Executives: Thane Fotopoulos - Investor Relations George Cope - President and Chief Executive Officer Glen LeBlanc - Chief Financial

Officer
Analysts: David Barden - Bank of America Simon Flannery - Morgan Stanley Aravinda Galappatthige - Canaccord Genuity Maher Yaghi - Desjardins Capital Sanford Lee - Macquarie Jeff Fan - Scotia Bank Drew McReynolds - RBC Vince Valentini - TD Securities Batya Levi - UBS Richard Choe -

JPMorgan
Operator: Good morning, ladies and gentlemen. Welcome to the BCE Second Quarter 2018 Results Conference Call. I would like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead, Mr.

Fotopoulos.

Thane Fotopoulos: Thank you, Donna. With me here this morning are George Cope, BCE’s President and CEO and Glen LeBlanc, our CFO. As a reminder, our second quarter results package and other disclosure documents, including today’s slide presentation, are available on BCE’s Investor Relations webpage. An audio replay and transcript of this call will also be made available on our website.

However, as usual before we get started, I want to draw your attention to our Safe Harbor statement on Slide 2. Information in this presentation and remarks made by the speakers today will contain statements about expected future events and financial results that are forward-looking and therefore subject to risks and uncertainties. These forward-looking statements represent our expectations as of today and accordingly are subject to change. Results may differ materially. We disclaim any obligation to update forward-looking statements except as required by law.

Factors that may affect future results are contained in BCE’s filings both with the Canadian Securities Commissions and the SEC and are also available on our corporate website. With that, I will turn it over to George.

George Cope: Great. Thanks, Thane. Good morning, everyone.

Thank you for joining us. I will just begin with a quick overview and then hand it over to Glen. First of all, clearly, we had an excellent quarter in terms of broadband growth from a year-over-year perspective 154,000 subscribers bring wireless, postpaid, Internet and IPTV, up 44% on a year-over-year basis. And importantly, all three categories had some significant improvement on a year-over-year basis. The 2% EBITDA growth for the company also helped drive slight margin improvement to 42%.

On the wireless side, we just continue to see strong financials and strong wireless net adds, of the net adds of 122,000 postpaid are our highest in 18 years in terms of the growth that we saw and of course even within that, we achieved some are reasonably strong EBITDAR growth and again slight margin improvement albeit accounting of the industry has changed year-over-year as everyone knows. Wireline, good quarter EBITDA of 1.1% driven by some strong residential revenue growth and again with tight management of cost saw our margin increase slightly there but they continued to have a margin at least from a North American perspective and giving us the headroom for the CapEx program that we have focused on fiber. On the fiber side, the strategy continues to pay dividends for us. External testing from a strong organization validating that our product is now the fastest in the market. We added about 47,000 new customers to our FTTH footprint in the quarter and this morning we announced the next evolution of our fiber product where later this month I will have a 1.5-gig service available in Ontario followed by Québec, Atlantic Canada and then Manitoba.

A positive about this is any client who has purchased our fiber product over the last couple of years will not require a change in the modem, they'll be able to just naturally go through an upgrade in speed and this is part of the evolution of this fiber technology which really is quite remarkable. In terms of the speed we will be able to bring to both business and the home. On track for a free cash flow growth of 3% to 7% for the year and with this type of RGU growth should position us well for our dividend growth model in the 2019. Turning to wireless, I mentioned our wireless net adds up approximately 38% year-over-year driven by strong gross additions in the marketplace. On the prepaid side, we continue to see some improvement there the Lucky Mobile product is doing what we expected it to do strategically.

We also late July, we rolled Lucky Mobile to the remaining provinces in the country, so we are now in all 10 provinces and we would expect our prepaid performance to continue to improve on a year-over-year basis. And as I mentioned before, that’s important, because we really weren’t in this space and it just stops the decline of that revenue in that particular category for us. In the term ABPU, the new, I guess it used to be what we call, ARPU, the real metric still for people in terms of our subscribers. We saw 0.6% growth year-over-year. I just want to call out for the analysts that everyone knows we had this large federal contract that we are bringing on board.

The contract 6 years has no churn. Excluding the subs in that contract base, our underlying ARPU growth was 1.7 on our traditional business, so it’s basically in line excluding that large account which has obviously a significantly different ARPU but a significantly different churn profile. On the networks side we continued to rollout LTE advanced services now at 90%, expect to be at 92% at the end of the year. Turning on to wireline side, FTTH expansion and the TV leadership drove 31,000 Internet and TV net adds in the quarter, year-over-year up 76% and importantly on the Internet side we saw approximately 11,000 Internet additions in the quarter, seasonally light quarter with the outs from the universities etcetera, but on the retail side 13,000 net additions year-over-year as our wholesale adds declined year-over-year and is not a focus of our business given the revenue profile of a wholesale segment. I mentioned the fiber 47,000 additions in the quarter, that’s up actually 45% year-over-year, so the strategy continues to unfold as I mentioned as expected and we should be at about 4.5 million premises by the end of this year and we had a really strong quarter from a TV perspective.

