly, improved productivity from the introduction of performance-based pay and the reduction of accumulated time off over and above vacation time. This is a time when we need all hands on deck focused on implementing our strategy if he we are to enhance the heritage of this company.

And finally, improved flexibility by modernizing our collective agreement to reflect the realities of today's competitive environment and deliver a better work environment for our employees. Investors should also consider that our current results and future projections do not reflect any improvement from productivity or efficiency gains or indeed better flexibility, which we are seeking to realize in a new collective agreement.

Let me reiterate that Telus desires to reach a collective agreement that meets the needs of our team members, customers and shareholders while accounting for the competitive landscape of the Canadian communication landscape. I remain optimistic that this new collective agreement can be realized without the need for work action. The intent of our six 2003 priorities is to focus Telus on what will continue to build value for our investors and continue to make Telus a successful organization in the competitive marketplace. I trust you will agree that solid progress continues to be made.

The final three slides serve to highlight our efforts are driving increased value for our shareholders.

Slide 9 shows that Telus, based on updated guidance provided today, is expecting 2003 EBITDA growth on average of 12%. This puts us in the top echelon of global telecom companies.

Slide 10 illustrates that growing EBITDA coupled with reduced capital expenditures is driving increasing cash flow in 2003. This increase in cash flow is up, again today, and is now expected to be circa 95%, once again placing Telus at the forefront of global telecom companies. Indeed, going to Slide 11, let's not just compare Telus against Telecom company comparables, but let's look outside our industry to the top 100 public industrial companies in Canada. We analyzed the free cash flow yield based on market caps of these companies as an important indicator of value creation.

As shown, Telus, with a free cash flow yield of 11%, is one of the top four in Canada with three other blue chip companies in the energy and resource sectors.

In conclusion, these third quarter results and updated guidance for the year reflect the efficacy of the strategy we embarked on back in 2000. The investments we have made in our core business in Canada with a disciplined focus on data, wireless and national expansions are continuing to drive growth and value for both our equity and debtholders.

Now over to George to review Mobility's strong quarter and recent developments in the wireless industry.

Thank you, Darren. Good morning, everyone. I am pleased to report Telus Mobility's industry leading financial results this morning. It truly has been another remarkable quarter for Telus Mobility.

Let me now turn to slide 13 and what this slide will illustrate is that our net adds were up 7 1/2% over last year's Q3. Importantly as well is that our post-paid net adds are actually up 14% year over year over last year's quarter. I think probably just as important for investors in the industry is that wireless net adds in the quarter were up amongst all the major players that have reported to date and that's very good news. I think should allow our major competitor to reconsider recent pricing decisions given the demand in the wireless industry is clearly accelerating.

Turning to slide 14, we see continuation of our ARPU increasing; our ARPU is up $2 over last year's Q3 and $4 up over the quarter prior, Q2 2003. We continue to see an increase in minutes of use which are up over 20% to 367 minutes a month now and all three of our categories are post-paid PCS, our pre-paid PCS and our Miche (ph) might network were up in terms of ARPU.

It represents the third quarter in a row that we have seen ARPU increase and again, I believe we are seeing summer effect in the industry for the second year in a row, where uses definitely increases in the summer months.

Turning to slide 15, this slide illustrates two important things, one from a Telus perspective in that we continued to maintain our 20% premium even though ARPUs have continued to rise. And just as important is ARPU is up across the entire wireless industry among the three players that have reported, and this is being driven by, as I mentioned already, MOU increasing, data and SMS services, improved network quality across the entire industry, the move to per-minute billing and just recently the move to new evening and weekend clock and it's interesting to note that we also offer the old clock as do our competitors, but for a $5 fee and over 50% of our evening and weekend clients are subscribing for the old clock but paying the additional $5 for it.

Turning to slide 16, our churn rate has improved again; it's a positive improvement from 1.7% last year to 1.4%. I still would strongly caution the analysts to model in at 1.5%. I think that's realistic given the industry dynamics and what we continue to model on. What is important to note, though, is that our revenue churn, though we don't report it, as no one does in the industry, is lower than our customer churn.

So we are clearly, when we lose clients, losing the right ones. In fact our revenue churn was as low as 1.2 in the quarter. We plan to continue to invest considerably in retention next year, probably close to $120 million our intention next year, representing upto 5% in revenue; we are seeing a remarkable return on investment in investing in this area.

Turning to slide 17, you can see that Telus continued to be among the leaders in North America in churn. You also can see that the Canadian wireless carriers generally are enjoying better churn than that in the U.S. Our churn rate of 1.4% is our blended churn rate.

Our post-paid churn rate in fact was 1.1% in the quarter, which is the lowest reported in North America. We think there are a couple reasons for this. Continue to be differentiated reasons over our competitors, we continue to be the only one to our knowledge that offers three-year consumer contracts as opposed to two-year contracts and continue to be the only carrier that does not offer zero priced phones for signing contracts. And although that does cost us in gross market share, we believe we attract the right clients when they pay for the phone and we see that in our usage and our ARPU performance.

Turning to slide 18, you can see here what thus illustrates, the improvement of our profitability through a focus on profitable subscriber growth. Our lifetime revenue of our subscribers has increased 26% year over year and for the first time ever our costs of acquisition has gone below 10% of the expected life of our clients and that's very important in terms of driving long-term EBITDA margin growth.

Turning to slide 19, clearly the highlight of the quarter for Telus Mobility. Let me first of all talk about EBITDA growth. Darren already mentioned the 49% being leading in North America. Clearly about management's expectation in a believe the investment community's expectations.

This is not just being driven through increase in ARPU, it's also being driven through hard disciplined cost management, in fact 97% of every incremental dollar on our network revenue flow to the EBITDA bottom line, which is clearly by far, industry-leading.

