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

Officer
Analysts: Richard Choe - JPMorgan Phillip Huang - Barclays Maher Yaghi - Desjardins Capital Markets Jeff Fan - Scotiabank Drew McReynolds - RBC Capital Markets Aravinda Galappatthige - Canaccord Genuity Batya Levi - UBS Simon Flannery - Morgan Stanley Michael Rollins - Citigroup Greg MacDonald - Macquarie Tim Casey - BMO Vince Valentini - TD Securities Rob Peters - Credit

Suisse
Operator: Good morning, ladies and gentlemen. Welcome to BCE’s Third Quarter 2016 Results Conference Call. I would now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead, Mr.

Fotopoulos.

Thane Fotopoulos: Thank you, Valerie and good morning to everyone on the call. Welcome to our third quarter earnings conference call. With me here today as usual are George Cope, BCE’s President and CEO as well as our CFO, Glen LeBlanc. As a reminder, our Q3 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, before we get started, I want to draw your attention to our Safe Harbor notice 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. 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 with both the Canadian Securities Commissions and the SEC and are also available on our corporate website. So, with that, I will turn the call over to George to begin the Q3 review.

George Cope: Great. Thank you, Thane. Good morning and thank you for joining us.

Let me begin by sharing a few highlights of this past quarter. BCE produced another quarter of consistent financial execution as total service revenue growth of 1.8% and continued cost control drove an increase of an EBITDA of 2.2% and an expansion in the margin to 41.4%. Year-to-date, the company’s free cash flow has grown 10.6%. Once again, the Bell team produced outstanding wireless subscriber and financial performance with strong net add momentum and ARPU growth resulting in 5.2% service revenue growth and 5% EBITDA growth. Our broadband share of TV and internet subscribers continued to grow as we added 76,000 net adds in the quarter.

We concluded our ninth consecutive of positive wireline EBITDA growth, while adding to our industry leading wireline margin of 41.7%. The media division continued its consistent performance and revenue growth of 3.5% producing EBITDA growth of 2.2% and an increase in contribution to BCE’s cash flow of 3.8% in the quarter. The wireless network and fiber internet networks once again were confirmed as the fastest in Canada. Bell’s network leadership is clearly beginning to resonate with Canadians in our results. I am proud today also to announce that Bell has become the first major TV provider to offer its TV service on Apple TV.

The Apple TV 4 Gen product will be offered as a secondary set-top box in the home beginning next week. Our Bell stores will be distributing the product beginning next week. This exciting development with Apple ensures Bell’s Fibe TV continues its innovation and leadership position in Canada. Our IPTV platform and development leadership has clearly been recognized by one of the world’s leading technology companies and we continue to stay ahead of our competitors with our TV service offering as second to none in the country. BCE’s track record of year-over-year EBITDA growth continues.

We have now completed 44 quarters of uninterrupted EBITDA growth. Our shareholders are clearly seeing the benefit of a consistent and reliable execution. These results combined with our outlook in Q4 should position us well to continue our dividend growth framework in 2017. Turning to the wireless results on Page 5, as I am indicated we had a very strong quarter, gross adds up, postpaid net adds up 38%. Our network message has two times faster than our largest competitor is really resonating in the marketplace.

We see that particularly in the type of customers we are attracting high usage customers. We saw an increase in usage year-over-year on the LTE network of 35% from our subscribers driving incremental ARPU at 3.7% year-over-year. Cost of acquisition was up slightly driven principally by the weaker Canadian dollar and some advertising in the Olympics. The higher retention spend reflects the increased mix of high-end devices, but importantly, our churn rate was down year-over-year and part of that of course a reflection of our investment. Turning to wireline, we added 39,000 internet subs in the quarter.

That would be important to call out. We actually added 54,000 in our FTTX footprint either FTTN or FTTH and we saw decline in that number of about 8,000 wholesale customers. So, overall, fine results in the footprint that we are investing in. IPTV was 36,000 in the quarter. We have clearly had less mature footprint or new footprint this year and some of our promotions in the market were not as aggressive as they were last year in Q3.

On the satellite side, I think we can do better outside our urban footprint with results and we will be working on that as we go forward to try to mitigate that pace of decline in satellite. I already mentioned the announcement of the Apple TV to continue the positioning of Fibe TV. On the local access line, it was up slightly, most of that driven on the business side and particularly the election last year we lapped and we put a number of lines on when there is a federal election that clearly are not available in this quarter. Turning to Bell Media, continued consistent execution as I indicated at the outset, strong leadership again from a ratings perspective. CTV continues to be the number one network for the 12th consecutive summer, 3 of the top 5 programs leading in premier week in September, 5 of the top 10 English entertainment and specialty services, 5 of the top French specialty and pay services.