In our wireline core footprint, we actually saw 7,000 net new TV subscribers, IPTV up 25% year-over-year and our IPTV of course is our new product Alt TV and also significant improvement in our satellite business, where our losses improved 33% year-over-year and in fact if we exclude our wholesale satellite relations that we have with one of our telcos in Western Canada, we actually had a 43% improvement in our satellite losses year-over-year. So again, that the losses on the satellite business continued to slow as a result of the IPTV footprints generally being completed by the telcos across Canada. We also had this – we ran a unique wireless trial in some markets leveraging our footprint in areas we have not really been competitive in the real footprint in the past and so very positive results, so we are rolling out in other 30 additional rural communities. The great thing here is the fiber that we are building for our wireless network to these towers we as a result can offer a fixed wireless solution into the home as well with speeds customers will see will be 25 to 50. And these will be markets for us that we might have anywhere from 5%, maybe 10%, 15% market share and so these rural markets are such a great solution for us.

The test went very and so we are going to do 30 additional communities and you will hear more about that in addition communities over time as we think it’s a real way for us to get into the rural markets with a fixed wireless solution, leveraging the fiber backhaul that we put in place that will also obviously help drive 5G in our mobile network going forward. On the media side, continued to have a very strong viewership results as CTV again continues to be number one conventional TV network, TSN has returned to being the number one sports network. Our news is leading the country and overall we had a very strong result from the World Cup. We also did made a strategic call to allow TSN and RDS to be available direct albeit at $25 direct with a product that is now available also in an over-the-top format. And overall, this business continued to generate significant cash flow for us but clearly is under some structural challenges for sure in the marketplace.

With that, let me turn it over Glen.

Glen LeBlanc: Thanks George and good morning to all and thanks for joining us. I will begin on Slide 9 with quick overview of our consolidated Q2 financial results. We delivered another solid quarter consistent with plan led by continued strong wireless operating profitability and improved organic wireline growth trajectory and a healthy contribution from Bell Media to overall consolidated free cash flow. This all contributed to total revenue growth of 1.7% which drove a 2% year-over-year increase in adjusted EBITDA.

Consistent with this growth in EBITDA as George mentioned margin also improved expanding to 42% on a high revenue flow through increasing broadband Internet scale, improved wireline business markets performance and disciplined spending on subscriber acquisition and retention even as the level of competitive intensity remained high throughout the quarter. Adjusted EPS of $0.86 was in line with the plan, but down from the $0.89 last year due to the pickup of some operating losses from our minority interest equity investments which can be variable and lumpy from one quarter to the next. As a result, net earnings were lower year-over-year despite good growth in adjusted EBITDA, which frankly is the key factor underpinning sustainable free cash flow generation going forward. Consolidated free cash flow of just under $1 billion was in line with plan for the quarter and reflected timing related decrease in working capital as well as the seasonal step up in absolute dollar capital spending characteristic of the busier Q2 summer construction period. So all-in-all very well-balanced operating and financial results once again this quarter.

Slide 10 details the results for Bell Wireless, which we are very pleased with overall. Total revenue increased 5% driven by continued strong subscriber base growth and a greater proportion of postpaid users in the customer mix compared to last year as well as an increased sales of higher value smartphones. In terms of operating profitability, wireless EBITDA was up a healthy 6.2%, while margin increased 50 basis points to 44.2 reflecting both the higher revenue flow-through with 55% and spending discipline on new subscriber acquisitions and upgrades. This was achieved despite a 4% increase in operating costs that reflected higher product cost of goods sold driven by more customer transactions year-over-year as well as an increased network operating expense and customer support costs attributable to the strong postpaid subscriber and data usage growth. As we head into the seasonally busier Q3 back-to-school period, our postpaid momentum remains strong, with growth opportunities from our industry leading LTE advanced network, which now covers over 90% of Canadians, a great device lineup and an expanding Canadian wireless market.

Let’s turn to Slide 11 looking at Bell Wireline financial results for Q2, you will notice a better organic revenue growth trajectory compared to both the previous quarter and Q2 of last year. Our residential wireline unit saw improved performance trends this quarter with revenue up 1.6% year-over-year and combined TV and Internet revenue growth of around 4%. In business wireline, the rates of revenue and EBIT decline improved year-over-year supported by the cost management actions as well as stronger IP broadband connectivity and professional service solutions growth that benefited from the contributions of the G-7 summit and Ontario election. With increasing broadband subscriber scale, more favorable business market results and relatively stable year-over-year operating cost wireline EBITDA was up a very respectable 1.1%. This drove the 20 basis point increase in our North American leading margin to 42.1%, which provides ample operating leverage to fully cover our $2 billion in planned broadband fiber spending in ‘18.