The head count is slack year over year. Approximately flat year over year, yet we have added 400,000 new clients. In terms of margin to, me this is from a management perspective, clearly a milestone, it's the first time ever that we have reported over 40% margin on network revenue. In fact, we were 43% on network revenue. I have indicated that I thought the industry would move to 40% in 2004, 2005, we moved there quicker than we thought.

I believe that the analysts should still be modeling in a 40% margin in the 2004-2005 time frame. I have not seen the discipline in the Canadian marketplace that would justify higher margins than that and so we are modeling in 40% margins going forward and if you look at the U.S. or Canada, our margin over 40 is leading. The only other carrier in that range is Nextel.

Turning to slide 20, we had a dramatic improvement in free cash flow, a 220% year over year improvement. It's the best cash flow quarter the company has ever enjoyed. This can be seen on the next slide, slide 21, our operating cash flow yield of 24% is getting extremely close to our target of 25.

I believe we have the structure in place to achieve the 25% cash flow margin as we go forward in to the 2004-2005 time frame. Although EBITDA margins will probably be more in the 40% range, I believe with the increased capacity next year would be six to one new technology on the MIC network, the ONEX capacity were enjoying the roaming arrangement we have that allows us to save capital and the fact that largely our coverage is finished, we can run the wireless business, in a 11 to 13% of revenue to CAPEX as we go forward the next couple years, will put us in a position to generate the 25% free cash flow and also at the same time grow the cash flow dramatically over the next few years.

Turning to slide 22, I would like to briefly comment on an industry development that I'm sure most investors are aware. On Early October one of our competitors, Micro cell, made a decision to launch a $40 a rate plan unlimited rate plan without any charge assistance license fee in the market of Vancouver. Telus Mobility responded very quickly, we were decisive in our decision and very direct in what we're doing.

We heard of the announcement on the Monday, we're in the market on the Wednesday, on the Thursday when the program launched in Vancouver. We were in the market in Ontario and Quebec with a plan to convert clients to Telus Mobility's network off of the Micro cell network, we had the billing flexibility to identically match their plan.

It is my belief that a $40 unlimited wireless program is not cash flow positive, free cash flow positive when you take EBITDA less cash flow and therefore, over the long-term is not sustainable. There is one positive. There is no doubt that an unlimited rate plan will accelerate penetration in the market in Vancouver and because of our superior coverage footprint we believe a number of the clients over time will turn to Telus and hence, see subscriber growth in Telus benefit from the move over the long-term.

In terms of the impact, clearly it will have an impact on our growth additions in British Columbia and an impact on our churn. However, I can tell you that our conversions are growing weekly. On a very positive side, 80% of post-paid clients converting are taking contracts with Telus and I am generally certain that we are converting more clients in the east. I am certain we're converting more clients in the east than we are losing in the west at this point in time and we will be continued to be aggressive in this manner going forward.

Turning to some positive developments in the industry, at slide 23, Telus Mobility recently announced the MIC network now provides for dispatch service for direct connect service on nationwide basis. We think this moves the MIC product to a brand new level in terms of commercial marketplace we focus on and we'll begin to see the benefits of that as we go forward next year.

We have largely completed our coverage in B.C. and Alberta, we now have a superior footprint, much stronger than we had previously and with the nationwide direct connect we can expect to continue to see significant growth in this area. We do expect next year at some point to see competition in this space with CDMA technology. I believe that addition competition, we may in fact see the direct connect market grow faster than it does just with Telus having that service.

Having said, that when CDMA comes to Canada, Telus will be in a position to launch it, we will have the same capability as our competitor would have in that area, although we will still continue to have MIC exclusively in the marketplace such that we'll have differentiation in the dispatch market but be in the market at the same time with the product that our competitor may have going forward.

Turning to slide 24, one of the most exciting announcements I think for Telus Mobility in years it was launch over the last week of camera phones and picture messaging. Our product is differentiated in the market, it's a branding campaign that is extremely unique, you should have started to see some of it now, our name is not attached to it, will be shortly, launched the phone with no subsidy unless you're on contract, with a first CDMA carrier in Canada to launch camera phones, we're the only carrier in Canada that allows to you send and receive images with sound between the handsets in terms of the picture.

We're charging very consumer-type pricing at 25 cents per picture as posed to volume of picture, we have actually our pricing is based on a price per picture which we think will be future-friendly, intuitive to the user, and as I mention we have a strong brand campaign behind this and where he extremely excited about this launch given the early results in the U.S. that have been reported by some of the major carriers who launched camera phones over the last 90 days.

In summary, turning to slide 25, we had a tremendous quarter, all metrics moved the right direction and our focus at Telus Mobility is to continue to focus on profitable subscriber growth, not just subscriber growth to continue in our leadership position on a North American basis. Over to you, Bob.

Great, thanks, George. Congratulations on the quarter. Turning now to slide 27, I'll begin my comments with a brief review of our Q3 operating results before discussing some recent developments in review of our guidance. Consolidated operating revenue increased 2.3% for the second quarter of 2003, when compared with the same period last year.

Of particular note, consolidated EBITDA excluding restructuring and work force reduction costs increased a significant 14% due to dramatic cost structure improvements in our communications segment and tremendous EBITDA growth, which you just heard about in our Mobility segment. Overall, third quarter profits grew to $116 million for the quarter, and current EPS was up to 32 cents, inclusive of 5 cents relating to a favorable tax settlement. Both sharp turn around from the negative numbers last year due to restructuring charges.

Turning to slide 28, we can see the earnings per share measure for the third quarter of 2002 and 2003, normalized for certain one-time items. After backing out the impacts of the restructuring and work force reduction costs, favorable tax settlement and gain on debt buy back last year, normalized EPS growth is about 16 cents.