Contrary to some reports in other markets, the NFR ratings are up in Canada for the first month of the season and up actually 8% year-to-date. We surpassed a milestone on CraveTV of 1 million subscribers and our outdoor advertising business continues to grow with 30,000 advertising faces and with real focus on the airports now that we are in 6 major Canadian airports. Couple of comments on corporate development before I turn it over to Glen, the MTS transaction continues to track towards the closing either at the end of this year or into early 2017. We continue to work through the regulatory process on that file. We also closed the Q9 transaction, bought out the remaining position and closed that transaction on October 3.

The Q9 business would be roughly equal to the size of our own hosting business that we have. So, combined, it gives us a strong position in that space. The real opportunity for us on the hosting business is we have about a 70% connectivity attach rate to our data hosting centers and it was about 20% of our connectivity attach rate on Q9. Our goal there of course will be to migrate that attach rate higher and not only drive the data hosting revenue, but drive connectivity for our B2B business in the marketplace. With that, let me now turn the presentation over to Glen.

Thank you.

Glen LeBlanc: Thank you, George and good morning everyone. I will start with some high level comments on our key financial highlights for Q3 on Slide 10. Service revenue was up 1.8%, our strongest quarterly performance in the past year and this was driven by continued solid growth across our wireless, wireline residential and media operations. Low margin product revenues decreased 7% year-over-year, once again, this was a result of the competitively driven wireless handset discounting and lower wireline business data equipment sales due to the soft economy and lower overall telecom spending by large enterprise customers.

Adjusted EBITDA increased a very solid 2.2% on the third consecutive quarter of positive year-over-year growth across all three Bell operating segments. Consistent with this EBITDA growth, as George mentioned, margin also improved, increasing 0.5% to an impressive 41.4%. Adjusted EPS of $0.91 was in line with our plan, but down from the $0.93 last year mainly as a result of the $0.03 mark-to-market gain on equity derivatives due to a sharp increase in BCE share price in the same quarter of 2015. Higher EBITDA was the main factor supporting free cash flow growth of 3.3% in the quarter and this was achieved despite a $41 million and higher year-over-year capital spending. So overall, another very good quarter of consolidated financial performance consistent with our full year guidance targets demonstrating yet again our clear focus on subscriber profitability and price discipline in the face of sustained market competition across all our customer and product segments.

Turning to Slide 11, our wireless segment another excellent quarter financial results with service revenues up 5.7% driven by higher postpaid subscriber mix, data usage growth and a greater percentage of customers on 2-year contracts, which collectively drove blended ARPU growth of 3.7%. Similar to the previous couple of quarters, product revenue decreased year-over-year as a result of lower average handset prices as I referenced earlier combined with fewer handset upgrades compared to last year. Wireless adjusted EBITDA was another financial highlight of the quarter growing 5% year-over-year, which yielded a strong service revenue margin of 46.5%. More impressively, this was achieved even with a $47 million year-over-year increase in combined total spending and customer retention and COA which resulted in a 38% increase in postpaid net adds. Our wireless segment also continued to contribute significantly to overall BCE free cash flow generation in Q3 which – with growth in adjusted EBITDA less CapEx of 4.7% as we maintained a low and very capital efficient capital intensity ratio of 10.6%.

Moving to Bell wireline on Slide 12, Q3 service revenues was essentially flat year-over-year decreasing a modest of 0.3% as we benefited from improved performance trajectory across our three key wireline units residential, business and of course wholesale. This represents our best quarterly result of the year significantly outpacing the 1.8% year-over-year decline we reported last quarter. Overall, revenue growth was impacted by the sale of a call center subsidiary in September of 2015, richer acquisition and retention discounts driven by competitors’ aggressive back-to-school promotional offers as well as reduced business data product sales to large enterprise customers. As a result, total wireline revenue declined 0.8% year-over-year. Excluding the $10 million revenue loss from the call center sale that I just mentioned, residential service revenue increased approximately 1% over last year.

This was due largely to the strong growth in total combined internet and TV revenues of approximately 6% in the quarter. In business wireline the rate of revenue and EBITDA decline improved year-over-year supported by stronger IP connectivity and solutions growth as well as ongoing cost management actions. Wireline adjusted EBITDA increased 0.6% on a 1.7% reduction in operating cost representing our 9th consecutive quarter of year-over-year growth. That drove a 0.6 percentage point improvement to margin to an industry best 41.7% maintaining the lead over our closest North American peer by a wide margin and providing us with ample operating leverage to self fund continued significant investment in our strategic broadband fiber programs going forward. Turning to Slide 13, Bell Media, overall another solid set of in line results with positive revenue, adjusted EBITDA and cash flow growth generated for the third consecutive quarter.