More impressively, I would like to add that this extensive fiber build-out which is the largest program of its kind in North America is being executed at a wireline capital intensity below that of our direct cable company peers. Moving to Bell Media on Slide 12, overall performance was consistent with industry trends reflecting a reduction in spending by advertisers on traditional linear TV and ongoing audience declines as viewership continues to move increasingly to online platforms. Total media revenue was down 0.6% on 1.7% year-over-year decline in advertising. This was moderated by revenue generated from the recently concluded 2018 FIFA World Cup and continued steady growth in outdoor advertising. We also enjoyed relatively stable growth in subscriber revenue, which increased 1.9% this quarter driven by continued CraveTV and TV Everywhere GO growth as well as revenue generated from our new TSN Direct and RDS Direct sports streaming services George alluded to earlier.

Last week consistent with the expectations of the quarter, adjusted EBITDA decreased 8.5% mainly as a result of higher costs for sports broadcast rights, including the World Cup and CraveTV programming expansion. So despite these structural pressures facing the industry, Bell Media remains well-positioned to navigate this changing landscape with its powerful brands, market-leading content and consistently strong ratings, while generating over $500 million of simple free cash flow annually, which we are redirecting into strategic capital investments that will support the long-term growth of our business and capital markets objectives. EPS, Slide 13 provides the key components of the adjusted EPS, which was $0.86 per share for the quarter as I mentioned down $0.03 year-over-year. The higher adjusted EBITDA drove $0.04 of EPS growth, but was effectively offset by higher depreciation and amortization expense as well as an increased net interest expense. Depreciation and amortization increased $0.03 per share over last year, the result of higher capital asset base, while interest expense was up $0.01 reflecting the higher average level of outstanding debt.

Also negatively affecting adjusted EPS in the quarter as I mentioned was the higher year-over-year losses from our minority interest equity investments principally related to MLSE, which in total amounted to $0.03 per share. Year-to-date adjusted EPS of $1.66 is in line with plan keeping us comfortably on track to achieve our guidance target of $3.45 to $3.55 per share for calendar ‘18. Turning to Slide 14 on free cash flow, we generated free cash flow of $994 million in the quarter driven by adjusted EBITDA growth and lower cash pension payments. This quarter’s results also reflected higher planned capital expenditures as I referenced earlier and a decrease in cash from working capital due mainly to the timing of payables that will largely reverse out in the back half of the year. With year-to-date free cash flow of more than $1.5 billion on track to deliver full year growth target of 3% to 7%, we see accelerated free cash flow generation through to the end of the year giving us significant financial flexibility that support the execution of our strategic capital investment programs within a consolidated capital intensity level of around 17% and higher dividend.

Drop up on Slide 15, the financial performance we reported in the first half of ‘18 demonstrates a clear focus on subscriber profitability and price discipline. We continued strong wireless industry subscriber growth ahead with continued strong growth ahead in a wireline business that is competitively well-positioned and getting stronger with increasing broadband scale, we see good momentum to take us through to the end of ‘18 and into next year. Given this outlook, I am reconfirming all of our financial guidance targets for 2018. And with that, I will turn the call back over to Thane and the operator to begin the Q&A portion.

Thane Fotopoulos: Thanks, Glen.

So, before we start the Q&A portion, just to keep the call as efficient as possible, I would ask to limit yourself one question and one quick follow-up, so we can get to everybody on the call, if we have additional time to circle back. With that Donna, we are ready to take our first question.

Operator: Thank you. [Operator Instructions] And the first question is from [indiscernible] from Barclays. Please go ahead.

Unidentified Analyst: Hi, thanks. Good morning. First, a clarification on wireless, George, thanks for the color on the ARPU growth, excluding government contract, I just was wondering how Lucky Mobile is doing and if you expect its growth to be a factor in ARPU growth going forward? And then my question is on the FTTP footprint expansion, you guys seem to be ahead of schedule having already completed 500,000 of the targeted 800,000 households for the year, do you think we could you could do more than 800,000 households this year? Thanks.

George Cope: So, yes, let me do the second one first. No, I don’t think we will be able to get beyond is really two things one is a capital on, but two also the seasonality we are really as you can imagine, when the spring gets into the summer that we are going pretty hard for our guests of the U.S.

it gets that ground get pretty hard up here later in the year. So, we end up not being able to do as much. So I think we are on track. I don’t think we will be – we to be very small, almost immaterial for the Street to see it. Yes, as you can see, the prepaid is improving with the all the promises without having the product available, it’s going to or should turn our prepaid business to not being a drain from perspective for us, which it has been for many, many years due to real focus issue for us on postpaid.

And over time, of course as we build the prepaid base up, the strategy there is to do some of that migration to postpaid, which we do think one of our peers has done very well at that and an opportunity for us, but to do that with the Lucky brand as well. On an overall ARPU base, of course, our mix will change as prepaid would arguably come at least a stable portion of our mix, it wouldn’t decline on a quarterly basis and obviously prepaid subs are a lower ARPU in total.