Now to slide 29. We continue to exercise discipline on expenditures this quarter, with CAPEX down 7% from a year ago. As a result, CAPEX intensity measured by the ratio of CAPEX. The sales decreased by 2% points year over year to 17%. The reduced CAPEX in combination with the increased EBITDA resulted in a remarkable $417 million of free cash flow in the third quarter of 2003 alone. This represents a 74% or $177 million improvement in quarterly free cash flow generation.

Slide 30 shows the components driving our tremendous free cash flow generation for the three and nine-months ended September 30, 2003. Regardless of which definition is used, we are generating significant cash flow. As already mentioned, free cash flow of $417 million was generated in the quarter, and this is a significant accomplishment and reflection of the financial strength of our company.

The strong third quarter free cash flow generation has brought the nine-month year-to-date result to $862 million, which is almost a $800 million improvement year over year. The strength of this result is further reflected in the fact that our original target for 2003 was only 300 to $600 million. As a result of this better than expected result, today we're improving our annual 2003 free cash flow guidance for the third time this year by raising the low end of the guidance range by $100 million so the new range is $900 million to a billion.

On slide 31, you can see the results of our wire line segment Telus Communications. Revenue was down 3.8% from a year ago, or 2.9% when normalized for approximately $12 million in negative price cap decision impacts. Despite this revenue decline, Communications EBITDA improved 2.1% as the operational efficiency plan helped drive an 8% decline in operating expenses. Declining communications CAPEX led to a 12% cash flow improvement year over year.

Slide 32 emphasizes one of our key priorities that are delivering operational efficiency in our communications segment. At the end of the third quarter we had reduced 6,000 positions in phases 2 and 3 of the OEP beginning in 2002 through voluntarily and early departure programs without resorting to layoffs.

We expect to meet our year end target for net OEP employee reduction of 6500, with most of the remaining departures being in December, the last possible date for employees to select their departure date under our voluntary programs. During the quarter, we achieved incremental savings of $80 million bringing our total cost base improvement for the year to $279 million, and $429 million since the beginning of the OEP.

We're clearly tracking to achieve our 2003-year end target of $450 million. We're also intent on achieving our target of cumulative annual ongoing savings of $550 million by the end of 2004, resulting from these efficiency improvement efforts.

The next slide shows Telus' labor productivity as measured by annualized EBITDA per full-time equivalent employee. As you can see in the past year, communications segment annual labor productivity is improved by 20% as a result of the OEP program's success. Mobility segment labor productivity has improved by 48% in the past year, despite adding about 400,000 net subscribers over this time frame. This demonstrates both economies of scale being realized and cost containment being delivered. On a consolidated basis, these impressive gains have led to a 29% improvement in labor productivity in just one year.

Now let's look at our usual non-ILEC chart showing quarterly process for that part of the business. Third quarter, non-ILEC operations generated $138 million revenue, a 2% year over year improvement. However, the revenue growth rate is somewhat understated due to the sale of a asset in the second quarter of this year, which reduced quarterly revenues by approximately $7 million. Normalized for that asset sale, Q3, 2003 non-ILEC revenues would have increased by about $10 million, or 7% year over year.

In addition to sequential EBITDA being impacted by the Q2 asset divestiture, as mentioned on our last quarterly conference call, Q2 non-ILEC EBITDA benefited from someone-time true-ups totaling approximately $4 million. So normalized Q2 EBITDA would have been closer to negative $10 million.

As a result of these factors, the negative $6 million result in Q3 represents an improvement in the underlying non-ILEC EBITDA sequential run rate. And puts the non-ILEC operations on track for positive EBITDA in 2004. Slide 35 highlights TELUS high-speed velocity Internet growth. The 47,000 net high-speed additions in the third quarter of 2003 marked a notable acceleration in load, given the 2003 year-to-date result of 106,000 as indicated in the green portion of the bar, second from the right.

As a result of a strong Q3, TELUS total high-speed Internet base was approximately 516,000, at September 30, 2003. As shown in the slide, we're increasing our high-speed internet net add target for the year to approximately 150,000 from the former guidance of 125,000, so we expect to finish the year with about 560,000 subscribers, which would be over 2 1/2 times the 215,000 total of only two years ago.

Turning to slide 36, you can see that TELUS Mobility, as George mentioned, continues to perform exceptionally well across the board, revenue was up 16% from year ago due to a combination of strong subscriber growth and increased ARPU. EBITDA was up an impressive 49% due to the strong ARPU, reduced churn rate, cost containment and operating economies of scale.

The extent of the cost containment and improved efficiencies is reflected by the fact that 97% of service revenue growth flowed through to the EBITDA line in Q3. Mobility CAPEX declined slightly, when coupled with strong revenue growth resulted in CAPEX intensity decreasing to 15%, which I believe is one of the lowest, such ratios among major operators in the wireless industry. Mobility achieved both outstanding growth and significant cash generation, as reflected by EBITDA less CAPEX increasing to $150 million in the third quarter alone, as compared to $68 million last year. year.

Turning to slide 37, the bars represent total wireless subscribers while the green portion represents the net adds for the respective period. In the third quarter, Telus had net of 102,000, bringing year-to-date net adds to 270,000, ahead of the pace we were formerly expecting. So as shown above, in the slide we're again increasing our net sub subscriber addition for 2003 to approximately 400,000 from the former range of 350 to 375,000. This means we expect to approach a total of 3.4 million subscribers by year-end. Slide 38 shows the strong margin expansion across the board at Telus.

In Communications, our ongoing OEP program has boosted margins to 42% from 40% a year ago at mobility EBITDA margin over total revenue has increased by a remarkable 8 points to 39% in the past year, benefiting from strong revenue growth coupled with disciplined cost containment. In terms of network revenue as George mentioned, Mobile posted a record 43% margin, a 9-point year over year margin expansion.