Total revenue for Q3 was up by healthy 3.5% on the strength of higher year-over-year subscriber and outdoor advertising revenues. Subscriber revenues grew 14.6% driven by the expansion of The Movie Network into Western Canada as well as ongoing customer growth for CraveTV and our TV everywhere on demand pro-products. Consistent with our expectations, advertising revenue was down 3.7% in the quarter as a result of year-over-year declines in conventional and specialty TV. The advertising market remained soft across the industry. And more specific about advertising demand in Q3 was impacted by a shift in spending to the main broadcaster of the Rio Summer Olympics and the non-recurrence of advertising dollars generated last year from the federal election.

This was partly offset by strong year-over-year growth in our outdoor advertising. From a profitability perspective higher revenue and labor savings from workforce reductions that took place in Q4 ‘15 drove adjusted EBITDA growth of 2.2%. This was achieved despite a 3.9% increase in operating costs that reflected higher costs for sports broadcasting rights, new programming and the continued ramp up in CraveTV content. And most importantly, Bell Media generated simple free cash flow of $475 million year-to-date or 2.8% higher than last year and impressive result when you take into account the operating losses we have absorbed in EBITDA from scaling up CraveTV which surpassed 1 million customers this past quarter. Slide 14, provides the key components of adjusted EPS which was in line with our plan for Q3 at $0.91 per share and as I mentioned down about $0.02 compared to last year.

Higher EBITDA accounted for $0.04 year-over-year increase in EPS. Other items that contributed positively to EPS this quarter included lower net pension financing costs as well as higher year-over-year tax adjustment which amounted to $0.02 of EPS versus $0.01 last year. Brining total year-to-date tax adjustments of $0.04 per share, no further material tax recoveries are expected for the remainder of ’16. Despite these positive factors as I referenced at the outset, EPS was negatively impacted this quarter by $0.03 per share, non-cash mark to market gain on the equity derivative contracts recognized in Q3 of last year. Additionally, total depreciation and amortization expense increased on a net basis over last year due mainly to more assets in service.

This was expected given our higher planned capital spending this year. And lastly, year-over-year decrease in adjusted EPS also reflected the dilution of around $0.02 per share due to the higher number of outstanding common shares following our $863 million equity issuance last December. Free cash flow, moving to Slide 15, Q3 free cash flow was $951 million or 3.3% higher compared to last year driven by higher EBITDA and improvement in our working capital position, lower cash dividends paid to Bell Media’s non-controlling interest due to the timing of the payment this year versus last and a year-over-year decrease in net interest paid. We have taken advantage of favorable market conditions in a sustained low interest rate environment this past quarter to further bring down our weighted average cost of debt and achieve additional preferred share dividend savings. On December – excuse me, on August 12, we completed $1.5 billion dual-tranche public debt offering at a blended average coupon rate of 2.4%.

Both new series of debentures represented the lowest coupon rates we ever achieved reducing our after tax cost of debt to 3.33% while maintaining an average term to maturity of just over 9 years. This has not only helped to drive our strongest interest rate coverage ratio of the past 5 years which at 9.21x adjusted EBITDA is significantly above our 7.5x target policy, what also provides good predictability and our debt service costs as well as the protection from interest rate volatility going forward. With respect to our preferred shares we have reset the fixed dividend rate on four different series so far this year with one additional reset coming on the 1st of December. These five share resets which had a total face value of $1.8 billion in aggregate are expected to bring the average dividend rate down from 4.1% to approximately 2.7% resulting in an annualized savings of approximately $25 million. This quarter’s free cash flow result also reflects higher planned CapEx investment as I mentioned earlier and a year-over-year step up in cash taxes consistent with our guidance assumptions for the year.

With strong year-to-date free cash flow growth of 10.6%, we remain comfortably on track to achieve our full year guidance target of 4% to 12%. In closing, with three quarters of strong operational execution and healthy growth in consolidated financial results that demonstrate a clear focus of subscriber profitability and price discipline, we are well positioned to deliver on the guidance targets that we provided at the beginning of this year. Finally, we expect no impact on the 2016 financial guidance from our acquisition of Q9 Networks that was completed in early October. Given Q9’s relative size in terms of revenue and EBITDA, it’s not financially material to our overall wireline and consolidated results nor does it impact BCE’s leverage ratio meaningfully. On that note, I will turn the call back over to Thane and the operator to begin the Q&A portion of this morning’s call.