Unidentified Analyst: Right. That’s very helpful. Quick follow-up on the wireline side, there are still some new herds in Toronto that are yet to be passed for FTTP, just wondering if we should think about – how we should think about the way you prioritize the bill through the city? Thanks.

George Cope: Yes. So, Toronto, I think we are going to end the year, I think about 88% of Toronto 416 should be completed by the end of this year and then the last 10%, it really is about getting right away approved or one particular condo that might be slow to respond to yes or some of those issues, but I mean, I think from an investment perspective, you called Toronto completed, fully completed basically at the end of this year with a little bit of add-on, there is new premises built in the city. The rest are really things we call denials or we just can’t get at and those would take 5 to 6 years to sort through. That’s the same in every market we go into.

Unidentified Analyst: That’s helpful.

Thanks very much.

Operator: Thank you. The next question is from David Barden from Bank of America. Please go ahead.

David Barden: Hey, guys.

Thanks for taking the questions. Appreciate it. Just following up on the Toronto build for the fiber-to-the-premise, obviously this was the quarter where the mass-marketing began, could you talk about how that have might contribute to the better video/broadband performance in the quarter and are we at run-rate you think in terms of where we are in the Toronto market? And if I could just follow-up on this, the media business, in terms of kind of the outlook, can we see this flattening out, I think we have got the World Cup expenses behind us or is this kind of a slow trend downwards and it’s more about playing defense in that business right now? Thanks.

George Cope: Okay. So, on the first question, first of all, there is no doubt where we have the fiber footprint, when you see almost a 50% addition to our fiber subs on a year-over-year basis, that’s helping drive our broadband growth, but without a doubt helping us drive up IPTV.

I mean, for us a lot of our products are sold that way through a bundle and particularly now with all Alt TV where it’s basically a product with no set-top box at different price point than traditional TV, because we are saving a $300 set-top box, we are pricing all of that savings over to the consumer and now offering those that would not want a set-top box services something similar to streaming every conventional or specialty TV capabilities there in that product. And so you bundle that with the fiber. We think it’s a very compelling offer in the 416 core for us and we will be as in other markets as well particularly here we have such a strong growth in the condo development area. So actually, deploying it through and then in terms of steady – in terms of broadband, I mean, there is seasonality in broadband always for all of us and our peers. I mean, the second quarter gets impacted by the outs from the schools and the third quarter is always one of the stronger quarters and we would expect that historically to continue what’s happened historically going forward.

So, it shouldn’t be a run-rate from this quarter, we should over time see the seasonality pickup in our broadband numbers. Then on the media business, on the media business, there are – definitely we have work to do on that and I think we have our consolidated guidance, probably what we are going to stick to in terms of an overall comment of that, but we are doing some pretty creative things with Alt TV which drives media revenue for all of our and also our peers, because now we are pursuing the non set-top box marketplace or OTT as people would use the term with an opportunity for our media business than to see growth in subscribers there, you are seeing some of the direct stuff that we have done very carefully with both Crave and with now TSN and RDS. So, it’s all about readopting that model to that profile to try to turn that business to not be as you said in some type of decline on a perpetual basis. And that will be what we will be working at this year and next year and going forward with that asset.

David Barden: Thanks, George.

Operator: Thank you. The next question is from Simon Flannery from Morgan Stanley. Please go ahead.

Simon Flannery: Great, thank you. George, you talked about the improvement at the satellite TV business, so is that business sort of right-sized now on the more – focused on the more rural, is that how we should think about this stabilizing more over time? And then just a quick one for Glen, how should we be thinking about your leverage targets over the next few years with spectrum auctions etcetera coming up? Thanks.

George Cope: Yes, Simon, I would agree with your comment. I mean, there is still some growth in IPTV footprint from us and our peers, we are not at the level it was, so clearly we have our own internal numbers that shows how many satellite customers are still remaining in our IPTV footprint and it’s obviously now down significant and that’s why you are seeing the stabilization. We are not stable yet, we are seeing an improvement in the losses of satellite. And we would expect that hopefully to continue. Also I have to as I have said before the acquisition a few years ago of Aliant and acquisition of MTS has helped our business because in those rural markets we were not as strong as selling our satellite services we are now under the leadership of those teams, so that’s helped it as well.

And of course Q2 always gets a little bit of help and seasonality because up here again the cottage country opens up and satellite business always gets a little bit of a help. But on a year-over-year basis no doubt there is some structural improvement.

Glen LeBlanc: Simon thanks for your question on leverage. As you have heard me say many, many times before we are absolutely committed to the BBB high rating that we currently have and are not going to take on any actions that jeopardize that, we see over the next number of years using our free cash flow to be able to address the current leverage and migrate closer to the stated policy objective. One big thing to remember is the last decade has resulted in on over $4 billion of pension injections that we have had to make and certainly with the healthy state of our Bell Canada pension plan now I would see that being not the same type of burden that has been historically, so absolutely committed to the triple berating BBB rating.