On a consolidated basis, Telus delivered a truly impressive 4-point increase in EBITDA margin from 38% in the same period last year to 42% this quarter. Slide 39 depicts the nine-month year-to-date cash flow improvement in our Mobility and Communications segments, as you can see, Telus enjoyed dramatic growth in cash flow as measured by EBITDA less CAPEX, of approximately $326 million at Mobility and approximately $410 million at Communications, significant achievements indeed.

Turning to slide 40, you can see that free cash flow generation combined with the equity issue and debt repurchases over the past 12 months has led to reduction in the net debt EBITDA ratio from 3:4 times at the third quarter 2002 to 2.7 times at Q3 2003. We have already achieved our previously updated year-end guidance of less than or equal to 2.8 times ahead of schedule, yet again. In spite of our traditional large fourth quarter semiannual bond interest payment, where for the first time since this public bond issue in 2001 expecting to have break-even to positive free cash flow in the fourth quarter.

Accordingly we're again revising 2003 leverage target, this time to be less than or equal to 2.7 times. I would like to briefly review Telus intentions with regard to the significant free cash flow being generated by our company. During the third quarter Telus reduced net debt by 500 to $516 million. In addition, as a result of applying cash from operations towards repaying our revolving bank line, as of October 6 we no longer have an outstanding balance drawn on our bank credit facility. With the continued surplus funds that we're generating, it's now our intention to significantly reduce accounts receivable securitization program going forward.

Turning to slide 42, you'll see the revisions to our communications segment guidance for 2003. The revenue outlook decreased slightly to 4.8 to $4.85 billion reflecting softer than expected demand. We have also narrowed our annual EBITDA guidance for Communications to 2.025 to $2.05 billion, the mid-point range of previous guidance. With only a quarter to go, CAPEX guidance has been tightened to 850 to $875 million, the low end of previous guidance. Ad S&L --ADSL guidance revised upward to approximately 150,000 for the year based on results year-to-date, expectations for industry growth for the rest of the year.

Turning to slide 43, yet again we're upwardly revising Mobility guidance for 2003 to reflect continued strong operating results ahead of expectations. The revenue outlook has been increased to 2.3 to 2.35 billion. We have correspondingly increased annual EBITDA guidance for the third time this year, this time by $25 million to a range of 775 to $800 million. CAPEX guidance has been decreased at the top end to 350 to $375 million. Reflecting the strong Q3 loading results wireless net addition guidance is being revised upward again for 2003 to approximately 400,000 from the former range of 350 to 375,000.

Slide 44 shows our updated consolidated guidance. Our 2003 consolidated revenue outlook remains unchanged. However, we have tightened annual EBITDA guidance from 2.75 to $2.85 billion to a new 2.8 to $2.85 billion reflecting continued strong efficiently enhancements and strong performance in our Mobility business.

The EPS outlook is being adjusted upwards to 85 to 95 cents, largely due to a five-cent positive interest credit related to a favorable tax settlement. Our CAPEX guidance is being adjusted downwards to lower end of our existing range, our guidance for free cash flow is now approximately $900 million to a billion, which I'll detail further in the next slide. As mentioned previously, we're also improving our net debt to EBITDA guidance to less than or equal to 2.7 times.

Slide 45 provides an updated view of our detailed 2003 free cash flow outlook based on expectations for EBITDA, CAPEX, interest, cash taxes and dividends. After taking in to account working capital changes, proceeds and share issuance associated with the dividend reinvestment plan, as well as the employees share purchase plans and cash restructuring cost paid out during 2003, the outlook for cash available for debt reduction has improved significantly by 540 to $940 million from the original 2003 target range. It is note worthy that even after deducting approximate $200 million favorable Q1 2003 tax settlement in interest credit, 2003 free cash flow would still be in the 700 to $800 million range.

Slide 46 provides a look back at our outlook for 2003, provided in July of last year, just after we received various credit rating downgrades which stimulated market uncertainty about the prospects for Telus to deliver on its plan. What a difference 15 months makes. As evidenced here, very significant progress has been made in these cash flow and debt metrics. The fact we surpassed all three by substantial margin, have executed well ahead of plan.

To wrap up on slide 47, Telus continues to deliver on its operational execution, at Telus Communications OEP and non-ILEC progress on track offsetting revenue softness and negative regulatory impacts. Telus Mobility continues to deliver excellent results. We are seeing significant profitability increase in terms of both operating margins and in the EPS line.

We now anticipate generating approximately $900 million to a billion dollars in free cash flow this year enabling to us significantly reduce our debt, including recently paying off our bank facility and we expect leverage to continue to drop going forward. Continued operational execution has led to an improved 2003 cash flow and earnings outlook as evidenced by our positive revisions to guidance for the rest of the year.

In summary, Telus is delivering on its strategy and I look forward to outlining our 2004 targets on our December 18th conference call. Thanks, John.

Thanks, Bob. Operator, we would like to take some questions now on the line. I would like to remind the investors who are asking the questions to please limit your questions to something that's manageable, like one question and not three-part, just questions with no relation to the one question. So please limit it so we can deal it with and move through the queue. Please go ahead, operator.

Thank you, sir. Ladies and gentlemen, if you would like to register a question, please press the "1 4" on your telephone. You will three a three-tone prompt to acknowledge your request. If your question has been answered and would you like to withdraw your registration, please press the "1 3". If you're using a speakerphone, please lift your handset before entering your request. Our first question comes from the line of Richard Talbot from RBC Capital Markets. Please proceed with your question.

Thanks very much, good morning. Congratulations on the numbers. I have two questions for Darren. First is, I would like to explore a little bit the encouraging contract you've signed this morning with IBM and GD.

