Executives: Thane Fotopoulos - VP, IR George Cope - President, CEO Glen LeBlanc -

CFO
Analysts: Richard Choe - JPMorgan Aravinda Galappatthige - Canaccord Genuity Simon Flannery - Morgan Stanley Greg MacDonald - Macquarie Vince Valentini - TD Securities Maher Yaghi - Desjardins Capital Jeff Fan - Scotiabank Batya Levi - UBS Securities Tim Casey - BMO Drew McReynolds - RBC Capital Markets David McFadgen - Cormark

Securities
Operator: Good morning, ladies and gentlemen. Welcome to BCE Q4 2016 Results and 2017 Guidance 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 everybody. With me here today, as usual, are George Cope, BCE's President and CEO; as well as Glen Leblanc, our CFO. As a reminder, our Q4 results package, 2017 guidance targets 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 be made available on our website later.

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. These forward-looking statements represent our expectation 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 with both the Canadian Securities Commission and the SEC and are also available on our corporate website. So with that out of the way, George over to you.

George Cope: Good morning, everyone. Thank you for joining us. Very pleased with our year-end fourth quarter financial results.

Company obtained - met all of our financial targets for 2016 and put us in a very strong position going into '17 and allowing us to provide the incremental dividend this morning that we'll talk about in a moment. In the fourth quarter, service revenue growth accelerated to 2.3%. Either service revenue or consolidated revenue was our best topline performance since the third quarter of 2015. Very pleased that we not only achieved positive EBITDA growth of 2.3 for the company, but across the board, all three business segments, as we had planned, were positive EBITDA for the entire year in 2016. We had excellent financial results, 7.2% service revenue growth, continued growth in ARPU, EBITDA growth even with the incremental net-adds up 23% year-over-year.

We continue to have steady performance with our IPTV business and that is clearly pulling through the Internet in that footprint and we'll turn to that in a moment. On the wireline side, we saw positive EBITDA growth of 0.9% for the quarter. And for the year, wireline was positive and we saw an increase in margin in the fourth quarter in our wireline business to 40.1%. Media had a very strong fourth quarter. I think we'll see the financials are industry-leading with strong revenue and EBITDA growth and contributing to cash flow of BCE.

We now expect the MTS acquisition to close by the end of the first quarter of 2017. That continues to be subject to regulatory approvals, specifically Competition Bureau and ISED. It is our belief that we will get those regulatory approvals, still subject to those approvals, but with an expected close at the end of Q1. Turning to our Wireless results. As I indicated, postpaid net adds were very strong, up 23% year-over-year and that was despite the loss we thought we would call out of one particular corporate client of 18,500 units, a very low ARPU customer of $30.

Did have an impact on our churn but clearly, the client that we want to lose at those type of ARPUs and so as a result, turns up slightly, but you can see the net adds are still extremely positive, even with the loss of that account. ARPU growth of 4.7%, driven again by our mix of postpaid subs and the LTE data usage. We were looking at that yesterday and for the entire year, our data usage on the company across our subscribers is up 41% year-over-year. Cost of acquisition up slightly year-over-year. Again, mix of richer handset lineups as well as some impact of the weaker Canadian dollars.

Retention spend was also up year-over-year and again, that's principally driven by the activity in the fourth quarter and also, again, a move into the LTE handsets. Turning to our Wireless network plans for 2017 and are positioned to continue to lead. At the end of '17, we would expect 99% of the Canadian population will have access to 4G LTE. 83% of the population will have access to LTE-Advanced, and we continue to roll out a carrier aggregation technology to provide additional speeds in the industry, in fact in 2017 we will launch four carrier aggregation in a number of markets, which will give customers effective speeds of 41 to 166 megabits per second. We have already rolled out over 500 of our cell sites with that technology.

We are awaiting handsets, and we expect handsets in the second quarter to give of us that capability, and we believe it will certainly be, if not the only carrier in the world, one of the first carriers in the world to be in the marketplace with four carrier aggregation, which just improves the continual speed that we are giving to our customers. Our capital intensity for the year, even with these investments for wireless will be consistent, as it has been the last number of years at around 10% of our revenue. Turning to the wireline, we added 18,400 internet subscribers in the quarter. Importantly, 30,000 internet subscribers where we have IPTV. Clearly in the footprint the DSL footprint is where we had negative internet net adds.

So our strategy of continuing to roll out FTTE and in fiber is clearly the right strategy, and that will over time of course extend our footprint and help mitigate some of the negative net adds in the DSL footprints. Service revenue up 7% on internet, so strong quarter financially from an internet perspective. Approximately 36,000 IPTV net adds, and you can see within that 30,000 internet adds. You can see the pull through and the strategy working, and of course the average revenue per customer with internet and IPTV for us would run around $120. Net in our footprint when you include the losses of satellite was about approximately 6,000 TV net adds in our wireline footprint, and we saw slight improvement in NAS losses year-over-year, particularly in the small business area, where we have seen our performance continue to improve throughout the year.