Simon Flannery: Thank you.

Glen LeBlanc: Thanks Simon.

Operator: Thank you. Your next question is from Aravinda Galappatthige from Canaccord Genuity. Please go ahead.

Aravinda Galappatthige: Good morning. Thanks for taking my question. In terms of wireline EBITDA growth we see that you are back to sort of positive growth even on organic basis and I suspect the number is something close to 1% even if you exclude [indiscernible]. I wanted to explore George the possibility of or the prospect of getting that growth number up to maybe a 1.5% or 2% when you think about the sort of the improvements you are talking about in enterprise potentially better subscriber trends and at least from our perspective it looks like the promotional intensity in the market on the wireline front is a little less than it was maybe a year ago and then on top of that the cost reduction, do you think that that’s a realistic prospect as you look beyond ‘18 or that this too may have headwinds that would kind of getting the way of that?

George Cope: Yes. Thanks for the question.

I would not on the modeling side the model more than the one right now and without giving guidance, but you are asking about the 1.5% or 2% there is really the challenge still for us is just the mix. We still have significant mass business I do with the analysts and the investors at the beginning of the quarter. You want the revenue at the end of the quarter, you are glad you have less in the mix, from a numerator denominator math side. But so clearly that’s the challenge. Our growth profile of our growth portfolio is strong.

And then on the other side I mean I think it’s clear to say that the great revenue growth we saw of the traditional linear TV is not at the same level that we would have seen 2 years or 3 years ago and we now have a new competitor in that or new products coming into that space. So our goal here is to be positive on the wireline side, because that makes the contribution to the company, so significant because of our scale. And I think the fiber strategies should enable us to do that with some type of cost management. But I think it’s a little too early to talk about things that happened to in front of it on the wireline side.

Aravinda Galappatthige: Great.

Thank you.

Operator: Thank you. The next question is from Maher Yaghi. Please go ahead.

Maher Yaghi: Thank you for taking my question.

George, you mentioned the ARPU looks better if you exclude the contracts with the government, but I am getting about 1% help you don’t provide full speed ARPU numbers, but the mix shift that I am calculating is helping you by about 1% in the quarter, so postpaid ARPU growth is looking to be between zero and 0.5, do you suspect that this should trend higher going forward and what are the pressures that you are seeing on the business itself that is pushing down the growth in that number in the market. And my second question on wireline, can you maybe talk a little bit about your strategy for wireless TTP?

George Cope: So on the ARPU, I mean, I think the way I would describe it as we said in the last number of calls is we have said we anticipated about a CPI improvement in ARPU on a year-over-year basis. I think it’s fair to say the federal government contract doesn’t have that pay book, ARPU and so we just for the purpose of the Street to give everybody color, we are probably roughly on that number excluding that contract, that contract is still unique, 6 years of no churn, so very different ARPU profile and subsidy profile in the traditional type of account we would have. So, I think that’s how I would answer that and all the mix is a pre and post on all that, that’s a modeling you think can work on, but from an investor perspective, we thought we would see CPI, I guess I was trying to say underneath that one contract, that’s roughly what we are saying. Clearly, the migration to the higher speed devices and LTE events, a lot of that has happened in the country.

So, the type of growth we saw in the last couple of years on ARPU 2% and 3%, I think we have been pretty clear on that, the last number of calls. That’s not what we anticipate seeing in the marketplace. That’s kind of review there. And so the other question was about the fixed wireless, yes, so the fixed wireless as I mentioned, we did some trials in some small markets, the cost of this service now looks quite attractive part of it is because we are doing fiber backhaul to all of our wireless cell sites. We couldn’t really offer this fixed service of that fiber there.

So now with the fiber there in these rural markets, we can leverage some fix product that we did a few trials. And frankly, we saw pretty significant share in market with a very, very small markets and so we are just kind of rolling out on these rural markets where we quite frankly don’t have an alternative that would be cost effective such as even FTTN or FTTH. And so we have got a small number being done to 30 communities, we will see how they go. And if that goes positive, we will do more and more of those communities and it gives people speeds of 25 to 50, which is way beyond what anyone is offering in those particular rural of communities, so more to come on that file.

Maher Yaghi: What’s the addressable market in terms of size for that technology in your view?

George Cope: Yes.

I mean, we still haven’t finalized it, but probably people would be safe, I think we have 1.25 million households possibly, we could get at with this technology, but that’s not what these 30 communities do, but we want to learn from 30 and as we roll fiber out, because obviously we don’t have fiber to every single rural site today that also lends this opportunity for us from a fixed wireless perspective to offer a product that quite frankly is vastly superior than what’s available in the market from anyone. And those are markets where we have high satellite share, obviously, traditional local access share, but very, very low internet share. And we as I said in some of those markets, we are at 3% and 5% and so we are just now trying to roll that out in these 30 markets and then we will come back to the Street with more information as it evolves, but not too much, so our competitors know everything we are doing.