What I'm wondering there, is if you could give us some sense as to what incremental CAPEX you need to incur to offer that service. And do you see building infrastructure that would have been above and beyond your plan and to what extent you'll be able to piggyback off that new infrastructure to secure additional contracts. And then if you could comment in general how the pipeline for wholesale activity looks.

Second question has to do with clearly the earnings picture has improved, your run rate would now be north of, let's say $1 of earnings per share. Free cash flow of about a billion dollars after the dividend. I'm wondering if you could comment on how your priorities are' evolving for how to redeploy the free cash flow and could we be on the verge of seeing an increase in shareholder value in terms of a dividend? Thanks.

Richard, of course we're very pleased to have secured the contract with IBM and the GD bank financial group to provide them with a managed data network solution for their 1200 branches across Canada. This is actually a landmark deal since the liberalization of the Canadian Telecom market.

In respect of the capital required, it is not material because we will be leveraging the next-generation network that we have spent considerable amounts of time, effort and indeed capital deploying over the last three years so, that is the asset that, which we will be leveraging, which will underpin the data network solution that we would intend to deliver to the GD bank financial group.

In terms of next year's plan, while we have not yet provided our guidance for 2004, I think we have stated publicly on several occasions that we intend to operate within a CAPEX intensity zone of 15 to 17% and I do not envisage anything, whether it's GD, anything we would wish to do to enhance ADSL capabilities in western Canada to deter us from that particular objective.

The other thing that you actually touched on which is an important point, as we go to address those 1200 branches across Canada, to the extent that we can expand our network, our core network, our on-net facilities by leveraging the GD network solution so that we can address other customers in those locales, we will actually seek to do that so that we can improve the economies of scale and scope that we get out of the td deployment, and that is very much front of mind for our organization.

In terms of the wholesale market in and of itself, that's a market that you know that has been quite challenging for us. As a result of the rationalization that has transpired within our industry, I would say that thus far this year we are quite satisfied that with the performance of our wholesale business and we're actually looking for new markets within the wholesale domain to expand our Telecom expertise and I would say I am not displeased with the performance of that part of this organization.

Finally in respect of the significant cash flow that this organization is generating, as you will know, Richard, the primary purpose right now for that cash flow is to repay the debt that we have incurred to expand nationally on a wire line basis, indeed expanding nationally to put the next generation network in place, supporting the td deal, expanding nationally for our wireless capability and coverage and of course, rolling out ADSL services across western Canada.

So, the primary use of that cash for the foreseeable future and not to make too fine a point, essentially I'm talking over the next 12 to 15 months, will be to continue to repay the debt that we incurred to go after the well publicized credit metrics that we have established in the marketplace. Once those objectives have been achieved, then we will look forward other uses for our cash.

And to this particular point again, I think we have been reasonably clear to the extent to which we have exhausted all of the core business development opportunities in Canada, so on strategy core business development opportunities in Canada and we have surplus cash, then we would seek to return that cash to shareholders in the most tax efficient mechanism possible, and you can surmise that that may involve one or two alternatives.

Thanks. If I've got my numbers right, though, the amount of debt that actually comes due over the next two to three years is relatively limited. Bob mentioned the accounts receivable securitization, fair enough. I'm just wondering how you look at the trade-off between premiums of calling in bonds versus other alternative, which would be a cash buildup.

Richard, in all due respect, I think that's the fifth question, you're the leadoff follow. You can give me a call directly, I think out of courtesy to others we'll move on.

Our next question comes from the line of Glenn Campbell from Merrill Lynch Canada. Please proceed with your question.

Yes, thanks very much. A couple of details on wireless for George. First, I was wondering if you could give us a sense of how much of the ARPU pricing drives lift year over year. And also whether you think you'll be able to continue to hold head count flat in the coming year.

Sure. On the increase in ARPU, Glenn, it's been a multiple of things. We have move to for a per-minute, the expansion of MOU, the increase in SMS, and I mentioned there have been some new pricing initiatives predicted at EW clock, that really hasn't had any impact yet, only started in the marketplace in the July-all time frame. In terms of head count, we won't be able to hold it flat in to next year.

We have growing out a lot of the efficiencies in the merger 97% of revenue flow through, we would love to see that rate and the growth we're experiencing can't continue that forever. So our expectation is head count in our group will primarily come in two areas.

It will come as we grow distribution through expansion of our stores, and in the client care areas as we continue to add subscribers, we have a ratio obviously of employees we have to support that. With a target of somewhere, we like to see in the 65% to 70, 75% incremental revenue flow-through to next year. And that will still provide significant cash flow growth for the company.

OK, that's very helpful. Thank you. On the wire line side, Darren, I appreciate your clarification on CAPEX for next year with relation to DSL that is quite useful. I wonder if could you update us on your thinking about the trade-off between pushing fiber deeper, getting higher DSL speeds, the cost and the ability to support high definition TV. These are issues that are on a lot of people's minds, we know you're thinking about it very carefully. If there's anything you can tell us about what the trade-offs look like, it would be very helpful.

Richard, well, we have not disclosed the capital we would intend to invest should we indeed decide to proceed with a TV solution over the ADSL infrastructure. As I said repeatedly, that is contingent upon first making sure that the economics are attractive and that we're improving the return on investment in respect of our original ADSL investment in the first place.

Also we want to make sure the technology is sufficiently robust, strong commercial differentiation so that if we do enter that market, we're differentiating ourselves with other than price, we don't am no ties value, but grow the overall market. I think it's important to point out our whole philosophy on the ADSL front is to improve return on investment in respect to the $800 million that's we have deployed rolling out ADSL in the first place and we're looking to improve the economies of scope. We're looking to leverage existing infrastructure rather than implement an overlay network or overtake a network refurb.

The other thing that's important for people to reflect upon is that if we did indeed decide to go forward, this would not be a big bang deployment. It's much different than the foot race for verging customers, which was the case for ADSL. This is going after an existing customer base with a differentiated solution.