Turning to Slide 8 and some of our capital wireline programs for 2017, for our investors our strategy really remains the same going into 2017 on the wireline side. We will continue to add fiber to the premises footprint. We expect that to end 2017 at about 3.5 million of our 8.4 million fiber locations, the remaining being FTTN. We expect the Toronto overlay, majority of Toronto to be completed by the end of 2017, so we will be in the marketplace obviously aggressively in Toronto, when we are through that important number. And from a TV perspective we have many more advanced features coming on you are IPTV product in 2017 positioning us well in the competitive marketplace in the evolving competitive marketplace we would expect in 2018, and we will be working aggressively to maintain that technology leadership, and set ourselves up very well going into 2018 with a number of key announcements in the marketplace in 2017.

Capital intensity for wireline will be similar to this year somewhere in the 24%-ish number to revenue, and we continue to do that while we execute the fiber build-out and that continues I believe to give us about 5% capital in teens below our largest cable competitor. Turning to Bell Media as I mentioned strong financial results. I think in the industry maybe leading financial results from a media persistence. CTV continues to be the number one network in the country. Discovery Channel was the number one specialty entertainment channel.

We also had a fairly strong quarter for TSN and RDS, with prime time audiences up 11%. We had the strongest TV audience that has, the strongest hockey audience that has watched any hockey game in the last two years with the World Juniors at 5.2 million viewers. Contrary to some other markets around the world, the NFL viewership is actually up 18% for us year-over-year, and Crave had one of its best months ever in December of 2016. So right across-the-board I think a fairly good quarter for the media operations. Turning to page 10, happy this morning, and very pleased to announce the dividend increase of 5.1% to $2.87 per share.

This dividend increase is consistent with what we have executed on over the last eight years. Our free cash flow dividend payout will be maintained between 65% and 75% with this dividend increase, and that will happen whether or not we close or do not close the MTS transaction. As I indicated, we expect it subject to regulatory to close at the end of the first quarter, but for our investors it's important to understand, that if something were to change there, our free cash flow guidance keeps us in our payout ratio, and allows us to provide this dividend increase. Really that's driven off the 7.6% free cash flow growth in 2016, just a very, very solid year for the Company, and allows us to provide the dividend increase for the eighth consecutive year. With that, let me turn it over to Glen.

Glen LeBlanc: Thanks George. And good morning everyone, and thank you for joining us. I'll begin on Slide 12 with our first quarter financials. These results round off another very solid year of consistent performance, which has become something of a hallmark for BCE, clearly showing the strength of our business model built around a disciplined focus, on profitable subscriber growth, and cost control. A highlight to the quarter was the service revenue growth George mentioned, which accelerated to 2.3% on the back of our wireless, broadband wireline, and media growth services, that collectively increased 4.7% year-over-year.

This represented our best top-line results since Q3 of 2015. Adjusted EBITDA was also up a healthy 2.3%, and like the first three quarters of 2016, reflect positive year-over-year contributions from all three of the Bell operating segments. Consistent with this EBITDA growth margin also improved, increasing to 37.2% on the flow through of continued strong wireless ARPU growth, increasing broadband internet, and IPTV scale, fewer NAS line losses, and lower year-over-year wireline operating costs. Adjusted EPS increased CAD0.04, or 5.6% over last year to CAD0.76 per share, on higher adjusted EBITDA, and lower year-over-year impairment charges related to the Bell Media properties. This was partially offset by the mark-to-market losses realized on our equity derivative hedge contracts, as a result of the decline in the BCE share price in Q4, and higher amortization expense.

Additionally, lower severance, acquisition, and other costs due mainly to workforce restructuring initiatives undertaken in Q4 of 2015, contributed to the 29.3% increase in statutory EPS this quarter. And lastly free cash flow. Adjusted EBITDA growth and lower cash taxes were the principal factors supporting free cash flow generation of CAD923 million this quarter. However, this was largely offset by the higher planned capital spending on our broadband network infrastructure, and decreased working capital from an increase in customer receivables, that reflected our strong wireless post paid growth in the quarter, and the inventory build-up mobile devices for the busy Q4 holiday sales period. And with that overview let's turn to the detailed results of our wireless segment on slide 13.