Thane Fotopoulos: Thanks Glen, so before we get started with the Q&A period given the number of questions in the queue and keep the call as efficient as possible, please limit yourselves to one question and a brief followup. To the extent we have time we will circle back at the end of the call. So Valerie with that, we are ready to take our first question.

Operator: Thank you, Mr. Fotopoulos.

We will now take questions from the telephone lines [Operator Instructions] Thank you for your patience. Our first question is from Richard Choe with JPMorgan. Please go ahead.

Richard Choe: Great, thank you. Just wanted little bit more color on the service revenue growth, can we continue to see ARPU move up at this rate and what is driving that?

George Cope: So on the wireless ARPU specifically, I think that’s what you are asking on, service revenue growth, I mean, it’s clearly two for one is the growth in subscribers which has been stronger I think than we had even expected at the beginning of the year and secondly, clearly it’s to your point in the average revenue per customer and what we saw in the summer again, and I would think we were also surprised given how strong ARPU growth was last year, people might recall in this quarter, again as the growth as people moved to our LTE advance network and the speeds that they are able to access, we saw an increasing usage of 35% year-over-year and so it’s really the incremental usage that’s driving some of the incremental average revenue that we are seeing.

It’s hard to know what will continue going forward but certainly based on what we are seeing, the demand to use the network is growing as a result that’s giving us this significant top line revenue growth.

Richard Choe: And in terms of better the environment has anything changed since the end of the quarter or is it sill kind of heavily commercial on the handsets?

George Cope: It’s aggressive, I don’t know if it’s more aggressive. But we are coming into what is traditionally the most aggressive season and as we enter into November, December, we had expected to be as intensive competitively as it always is given how important that quarter is from a sales perspective.

Richard Choe: Alright, thank you.

Operator: Thank you.

Our next question is from Phillip Huang with Barclays. Please go ahead.

Phillip Huang: Hi, thanks. Good morning. You know, question on the postpaid net add site, I would like to see the strong performance this quarter particularly given the strong financials as well? I was wondering if you could provide some regional color on the strong performance where you’ve seen the strongest momentum, is it Western Canada, any momentum or pretty balance overall?

George Cope: Actually it was balanced.

Overall, I actually took a specific look at that over the last couple of weeks to see if there was one specific geography that we saw strength and I would say it was across the board. We clearly saw net adds in really every one of the markets. It was a very strong quarter clearly for it looks like pretty industrial though there is one still to report and so we are able to through our execution we think in our specification the focus on the network, speed, and ad advantage we now are generating in the market is really driving the incremental ARPU for us and a good market share of the net adds.

Phillip Huang: That’s really helpful.

George Cope: It was across the board though.

Phillip Huang: Right and very similar question on the fixed line side as well certainly your subscribers continue to reflect pretty continued intense competition in the market particularly for Fibe TV this quarter. I was wondering if you could similarly provide us some regional color are you seeing a bigger delta in competition whether it’s in Ontario or Quebec or Atlantic Canada? Thanks.

George Cope: I would think specifically in Southern Ontario was most aggressive on the pricing side as we’ve seen – we saw pretty aggressive pricing from one of our competitors there and that’s in one sense reflected on our results and we are sticking to our discipline of growing the EBITDA and making sure we are driving through our IPTV to pull the broadband subscribers through and that continues to be the strategy. It’s probably one of the reasons on this call, we would normally, we shared also the growth we saw where we have FTTN and FTTH from an Internet perspective. So the people could see that there is some pretty strong underlying growth there where we are making those investments.

But it was a particularly aggressive quarter in Southern Ontario.

Phillip Huang: Thanks George.

Operator: Thank you. Our next question is from Maher Yaghi with Desjardins Capital Markets. Please go ahead.

Maher Yaghi: Yes, thank you. So I wanted to ask you about your go to market strategy, as you mentioned, you have so far resisted, you know, the view of matching or going out and being aggressive and gaining market share. But when you look at the investments that you are making in fiber-to-the-home, how long, I mean, or let’s say in order to deliver financial results on those investments that you are making on fiber-to-the-home, traditionally, we would assume that you need to gain market share at a faster pace than what you are seeing right now. So, I guess how long can a company continue to resist in order to protect profitability when the competition doesn’t seem to be constrained in its promotional activity?

George Cope: Well that’s a long question. Let me try to answer the best I can.

I think this management’s track record of finding the balance for our shareholders, we need subscriber growth, cash flow growth and EBITDA growth maybe is best shown in this quarter with our wireless results relative to our number one peer. But we are generating both financial strength and subscriber strength. So that probably speaks to our approach to the marketplace, I think also when I talk about our broadband Internet ads in the footprint that I have identified that isn’t – part of that is intended to make sure investors understand just how well that strategy is executing for us. And I think, if people were to look at our IPTV net adds on TV against our competitors, we took significant share on the TV side in that footprint. So I think, we are on track.