So the capital would be much more spread out. And we would take a very progressive and considered approach to future upgrades to things like ADSL 2-plus or BDSL that would support high definition TV but similar to 3G on wireless front, we would only make that move if the economics warranted it and customers willing to pay an economic rent for that higher bandwidth and the application that's it would support. The other thing that's important in terms of any move in to this particular area, we would look, be looking to pursue customers we already secured through our ADSL offering.

A couple of other points I think that are important for investors, is that one of the most indeed the most significant element to a capital deployment in respect of IP TV is the set-top box, variable in nature, indeed we only incur that CAPEX if we indeed secure the TV customer.

Finally, I contemplated IP TV deployment, should we decide to proceed, is a natural extension of data strategy in the underlying technology from the core network in to the access layer of our network, which essentially means we're eradicating the traditional demarcation between core and access and I think that's quite a positive development.

From an investor perspective in respect of capital, we're deploying same equipment in the access layer that we would deploy within the core, that's very important in terms of risk management because we can redeploy this equipment back in to the core, if that was called for, and indeed we can enjoy purchasing economies because what we're buying for the access layer to support IP TV is the same equipment that we're buying in our core network to support our next-generation network.

Finally in respect of our IP-based solutions, it means that our entire network obviously is now going to be IP-based going forward and we think that we can expect to enjoy significant cost reductions as this technology develops from both manufacturers and indeed application providers. Finally and again importantly, we would not be looking to alter our CAPEX intensity target of the circa 15 to 17% zone that we have been communicating all along.

Finally again on the HDTV front, it's important to point out that our service will be all digital in nature from the outset and that it will be better than traditional analogue TV service in terms of quality and certainly comparable to satellite and digital TV at the very least. We think the conversation that's are transpiring right now in HDTV are slightly premature.

This is a niche service, where very few TVs are available with, that, very little content and that we have more than sufficient time to upgrade to ADSL 2-plus, and VDSL and MPEG 4. Again, if that investment in bandwidth is associated with a greater economic rent from the application, if the are customers are demanding.

Very helpful answer. Thank you.

Our next question comes from the line of Vincent Valentini from Td Newcrest. Please proceed with your question.

Thanks very much. Maybe a difference bit on the dividend question is. You seem to increasingly have two businesses within one year. You got this incredible wireless growth engine that's obviously doing better than most of its peers.

Then you've got this cash flow engine in your ILEC side, which doesn't have much growth, but you're doing a great job reaping the cash flow out of it. It doesn't seem like the stock market is willing to value these two pieces separately, and sort of optimize the value for you. How long are you willing to sort of go with that? Or do you get frustrated at some point, and look to some way to surface value through some sort of restructuring?

OK. Well, I guess a couple of things, Vince, from the outset. Number one, we don't manage our business from a financial engineering perspective. But we manage our business with a focus on the customer, and how we differentiate ourselves from the competition.

And I think one of the things that we're perhaps most proud about is that we have been on the page of integrated solutions from the outset in 2000, I think that's what our customers, in fact I know that's what our customers are looking for, indeed that's what your organization is looking for Vince, in terms of a solution from the Telus organization. I think that's one of the strengths that we have as an organization is our ability to provide that integrated solution, and differentiate ourselves from a lot of the competition. So there is very little, but I would ever want to do to mitigate what I see, or I construe as a significant competitive advantage.

The other thing that's perhaps we are pointing out, believe it or not, you may not be wholly convinced but I haven't given up the ghost in terms of realizing growth in the wire line side of our business, I believe that there is significant opportunity within the ILEC, for greater penetration, or greater wallet share of both our business and consumer customers. And I think that wallet share gain that we should be able to realize, should be more than sufficient to offset competitive intrusion in to our market place.

On a non-ILEC front we have a market opportunity in Ontario Quebec, which is at least three fold the size of the market in Alberta and B C, which I think is quite encouraging, and certainly in terms of the profitability improvement that you are seeing from our non-ILEC business right now, we would hope for that business, to make not just a contribution to revenue growth, but also to EBITDA accretion and there after in 2005, beyond to the free cash flow generation of this organization.

I also think that we have significant opportunities in the consumer market in Alberta and B C. in Eastern Quebec, where we enjoy a relationship with up to some three million households, a very strong relationship and indeed we have a very strong brand and we now have high-speed infrastructure in place and I think that opens up a realm of possibilities for us that should resonate with our customer base and align very much with our brand strengths. So from our perspective right now, we are going to continue to operate as an integrated solution. That's the type of organizational structure and marketing ethos that I think underpins long-term competitiveness and long-term success for this organization.

That's great. A follow-up to pick up on one thing you mentioned, in terms of ILEC growth, can you comment on the CRTC notice from last week? It seems like they're almost trying to tell to you raise your prices in the business market, which I assume could have a positive impact on your ILEC revenues in the future. And maybe you can also comment from your non-ILEC perspective how you think that may impact you?

Well, I think one of the advantages of national expansion is that it acts as a regulatory hedge against adverse regulatory decisions. Indeed, what hurts us in our ILEC helps us as the new entrant in Ontario and Quebec is of course obviously the reverse is also true.

We're still digesting the CRTC decision from last week, but I would say as a point of principle, Vince, any opportunities that we have are to increase prices on a basis that creates greater economic value for shareholders whether its in with in a wireless or wire line business, you can expect to see us leverage those.

Again, you know, we're very cautious in terms of decisions coming out of the regulator these days, we are hopeful that they carry on with the policy of infrastructure or facilities based competition because we think continuity in terms of regulatory model is important in terms of making appropriate investment decisions. We do not view competition within the Canadian marketplace as being weak by any stretch of the imagination.