Maher Yaghi: Okay, alright. Thank you.

Operator: Thank you. The next question is from Sanford Lee from Macquarie. Please go ahead.

Sanford Lee: Hi, good morning. Thanks for taking the questions.

On the Internet and TV subs strength that you are seeing right now, that’s good, but what I noticed is that the wireline data revenue was only up 3%, the Q1 ‘18 data revenue was up 6% so sort of it seems to suggest that there is ARPU pressure on Internet or TV or possibly both? Now that you have got the Nike TV product just launching out. Can you – and it’s early days obviously, but can you give me an idea of what you are seeing as far as the pricing environment on Internet TV?

George Cope: Yes, actually, I think that the – I think you have got to look at last year’s quarter, not the Q we got MTS’ on all those numbers for the last four quarters. So that would be not having it right in front of me, that would roughly be 63 probably organic versus not, so that’s the first point. On the second actually, we talked about and I think in one of the notes that we talked about 9%, 4% revenue growth story between TV and Internet and that would be in those numbers. So highly competitive marketplace, I wouldn’t say someone had said on one call less competitive than other quarters, I wouldn’t say that.

We think it’s pretty competitive, because our product is clearly – fiber is clearly superior than anything in the market and Alt TV is obviously a very creative product meeting the demands of the consumer and the offset of that as you just said we now got some peers in the marketplace who are offering some new TV services would be competitive. So, highly competitive market, I certainly wouldn’t say less competitive, but I haven’t seen anything in our actual results that concerns us year-over-year, which is a little bit where you were going.

Sanford Lee: Great. Thanks. And if I could ask one quick one on wireless, of the 122 postpaid subs, can see how many related to the shared services contract in connected devices? Is there more to come from…

George Cope: Yes.

There is actually many more of those customers still sit with our competitor although I think they say they are not in the subscriber numbers, but they are sitting there not with us. And so this will take a fair amount of time for all these customers to move over. It’s a very different type of client. It’s a fantastic client to have its corporate, it sets us for wireless solutions that go deeper into the Federal government. And the most important part of it is what’s for us significant and why the pricing is so different than other clients, but it really has no churn attached to it.

But we are not going to give quarter-to-quarter results on any customer profile. I did call out the ARPU in fairness to everyone because I knew we get the question for all the analysts on the modeling issue.

Sanford Lee: Great, okay. Thank you.

Operator: Thank you.

The next question is from Jeff Fan from Scotia Bank. Please go ahead.

Jeff Fan: Thanks. Good morning, just a quick clarification and then a bigger picture question on media and Internet on the clarification George just on the government of Canada contract, did you see this was a 6-year no churn?

George Cope: Yes. Should be 6-year, basically – actually it has renewals after that, we never know if we will get them.

Jeff Fan: Okay. Just on the media, Internet related question, so some of the U.S. operators are now starting to shift their focus to Internet only services, trying to shift away from the bundle, just given the vast amount of direct to consumer video OTT services that have popped up in the U.S. and I am not saying that Canada has the same number of direct to consumer services, but you are now starting to do some of the direct services all like TSN, I guess my question is really wondering in a world like that where the market maybe going to Internet only how does that – how do you look at that from an ARPU per household or ARPA, however you want to define it, that you could get from the household when there is no traditional television services attached and how that affects the revenue opportunity for the fiber investment?

George Cope: Okay. So a couple of things, I think first of all the underlying strategy of Alt TV is exactly addressing the consumers change and how they want to view video.

And the product of course is currently restricted to two simultaneous streams, so that focuses very, very much on the condominium market although as we traditionally people use the term core-cutter market or core-never market that’s the subscriber where frankly the TV product is. As I have said, it’s to a customer, the present value savings is about $300 or more over any 24 month or 30 month period because the TV product is anywhere from $10 to $20 cheaper. So you are adding Internet plus video for that for a much less cost overall and that’s as we are passing that savings through. So we are expecting a lot of bundled out Internet fiber subs going forward. And so you end up arguably with a different or a lower overall ARPU.

But as over you are also not providing set-top boxes in your capital program. And so that’s really our strategy and then of course we will continue on the linear TV market which is still significant for us providing some growth and obviously there are still some additional features on the linear side that we can’t fully provide in the OTT world that we don’t today. And then on the direct for media, just it’s – it won’t make sense. The more important thing for our media assets is to make sure that content and courses content and other content is in a successful Alt TV launch because that’s what will drive subscribers in the media business.

Jeff Fan: So I guess what you are saying is the Alt TV contribution is as good as the linear TV contribution?

George Cope: Well, net-net it should – that would be the goal, right.