It’s aggressive, and of course you always have to balance the question you are asked. We hopefully, have that balance correct and we will continue every quarter to have to – to make those decisions above with EBITDA growth in wireline, cash flow growth of 10% year-to-year and those strong overall subscriber results, we are really pleased with the quarter on balance given the competitive dynamics.

Maher Yaghi: And just a follow-up, thank you for that. And just in terms of the – in the territory that you have the footprint where you have fiber deployed, how much of the satellite pluses are switching to your own Fibe TV or is it namely going to other ISPs or I mean, in terms of resellers?

George Cope: Yes, it’s, I think, we talked about it in the past anywhere from 10% or so. But I think in the last quarter, it was more about 6% in our footprint.

And so, on the satellite side, one of the reasons I mentioned earlier, we’re thinking outside of our IPTV footprint. We can probably compete a little more aggressively on the satellite side in the markets where there is not the IPTV conversion market going on. So we will look to do that going forward in the marketplace. But there is not a lot of conversion now from our satellite to IPTV, there is a lot of, we don’t have as many subs left in that particular footprint.

Maher Yaghi: Thank you, George.

George Cope: My pleasure, thanks.

Operator: Thank you. Our next question is from Jeff Fan with Scotiabank. Please go ahead.

Jeff Fan: Thanks, good morning.

One quick clarification, and then the question about the TV market, on the clarification, George, you mentioned the – you broke down your ads related to on Internet related to FTTX and outside FTTX, wondering if there is any distinguish difference between what’s going on inside your FTTH versus just the FTTN footprint, in terms of Internet ads?

George Cope: Yes, better. That is where we have the fiber – one of the reasons we continue to accelerate fiber. Overall, I want to give the FTTX number, so people could understand the difference between the two because clearly therefore in the footprint without FTTX meaning for investors on the line, FTTN or FTTH, when I do that, that’s clearly, we don’t have either those footprints where we see that in essence a decline in internet subs. But yes clearly where we had FTTH is where we see the strongest results and that’s why we continue to make the investment and why we are going to do that over the next decade.

Jeff Fan: And then a question on TV, I mean Bell is obviously the leader in technology platform, functionality, user interface etcetera, do you guys continue to integrate with other platforms like Apple TV just announced today, but as you look ahead is it, do you think customers are – the market is shifting to a point where functionality and technology platform really makes the difference to drive better TV ads or do you think it requires a change in packaging and pricing of channels or offering to the core market, I don’t know if that’s big right now for you to go after, I am wondering if you can give us your thoughts on that?

George Cope: Yes.

Well, I – first I want to be – dismiss of the question gives questions an important one, it is a mix of all of those and we are having to as industry is so competitive clearly we have to repackage based on the consumer preference. And we have got to do that to drive the market share. The technology differentiation is our leader with IPTV. But some times it stands up and gets subscriber, other times it doesn’t. So some times you may have to obviously do price packaging that might be more aggressive.

And then in terms of the OTT world I think we were most focused on at the moment is learning to our launch of the Crave product where really customers who want to subscribe the service over the top can do that now with Crave. And we think with a fairly competitive product we think the Canadian development recently probably positioned that product a little stronger in the marketplace. And with some of the announcements you will see on Crave coming up, some of them referred too on our press release with some first run content on Crave, we think we are putting our foot into that marketplace and make sure we are trying to meet the demand there as we go forward. And we are quite frankly learning as we go through the demands that the consumer wants to see from a product perspective.

Jeff Fan: Okay.

Thanks, George.

Operator: Thank you. Our next question is from Drew McReynolds with RBC Capital Markets. Please go ahead.

Drew McReynolds: Thanks very much.

Good morning and George two questions for me and I won’t have a follow-up, I am sure. Just can you comment just two quarters into this up-tick in gross – wireless gross additions across the industry, can you just kind of comment again on kind of what you think the source of that is just because it’s benefiting everyone, it looks like the market has expanded somehow. And then second one just a big picture, when we look down in the U.S. we are obviously seeing Verizon, AT&T branch out in a content and in some instances expand geographically and that’s perceived to be due to just slowing core revenue growth in their core business, can you just talk about what you are seeing here in Canada in terms of that growth outlook and where are you seeing new revenue opportunities? Thanks.

George Cope: Yes.