Indeed, I think the regulatory model has been quite successful. I think we need to encourage the regulator, I would ask you to encourage the regulator to take a broader view of competition rather than just ILECs and traditional new entrants within wire line communications and begin to define the market more broadly that takes account of new disruptive technologies such as voice over IP, takes account of things like fixed wireless substitution and also recognizes the more significant role that the cable operators are playing in driving competition in to the consumer market. So I guess you can take our, or draw inference from those comments. I would never be specific in terms of a price increase on an investor call, because I do not believe that's in our best interest.

Thanks.

Operator, and people on the line, we have quite a queue here, we would like to move through the queue. Can we please have one question.

Our next question comes from the line of Greg McDonnell from National Bank Financial.

Good morning, guys. Question goes to George Cope if we can get back to the wireless segment for a second. George, things have changed obviously in materials of the outlook across the industry for sub growth, we started off the year sort of 400 to 450, down to 350, back up to 400. And you know, I know you're not missing anything in the market here.

So things have obviously changed in terms of trends. I wonder if you might just comment on what is happening in the industry from your perspective to see the re-acceleration, I guess, if we can define it that way, in the industry sub growth. And in particular, people have a lot of different views on this, but do you think we're starting to see the beginnings of a acceleration in the wire line substitution trend?

Thanks. Are you right, in fact we're back to where we were on pretty much where we were on the original guidance at the beginning of the year. A couple things I guess I would add. One is I think the industry was surprised in the first quarter, the numbers were down over the year before and I'm still not sure whether or not there was such an aggressive fourth quarter last year we pre-bought some of the first quarter, because second and third quarter were closer and frankly showed improvement on a year over year basis.

I think the things that are driving it and in a more general comment than something we can put our finger exactly on, clearly the services that all the carriers are bringing to the market, the SMS service, camera services, the products just have so much more than it did a few years ago. I mentioned quality of the network. We have certainly when you good et to north of 40% or there's around the world sort of a inflection point, there you can see where growth has had some acceleration in other countries, probably benefiting from part that as well.

And I think those are probably some of the reasons driving the growth penetration that we're seeing. And you know, clearly investors still have a great opportunity in Canada as we still lag the U.S. by two years and historically just show we just follow that curve 24 months behind and that again is happening.

In terms of the substitution effect, I think there is minute substitution, clearly, why we're seeing increased number of minutes on the wireless networks and that's obviously a very accretive for Telus because we have a national wireless franchise in every market in the country. And so obviously we are seeing some minute expansion and I would think part that comes off of historical landline.

Our next question comes from the line of Peter Rhamey from BMO Nesbitt Burns. Please proceed with your question.

Yes, just continuing on that theme, George, maybe you could talk a little bit, you cryptically said, you mentioned lack of discipline in the industry. I was wondering whether you're referring to city fido or other things you're thinking about when you look at the outlook for your company. And connected to that, could you talk a little bit about CAPEX. The CAPEX reduction, is that fine-tuning or are you seeing fundamental changes in how you're doing business and performance that technology? I'm talking over the last three months versus longer-term trend of the last year or two.

Yes, in terms of pricing, clearly the Fido, I have commented on, I don't think I have to add anything there. I think we have seen some things that we're not encouraged by, that we would question. Certainly bundling is part of the marketplace, part of our market in the west. But 15 to 17% discount on bundles in a market that's growing, it wouldn't be a strategy that certainly I would be leading at Telus Mobility.

And I guess secondly, we are in the business market in western Canada, beginning to see our largest competitor offer one-second billing to new clients. We're hoping that won't continue. Certainly we will not move off of one second billing at this point, we think it's been very accretive for us and we don't think it effects demand in the industry. So that's been a bit of a disappointing development and maybe with some, with everybody seeing the demand that's in the market again, maybe we'll see a reversal that approach, those have been some of my concerns recently.

But I think having said, that our strategy of profitable growth will continue to be our strategy, though we will move strategically from time to time to, for lack of a better term, lend discipline to the marketplace.

Thanks

Our next question comes from the line of Rob Goff (ph) from Hayward Securities. Please proceed with your question.

Thank you very much. What are the drivers behind the increased long distance competition? And where will it end? What will cause an end to the increasing price competition? Thank you.

Well, just to jump to the conclusion, I think rationalization in the market affecting the fact that ill advised non-economic pricing strategies only have one conclusion and I think we have already seen that in one instance in the Canadian Telecom market.

And I would say if people do not emerge or entities do not emerge with new pricing disciplines or new strategies, they are going to have the same outcome all over again, so a one aspect or one part of the response would be people waking up and behaving in a way that reflects better pricing discipline to drive economic value creation or if they don't do that, then inevitably rationalization in the market will instill the discipline in and of itself, Rob.

I would say from a Telus perspective more particular, we have seen two things transpire within our business between the business side and the residential side. On the business side we have seen erosion on LD post-the demise of stent or adds eastern based corporate have consolidated their LD spending with one of our competitors.

We have seen that particular development now reaching a conclusion and we're seeing much better stability on the business side. On the residential side we have seen an overall decline in minutes. That's driven by I think as you're well aware, a number of factors. Two of which are wire line, wireless substitution and that particular area, just speaking directly to wire line, wireless substitution, we feel that that's development that can be somewhat mitigated within Telus as a result of having the Telus Mobility organization.

So whatever shifts out of the wire line side of the business we do have a fair share of those minutes being picked up by Telus Mobility. The other thing that's worth pointing out, when we worth ob numbers they are purely wire line LD, we do not include LD for our wireless business in our reported LD numbers that are in our disclosure. And the other second development of course has been second line loss or second line erosion from the development of high-speed Internet access.