Obviously, we absolutely want to get to that type of number frankly early on it’s more cash flow accretive because we are not putting the cash flow for the set-top box. And frankly one of the important things in Canada, the average ARPU for Canadian TV has been around CAD60, that’s a lot different than $90. And obviously Alt TV is below that CAD60 we think that makes some of the OTT, linear OTT offers you are seeing in the United States not look anymore attractive and we are now offering in Canada with Alt TV. And we think that environment probably puts us in a great competitive position.

Jeff Fan: Okay.

Thanks George.

Operator: Thank you. The next question is from Drew McReynolds from RBC. Please go ahead.

Drew McReynolds: Yes.

Thanks very much. Good morning, George just wanted to kind of touch on residential wireline clearly the battle over time here moving beyond traditional telecom services to more of the smart home and owning the home, just can you talk to kind of what the roadmap looks like for Media Room and Media First along those lines and to what extent does your M&A focus shift here as you kind of look more broadly in terms of servicing the home?

George Cope: Well, I think we have made the – as everyone knows we did the first investment on the security side really to give us a platform. I think some people here in the market probably would have seen some of our re-branding there we are starting to offer some that we call Connected Home service is there and that’s in early days. That product combined with our fiber is really about getting the overall household. In terms of acquisitions frankly I think we have our head down pretty focused on the organic assets that we have.

I mean there is going to be – as we have said there are small things, but nothing of the scale that we have got in the past. If you look at the geography of Canada and what we have been able to put together here, we think we are really happy with the portfolio we have and they I don’t mean to be hopefully that’s helping to answer the question.

Drew McReynolds: Yes, that’s great. And maybe a follow-up for Glen, can you just comment what the impact in the quarter was with respect to the G7 and Ontario election and maybe a bigger picture just on the business market we are clearly seeing pretty robust U.S. economy overall, just wondering if that business market, you are a little bit more optimistic in and around it going forward here?

Glen LeBlanc: Yes.

Look, we have seen that as I have said in my remarks. We have seen a turnaround in business and that we are not seeing the same level of decline we have had in the past and look I have said before one quarter does not a trend make, but this has been a few in a row, so we are optimistic that we are starting to see some improvement in the economy, it’s playing well. Our business market has done a remarkable job of maintaining the market share that we have and that’s despite some pressure on re-price we are able to manage that re-price better than we have in the past while maintaining the market share, so optimistic that our business performances is going to start to hold. As far as the G7 and the Ontario election, I am not going to call out specifics, it obviously, Drew it’s not overly material on the big scheme.

George Cope: But it’s also confidential contract.

Drew McReynolds: Okay, understood.

George Cope: It would still be positive there regardless.

Drew McReynolds: Yes. Now understood. Thank you.

Operator: Thank you. Your next question is from Vince Valentini from TD Securities. Please go ahead.

Vince Valentini: Thanks. One clarification and one question, that the fixed wireless service you talked about George is that just using your traditional mobile spectrum or you will contemplate using some of the higher up spectrum in 3.5 CAGR or millimeter wave bands.

And then the bigger picture one, still wanted to be 5G, haven't heard you talk much about it, I mean you obviously have the bigger scale in the business in Canada, you always seem to have the leadership position and as you are doing right now with the biggest fiber build-out, can you talk a bit about your 5G plans, did you think of 5G is just being a dumb pipe in the future or given your scale can you start to think about being a leader in generating some of these apps for connected cities and whatever other applications if – can you talk us through anything you are doing in the early stages on that? Thanks.

George Cope: So on the fixed wireless we are using the spectrum we have which is 3.5 spectrum that we have been – we are using for that and because cell sites have frankly shrunk so much and even these rural markets, it lends itself out with a fiber backhaul to give this an opportunity for us and that’s why we are pursuing it. And so that’s probably covered in a couple of different ways, but that’s its early days as we have said it’s a way to get to the million plus households with the service that we don’t have a strong share on. On 5G it’s interesting, we have done 5G trials, we think we are going to be – we are the best positioned telco maybe in North America, because every cell site were finished, all this fiber build we are doing is going to serve as an underlay for our 5G mobile network. We don’t think in urban markets 5G fixed will be the same as in the United States because of how deep fiber is going here in Canada between us and our peer in Western Canada who is following pretty similar strategy, I mean in the next 36 months Canada will probably the most fiber connected country in the world and so the 5G fixed opportunity at 1 gig isn’t comparable to today’s launch of 1.5 already into the home with fiber.

On the mobile side, obviously absolutely the next evolution of service for us will be 5G. That will be as the handsets and the protocols are set in a way that they are commercially readily available and then we will do an overlay of our network with that. And then on the whole area you are going to which is the whole IoT area, yes we think it’s a huge opportunity for us with our vertically integrated wireline and wireless business and that will be in our numbers going forward and we will have more to say as that technology evolves. But we – and we just set our assets appropriately for that because we think this fiber investment we are making in wireline in one sense is going to make our wireless business which would have to bear the burden of this really now it will just be obviously a cross charge from one entity to another.

Vince Valentini: That’s good.