On the wireless subscriber side, I think it is fair to say the industry including the analyst community we have all been pleasantly surprised by the strength in the industry. There is – and we are as we go forward here also learning this as to what we are – why is this demand accelerated so quickly. And I think there are some things we are seeing clearly to the expansion of these networks and our LTE advanced network does bring product and broadband solutions and quite frankly you can imagine are going to be available on wireless. I think that’s increasing in demand for our services. I think if we look at the new entrant market they are doing fine, but the rapid growth there were seeing in the last few years is clearly not in their results, that’s seems to have leveled off.

So I think there is probably some market share change there. I think the second line addition in the marketplace is happening in Canada possibly behind where the U.S. was a couple of years ago, where the separation of people from their business line into consumer line continues to grow in Canada. And I think that probably started in the U.S. earlier than it is happening in Canada.

And then I also think just generally across the population. And this products become so important, there is probably some demographic of that, we are probably moving down the age curve on this product and seeing that growth as we enter the fall every year as people return to school almost at quite younger and younger ages, that’s probably part of it. And then overall the immigration in the country, when we talk about 300,000 new Canadians a year, clearly they are going to be subscribers to wireless services and that allows for some incremental growth as well. I mean that’s where we would generally frame it. And then I think probably a little stronger economy people have talked about in some other provinces where there is a lot of population that can’t hurt the overall industry, it can only help it.

That’s our view.

Drew McReynolds: That’s great and just on the big picture kind of revenue growth outlook?

George Cope: Well, I mean we had a stronger quarter in the third quarter we would hope it’s an outlook that we will have a stronger fourth quarter on our revenue across I was pleased with the wireline revenue being a little bit up and I think Glen talked about that. So I mean our guidance isn’t changing this morning and certainly we feel better in this second half than we did in the first half on the overall revenue for the company and particularly with this underlying wireless growth that we are seeing here on the revenue side.

Drew McReynolds: Okay. Thank you.

George Cope: Thanks.

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

Aravinda Galappatthige: Good morning.

Thanks for taking my question. George I just wonder if you can expand a bit on the improvement that you have alluded to on the B2B front, obviously it’s been in decline mode albeit relatively steady for a while now, I mean is there any sign of sustained improvement there or is that just smaller segments that are kind of going in your favor?

George Cope: We did have a little better quarter year-over-year and one, we will take it to – we hope it turns into a trend. I would also say on the calling out our small business group is doing a little better year-over-year. We are probably competing there a little more aggressively, but it’s helping us to maintain customers and on the B2B side there had been some large wins and win-backs that we have which will help us actually into next year. So overall, that’s not a – for investors we are not positive yet on the revenue side on the B2B side.

But that decline was better quarter-over-quarter and of course if that stabilizes that helps your overall wireline story, but still lots of work there to do.

Aravinda Galappatthige: And just to as a follow-up to that, the declines on the business and losses that shouldn’t be seen as any kind of lead indicator with it?

George Cope: No, I wouldn’t I mean we – when these federal election there was a lot of lines that go in and out and we would try to call that out here and things happens to take some other folks with detail on that. But basically that’s really what happened on the B2B side.

Aravinda Galappatthige: Thank you.

Operator: Thank you.

Our next question is from Batya Levi with UBS. Please go ahead.

Batya Levi: Great. Thank you. On the wireless side, you mentioned that the upgrade activity was low in the quarter, can you provide a bit of color into the 4Q, do you anticipate that to pickup.

And should we assume that the COA and retention was up year-over-year and that continues in the fourth quarter as well?

Glen LeBlanc: Yes. I think on both, COA and retention will be a little bit year-over-year as it was in this quarter. The volume was down, remember last year we were into the first full quarter of the double cohort. So volume was a little different, but costs are up. Costs are really up in Canada on COA.

One, the mix of customers who want the high-end smartphones and secondly the dollar working against us year-over-year starting to impact as that goes through the financials and we will have obviously an impact with the dollar versus a year ago. See, I would expect both COA and our cost of retention to be slightly up. But we will have to see, I mean frankly you can change so dramatically depending on the competitive intensity and you could end up as much as $10 a unit, higher. You could end up $10 a unit lower depending on what’s happening in the market on intensity perspective.

Batya Levi: Got it.

Thanks. And one follow-up on the wireline side if I could, can you provide a little bit more color in terms of the specifics you were seeing on KPIs when you compare your fiber to the home footprint or this fiber to the node, maybe in terms of ARPU or churn, I am assuming probably [indiscernible] is better, but any number that you could put around that?

George Cope: I mean a couple – I will just comment on the churn rate is better. Our market share is better in markets that we have. And importantly for us the operating costs and so the call backs that we call truck rolls visiting customers because of issues are about a third less. And so those are the numbers we have.