Q4 was another in a long line of exceptional quarters for Bell Wireless. Service revenues continued to accelerate increasing 7.2% year-over-year. This was a result of our postpaid mix, which now represents 91% of our subscriber base, and data usage growth driven by the faster speeds of our leading LTE networks. Wireless adjusted EBITDA grew a strong 5.1%, yielding a service revenue margin of 39.6%. This result is even more impressive, given that it was achieved while absorbing CAD67 million in higher costs year-over-year, from 46,000 more postpaid gross additions, and a 16% increase in the absolute dollar customer retention spending, which was a direct result of the Richard competitor acquisition offers, and consistently more aggressive promotional activity throughout the quarter compared to the same period last year.

Lastly in terms of cash flow, which at the end of the day is what matters most to a dividend growth company like BCE. Bell Wireless provided strong contribution to the consolidated BCE cash flow, in both Q4 and for the full year of 2016, delivering an impressive year-over-year growth in adjusted EBITDA less CapEx of 7.4 and 7.5 respectively. If we look at Bell Wireline's Q4 financial results on Slide 14, you will see similar performance trends to the previous quarter. 0.8% decline in total revenues was a result of softer wholesale results, driven by significantly lower rates set by the CRTC for aggregated high speed internet access services, as well as a lower sales of international long distance minutes. Reduced business customer spending on core connectivity service and data products also contributed to lower year-over-year revenue, which continues to reflect slow economic growth and repricing pressures rather than competitive market share losses.

In residential wireline revenues increased a solid 1% in Q4 reflecting combined internet and TV revenue growth of 5.8%. And the financial contributor from the acquisition of the data center operator Q9 Networks on October 3rd, also contributed to moderating the overall decline in total wireline revenue this quarter. In terms of operating profitability, wireline adjusted EBITDA increased 0.9% in Q4, and that represents our 10th consecutive quarter of positive year-over-year growth. This drove a strong 0.6 percentage point improvement in margins to 40.1%, reflecting a 1.8% reduction in operating costs, driven both by ongoing spending controls, as well as customer service and fiber related operating efficiencies and productivity improvements. Moving over to media results on Slide 15, overall another strong quarter of contribution to BCE's overall consolidated financial results, capping off a great year, Bell Media delivered positive revenue, adjusted EBITDA, and cash flow growth.

Revenue growth of 3.6% in Q4 mainly on the strength of subscriber revenues and year-over-year growth in Astral autophone. Subscriber revenues were up 9.6%, driven much like they were in the first three quarters of 2016, by the national expansion of the movie network, and the further growth in CraveTV, and our broad suite of TV everywhere go streaming products. Advertising revenues were essentially unchanged in Q4, down a modest 0.3%. They become in conventional TV due to the non-recurrence of advertising dollars from last year's federal election, as well as a soft radio advertising market, were effectively offset by growth in outdoor advertising and higher year-over-year specialty entertainment and news channel revenues. Adjusted EBITDA grew a solid 2.2% in the quarter on the flow through of the higher revenues.

This was achieved despite operating cost growth of 4%, driven mainly by the higher year-over-year programming in CraveTV content costs. And with that I'll stop there on results for the quarter. On Slide 16 I have summarized BCE's overall financial performance for 2016, at 1% we achieved our full year revenue guidance even with a 7.2% decline in low margin product sales that continued to cause topline variability. And if we look just at service revenues, which is recurring in nature, and therefore the key driver of adjusted EBITDA, we delivered solid growth of 1.7 for the year. We saw increased contributions across our growth services, as we maintained a sharp focus on subscriber profitability, price discipline and cost control to deliver adjusted EBITDA growth of 2.8%.

But more impressively this drove an 80 basis points increase in consolidated margin to an impressive 40.5%. We also finished the year with 3.0% higher adjusted EPS of CAD3.46 per share, and a strong 7.6% increase in free cash flow, which grew to over CAD3.2 billion. With strong operating cash generation, we had the headroom to move up our capital intensity increasing investment on our major strategic network priorities, while still generating more than CAD900 million of excess free cash flow, after the payment of a higher year-over-year common share dividend in 2016. So all-in-all our financial foundation remains strong, and our operations well-positioned as we begin 2017. I'll turn now to our financial outlook for 2017 summarized on Slide 17.

Our 2017 guidance targets build on the favorable financial results, significant broadband infrastructure investments, and operating momentum we delivered last year, with the expectations for continued strong wireless profitability and postpaid subscriber growth. A third consecutive year of higher year-over-year wireline adjusted EBITDA, and stable contributions from our Bell Media division. Our revenue and EBITDA guidance is consistent with current analyst consensus. We are also looking to manage our capital spending in 2017 at around 17% of revenues, allowing for increased spending to expand our fiber-to-the-home footprint, extend our LTE advanced network build-out, and meet rapid growth in data demand. All of which is expected to translate into another year of very healthy free cash flow growth, providing a strong and stable foundation for the 5.1% increase in BCE's common share dividend for 2017.