I would say Telus is an organization, if you look drastically over the last three years, fairly resilient in terms of market share in respect of residential and business long distance services. Right now as an organization we're focused very much on launching or in the process of launching a range of marketing plans to slow the average revenue per minute erosion that we're seeing as a result of price competition.

And as well to stimulate more LD minutes to try and improve our performance in that particular area. I think one thing has worked against us in respect of the discipline of our strategy and that's the fact that we have entered Ontario and Quebec with a focus very much on selling managed data network solutions on the, and not follow the easier route of being purveyors of long distance services.

I have experienced that particular new entrance strategy in the past and I can tell you it has particularly unpleasant outcome if the only differentiating factor between you and the incumbent is in respect of price on commoditized services such as long distance. So we're very much focused on the value-add side and very much focused on LD, or rather very much focused on data and as a result we do not really have a compensating LD development in Ontario and Quebec to mitigate some of the pressure that we have experienced in Alberta and in B.C.

Finally, I guess in respect to our organization, two concluding points. Number one, we're looking to leverage new technologies such as Voice-over IP, which we have brought to fruition through next-generation network, to lower the cost base of LD services so that even in the face of price commoditization we can preserve margins because simultaneously we're reducing our cost in respect of that particular product line. I think as well for our U.S. audience, it's important to point out that long distance only accounts for about 14% of our revenue composite. So we are not unduly exposed to commoditization in that particular product line.

Next question, please.

Next question comes from the line of John Henderson from Scotia Capital, please pre proceed with your question.

Thank you. I would like to talk about your service levels and to what extent do you think the deterioration in service levels over the summer is a result of poor employee morale and sort of, you know, possible work to rule behavior? And how much time do you think you have to correct these measures in view of Shaw's deliberations? I guess if you have any reaction to Shaw's deliberations on IP telephony that would be helpful too.

Thank for that question, John. I guess let me start off by saying I do not believe that the customer service deterioration that you've referred to has any correlation with poor employee morale. I would say quite the reverse.

The effort and the behavior of our employees in the face of numerous natural disasters has been nothing short of stalwart and exemplary and I could not be more proud of the way that they have risen to the challenge presented to us, particularly within B.C. coming from a series of exogenous events.

I would say first off on the customer service front, what's important to understand is that we expected to go through some customer service pressure points as we drove the transition related to the operational efficiency program. I don't think it's possible to take 7200 people at a growth level out of your organization without experiencing and being forced to deal with some pressure points in respect to customer service. Interestingly, I think we have done a very good job honoring commitment to try to hold the line on customer service. But it's really the tale of two components of our business, consumer and of course the business segment.

On the business segment while holistically we think we're holding the line, on the business segment we're actually performing better within the ILEC territory than what we did previously to the operational efficiency program.

Where we're experiencing customer service challenges is in the consumer segment of our business. I think you're recollect within the consumer side of business we have seen significant changes. We have gone, for example, 66 call centers in 19 locations to 19 call centers in six locations. Ultimately this to apology will yield better service for customers, but of course the transition period is particularly challenging for the organization.

As I alluded to at the beginning of my comments in this question, we have been impacted by several exogenous events, which indeed have almost been unprecedented. We have very had very serious climatic events within British Columbia that have included the worst forest fires and floods we have experienced in over 100 years.

And of course, on top of that we have been impacted by viruses and power outages and most recently we were hit by a third party construction incident where a third party Construction Company blasted through our major cable within the Vancouver corridor. That is not to say that all the issues that we're facing on customer service are related to events beyond our control. We have also seen some management challenges. I would say that the system's implementation and support of the rationalized call centers has not gone as smoothly as what we would have liked but we're progressing well now in that particular area.

Of course, in respect to the scheduled exits, 7200 growth exits that I alluded to earlier, that has moved according to plan, but our hiring to backfill, get to the 7500 net figure, is not proceeded at the pace we had hoped for.

And we have been very disciplined in terms of bringing people in to the organization and we have no desire to compromise our standards because we think that will be the wrong thing to do for the longer term. I think it's important for investors to know that we have now, and I mean now, turned the corner in respect of customer service and the trend line indicators on all customer service metrics, without exception, are quickly headed in the right direction.

And I will underpin the comment again that I made in my opening comments this morning, we will be delivering, and this speaks directly to your question, John, superior service on a uniform basis to our pre-operational efficiency program performance levels by December of this year.

So I think we're in a very strong position going forward to bring service levels to a performance position that's better than what they were pre-OEP and then seek to have customer service as a positive differentiator going forward. I guess last comment I would like to appreciate or express my appreciation for patience and commitment of our consumer customers as we emerge from this challenging transition period.

OK. Operator, we will take one more question, and that will be it.

Very well. Our next question is from Dvai Ghose from CIBC World Markets.

Thanks for sneaking me in. Question about wire line margins, Darren or Bob. First time in six quarter that's your wire line margins haven't improved sequentially. I'm wondering if that's attributable to the strong DSL net adds, natural disasters you spoke of or if there are other factors and/or would you argue on the other hand you're beginning to Mack out in terms of wire line margins with the impact of the OEP largely now complete.

Well, in terms of year over year, this would be the first quarter since the beginning of the OEP that we have had significant OEP savings in the prior period. So consequently the math would be a declining Kayger (Ph) in terms of efficiencies year over year, to be expected, the math of the program.

In terms of sequential quarter to quarter, I don't think there's any particular trend that one can read in to that or unusual items to mention. I think we're actually quite pleased, the third quarter margin on the wire line communications segment, certainly exceeded our expectations and our business plan, our budget, and so we're comfortable with that and so there's really nothing out of the ordinary to indicate to you.

OK, thank you very much, operator. I would like to thank you very much for the investors and others joining the call today. And I would like you to direct any questions that we didn't get to, to my investor relations team and myself for follow-up questions. We obviously appreciate your interest and continued support. Happy Halloween.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.