And a lot of those come from the number of years we have operated in the alliance footprint as we began to build out now the Ontario, Quebec and Quebec has actually got a fairly significant fiber footprint, Ontario, now with the folks in Toronto. So all the metrics that I have described drive us to want to continue with that investment knowing that ultimately the speed requirements in the home will only grow and the number of devices it has to home are only going to grow. So that is why we continue that investment.

Batya Levi: Okay. Thank you.

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

Simon Flannery: Great, thank you very much. George, I wonder if you could just give us a little bit more of an update on the billed plans for fiber-to-the-home, where are you currently and how is the pacing and the costing going versus your plans and we have seen Verizon and Google and other look a lot more closely at the fixed wireless for that sort of last drop from the street to the home, how are you thinking about fixed wireless 5G in this context? Thanks.

George Cope: So, FTTN and our FFTH in total is about $8.5 million. We are at about $2.8 million on fiber and that continues on the track that we have outlined. Our big focus this year or next year is in the 416 of Toronto and some other markets that we will be investing. So, we will talk about guidance in February, but somewhere between 500,000, 650,000 households a year is probably going to turn out to be our targeted rollout. And as I said, we think that will run through for quite a period of time.

And then on the 5G, I think that was the second part of your question, it’s – we are doing some trials. We think it’s quite a ways away from a investment perspective and deployment, particularly what we are seeing with the roadmap we are on now. And ultimately, possibly our fiber roadmap in that we have talked about getting to 80% to 85% of our footprint over time, but maybe at the end that’s not that extensive, because some of those secondary markets can be supported by 5G, but at the end of the day you are billing the fiber literally to the premise with that structure anyway. And so it will be an interesting decision we will have to make at that point in time. But for our investors, we are perfectly positioned to move at the pace that requires and if it turns out going right to that last premise and some of those secondary markets, it is more cost effective with the technology that’s not in the market today at that time than we could look at it then.

But right now, our core focus is we think fiber will still be the best avenue and 5G will be a layover – overlay for wireless as the next evolution of speed for wireless.

Simon Flannery: Great, thank you.

Operator: Thank you. Our next question is from Michael Rollins with Citigroup. Please go ahead.

Michael Rollins: Hi, thanks for taking the question. I was wondering if you can get an update on some of the key regulatory initiatives around the mobile side, the fiber wholesale side and any other key issues that you are watching the development of? Thanks.

George Cope: Yes, I think maybe the fiber wholesale where there are some missions going on now and then we will wait into next year as to what the pricing for that access to the fiber for resale will be. And so that’s probably one file that we are watching carefully. On the wireless side, there are always ongoing files.

I think the major one for us would be this particular resale of what fiber will be. And clearly, we were disappointed in the recent decision on the FTTN pricing on a wholesale perspective. We don’t think that was certainly not positive for BCE and we will have to manage through that as we go forward into next year. Thank you.

Michael Rollins: And so just to follow-up on that real quick, so what would be your expectations for the outcome of the fiber wholesale proceeding?

George Cope: Well, the outcome of it will be what is the resale price and we will be hopeful of that resale price is set in a way that ensure that Canadians can continue to see broadband investment by large companies with infrastructure projects like ours and the cable operators and that will have to be reflected in the wholesale pricing.

Otherwise, those type of investments can be curtailed. And particularly in the secondary markets, which isn’t something we want to see happen nor with anyone in Canada want to see happen. So, we just have to see how that process unfolds and what those pricings are and we will have to obviously course adjust depending on the outcome of that process.

Michael Rollins: Thanks very much.

Operator: Thank you.

The next question is from Greg MacDonald with Macquarie. Please go ahead.

Greg MacDonald: Thanks. Good morning, guys. George, quick question on the descriptors that you gave for the gross adds in the industry, those were quite interesting actually and all of the ones that you indicated seem to me to be sustainable trends, would you agree with that and have you seen evidence in the 4Q and are your expectations for 2017 are they all that – you will continue to see a positive impact on gross adds for the industry next year? That would be helpful.

And then I have a quick follow-up. Thanks.

George Cope: Greg, I think it’s too early to make that call. I think as all the analysts on the call will know and you will know, I mean this is two quarters of strong numbers, but I think all of us till we get underneath completely what’s driving it, but it’s hard to turn this into an outlook for the next 15 months. What we are really pleased with though is from an investors perspective is the underlying use of our product by our entire base arguably is driving as much revenue growth as the net adds.