Just one little, I mean would you already have in your number some investment in not just the network we see with you almost fiber in your cell sites, but actually on the software and applications side to think about some of those future IoT applications, is that just wait and see for standards or do you already invest in that today?

George Cope: We are already investing today. I won’t go much further because there is a lot going on in the company in that space starting to see actually some early wins. They are not 5G wins with our IoT wins and probably just not going to go further than other that other than we talk a little bit about some smart city work we are doing etcetera in the marketplace. So very excited about the opportunity, a lot of strategic work going on in the company, all of which at this point the only one really interested in this is my competitor, so I am not going any further.

Vince Valentini: Okay.

Thanks.

Operator: Thank you. The next question is from Batya Levi from UBS. Please go ahead.

Batya Levi: Great.

Thank you. One on wireless first, you mentioned that the strong momentum continued after the quarter, can you provide more color if most of those growth adds are coming on the phone side or your tablets and connected devices are helping as well and churn remains very low. Can we see any improvement in that or this is kind of like a good level to attain and maybe a little bit more strategically on the media business, how do you think about that longer term given that there are some regulatory restrictions to add more scale, do you think that you need more scale to perform better in that business? Thank you.

George Cope: Okay. So on the mix I would say a significant amount, the vast majority almost all did significant postpaid smartphone additions that would be driving a lot of that volume.

Your second question sorry was -- the the second question?

Glen LeBlanc: Showed an improvement?

George Cope: So on the – sorry on the churn side, frankly we would still like to do better we are working hard every single quarter to try to see those numbers improve. Having said that as you have said, I mean at 1.1 we are pleased what we want to just keep obviously trying to ride that churn down with our retention programs, but Canada has a structure that lends itself to these type of churn numbers, but there are some U.S. carriers doing better than us on that space. We pay attention to it and we want to work to get to those type of numbers over time. But on the media side, yes, we were disappointed in the investment we are looking to make in Québec to strengthen our position there.

But overall, we are actually quite – we think our media assets investments give us the portfolio we need to execute there. Of course also the ownership of our sports teams has been nothing but a tremendous investment for us. I mean our vertically integrated P&L on the sports side is pretty positive because we own the sports teams. We own the number one sports broadcaster in both French and English. And of course we are now offering that product as customers wanted on even a direct basis.

So we think we are well invested on the media side and there is nothing significant there that we need to do other than now try to monetize that assets as the market changes with products like Alt TV and Crave in the marketplace.

Batya Levi: Alright. Thank you.

Operator: Thank you. Your next question is from Richard Choe from JPMorgan.

Please go ahead.

Richard Choe: Great. Thank you. Wanted to ask, how should we think about wireline margins as you finished the Toronto build and then longer term as the fiber build ramps down, where could we see margins go from this 42% level that you have been very consistently posting?

George Cope: Thanks for the question Richard. We probably wouldn’t change or we are not only giving guidance on margins, but the challenge obviously on the margin side for us is the local access line decline, we still have a base there and everyone on the line analysts and investors will know the margins on those historically.

The offset is when you are putting broadband in, the margins are very high there too, but of course the CapEx is significant. So to do much better when we look at the global wireline margins is almost hard for us to forecast and obviously we have been working to try to improve it. On the cost side though I think it is fair to say as you are now indicating, we roll out the fiber we will ultimately see savings because the truck roll cost will drop simply because fiber requires less repair work than the traditional technologies that we leverage, but I am not properly prepared to say the margins are going to get even better. I think we saw a little increase this year also the synergies of the MTS deal and what we did with Bell line, it clearly helped us overall to hold these margins as we have seen the local access to clients.

Richard Choe: And as a quick follow-up in terms of the OpEx in terms of the build-out costs, that will eventually go away, but it’s going to probably take some time, but when it does, that’s going to be….

Glen LeBlanc: Yes, a lot of the costs right now are in the capital costs right, so much of this is capital to connect the home, there is no doubt on – even on the modems like those type of devices, right, a lot of that’s caught in our capital, not as much in the OpEx, but there is clearly, I think we have talked before we are hoping over time to see a 5% operating cost savings versus our traditional broadband to fiber, but we need to continue to get the scale that we are now getting to really see that benefit, but there is no doubt where we have fiber, there are less truck rolls, which is going to ultimately save us and save us money. Frankly, the work that comes in the home, not out of the home now because some homes just don’t have the capability for this type of speed based on what the wiring they may have in the house.

Richard Choe: Great. Thank you.

Operator: Thank you.

There are no further questions registered at this time. I would like to turn the meeting back over to Mr. Fotopoulos.

Thane Fotopoulos: Thank you, Donna. So before we sign off, I just want to thank everybody for their participation and interest in BCE this morning.

I will be available throughout the day for any follow-up questions and clarifications. So with that, thanks all. Have a great day.

Operator: Thank you. The conference has now ended.

Please disconnect your lines at this time and thank you for your participation.