The continual focus on net adds is important, but the real focus and where the significant money in the industry is coming from is the increased uses of these products because of our networks which are – I talked about it a lot I know, but being rated as the fastest in the world almost in terms of our wireless service, certainly North America. And what we will be doing next year with carrier aggregation taking it to another level again with speed we think that’s what’s going to continue to drive the revenue growth in the industry and then net adds are secondary part of that. But boy, it’s early to make a call on next year, at least certainly too early for us to.

Greg MacDonald: Okay, I appreciate that. So, the follow-ons related to what your description just was, so we have seen some evidence from Rogers that they are looking to advertise a product that allows small business customers to drop their landline and go mark for a business line and I am getting the sense that, that’s at least part of what we are seeing on the gross add front on wireless? Are the economics attractive enough for the industry and for you in particular to take that type of approach as well, because we are seeing systemic declines on the access line for business as well, if you can beat them, join them I guess is the question? Are the economics attractive enough to do that?

George Cope: Well, I would say the amount of wireless substitution for small business is actually fairly small.

We will see how our competitor does in the marketplace, but we believe our wireline products are vastly superior to anything the wireless industry is offering for small business on the wireline side and that’s our focus. And there are those that have total mobile businesses with clearly wireless and we are in that space, but we don’t think that’s had literally any impact on us at all in our company.

Greg MacDonald: Okay. Alright, thanks, George.

Operator: Thank you.

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

Tim Casey: Thanks. George, could you flush out a bit more what you are seeing on the competitors’ side on wireline in terms of the nature of the customers you are getting? You have stressed that obviously wherever you deploy fiber you are seeing better share. I am just wondering your primary wireline competitors have responded with aggressive internet offers and I am just wondering what you are seeing in terms of your ability to compete with that? Is it still the functionality on the video side or are you having to match on pricing on internet? Thanks.

George Cope: Yes, it’s good question. I want to be a little careful in the competitive questions on a conference call obviously, Tim, but I would say our focus continues to be for us that we know we have a vastly superior video products in the marketplace and that is our lead product. And the pull-through from our broadband shows up in our numbers, where we secondarily have FTTH built out. Clearly, we have the superior internet product second to none in the world and in that case we can push both those products so we can even leave with FTTH and that will of course evolve as we add more footprint. So, it is a combined solution, alright.

I mean, it’s for the consumer, it’s an aggressive market. It has been and everyone is trying to get their fair share of the growth in the industry and we are – we think we are achieving that balance and we will continue that to make sure we are competitive though and it changes market by market, province by province and city by city, it seems every quarter. And as I mentioned, I think it’s been particularly aggressive in Southern Ontario.

Tim Casey: Thank you.

Operator: Thank you.

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

Vince Valentini: Yes, thanks very much. George, you mentioned that the FTTN internet resale decision would be negative for you I assume it hasn’t been your focus in the last 15 hours, but COGECO didn’t lower their guidance by $20 million partly due to that decision. Is there anyway you can quantify it? I have got to imagine BCE’s exposure is quantums of what COGECO’s is on an absolute basis?

George Cope: Yes.

I think what I would say is our guidance hasn’t changed for this year and the impact of that will be in our guidance for 2017 in total, but also I think very important overall for BCE scale for our shareholders. And we believe our fourth quarter execution positioned us well to continue our capital market strategy. Having said on that very specific file, yes it’s not a positive decision. We think it has the risk to mitigate investment in broadband. And so obviously, we are following that and I wasn’t aware of that change with one of our competitors.

But I can imagine because overall for everyone it is a re-price on wholesale on the FTTN side.

Vince Valentini: Thank you.

Thane Fotopoulos: Valerie, it seems that we are headed towards the end of our hour. This will be our last question.

Operator: Certainly.

Our last question is from Rob Peters with Credit Suisse. Please go ahead.

Rob Peters: Thanks for squeezing me in. Just a question on data, I am looking at the IPTV side with Fibe app being available on Apple TV, is that going to count against household data cap, if they use that as their second cable box and then any kind of – sorry IPTV box. And then any color around how that might be considered given the current differentiated pricing practices here going on at the CRTC right now?

George Cope: We were anticipating that customers will subscribe to unlimited internet packages which we offer in the marketplace to leverage that product which of course for us drives incremental revenue for our investors on the line, for our customers a pretty unique experience is the only one in the marketplace that has the Apple TV capability with our Fibe app.

So we are really excited about that positioning. And I think most exciting is getting that recognition from I think is clearly everyone would know one of the world’s technology companies recognizing our leadership in TV, that’s probably one of the real proud moments for us this morning. So with that maybe thank you.

Thane Fotopoulos: Thank you to everybody on the call this morning who participated. As usual I will be available throughout the day for clarifications and follow-ups on that.

Thanks everybody again and have a great day.

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