As well as the capital investments that further enhance our broadband market competitiveness. Lastly, I want to be clear that the financial guidance we are presenting today does not include the impact from our pending acquisition of MTS. We'll come back and refresh our 2017 guidance targets, and provide a financial assumptions underpinning for those targets following the completion of that transaction. Moving to cash pension funding on Slide 18, the CAD400 million voluntary contribution we made in December maintained BCE's consolidated pension plan solvency position stable year-over-year at approximately 94%. We believe this is an efficient use of cash on hand at the end of 2016 as the contributions tax deductibility favorably impacts BCE's cash generation in 2015, while accelerating the move to a surplus position if interest rates rise.

With our solvency position being 94% funded, a modest increase in interest rates would reduce our ongoing funding requirements significantly. As a result of the CAD400 million prefunding, together with the year-end solvency discount rate that got back to the level with the previous year, owing to a sharp increase in government bonds yields in the latter of 2016, BCE's regular cash pension funding for 2017 will remain essentially unchanged at around CAD400 million to CAD450 million. Turning over to Slide 19, the statutory tax rate for 2017 remains unchanged at 27.1%. Our projected effective tax rate for accounting purposes is also around 27%, up from the 26.4% in 2016, due to lower year-over-year tax adjustments. We also expect that the step-up in cash taxes for 2017 increasing to the range of CAD700 million to CAD750 million from CAD565 million in 2016.

This mainly reflects the higher taxable income for 2017 consistent with the growth in our earnings. However, it does not reflect the benefit of the MTS tax loss carry forwards that we intend to utilize post the close of that transaction. Which I expect to be in the range of CAD100 million in 2017 alone. Adjusted EPS, slide 20 calculates our adjusted EPS old book for 2017, which we expect to be between CAD3.42 and CAD3.52 per share. Overall growth this year has been negatively impacted by the projected CAD0.04 per share decrease in tax adjustments, as well as the financial impact of the CRTC rulings from 2016 regarding wholesale internet tariffs, customer refunds for canceled services, and SuperBowl SIM supp.

In aggregation these items are estimated to represent approximately 1 full percentage point of adjusted EBITDA growth, or CAD0.07 of EPS in 2017. Accordingly, before the tax adjustments and the regulatory impacts, adjusted EPS is expected to grow by approximately 2% to 5% in 2017. Lastly, I would like to note that BCE's close to CAD1 billion of US denominated spending in 2017, has been economically hedged at a blended rate of CAD1.33. As a result we have effectively insulated our P&L and free cash flow exposure from US dollars purchases for this coming year. Moving to Slide 21, our free cash flow generation in 2017 is expected to be strong.

Increasing to a range of CAD3.325 billion to CAD3.45 billion, even without the incremental contributions of MTS. That growth of approximately 3% to 7%, which obviously has a mid-point of 5%, fully supports today's announcement of 5.1% dividend increase for 2017, and sets us up well for our continued dividend model as we head into 2018. This increase represents our ninth consecutive year of 5% or better dividend growth, while keeping within our targeted free cash flow payout range of 65% to 75%. As a result excess cash is projected to remain relatively stable at around CAD900 million. Finally, turning to Slide 22 for a quick update on our balance sheet and our cash resources heading into 2017.

Our capital structure continues to provide a very solid foundation, and high level of overall financial flexibility to execute our 2017 business plan and capital markets objectives. Our strong BBB+ investment-grade credit rating all have stable outlooks, and we expect our leverage ratio to improve to within target range over the next few years through growth and adjusted EBITDA, and applying some of the excess free cash flow toward debt reduction. I would also like to highlight BCE's attractive long-term debt maturity schedule, that has an average term of more than nine years, and only CAD350 million of MTMs to refinance in 2017. Moreover, with a very attractive after-tax cost of debt of 3.33%, owing to consistently low interest rates over the past eight years, our interest coverage ratio has risen to its best level since 2010 at 9.31 times adjusted EBITDA. This is significantly above our 7.5 times target policy, providing great predictability in our debt service costs, as well as protection from interest rate volatility going forward.

And as you have heard me say before, even if interest rate rise, the favorable impact on the pending plan deficit and resulting future cash funding requirements, would outweigh the higher costs of refinancing any long-term MTM debt. Lastly, as we enter 2017 we have access to more than CAD2.2 billion of liquidity. This reflects a combination of multi-year committed credit facilities totaling CAD3.5 billion, unused capacity under our three year Accounts Receivable securitization program, and a healthy year-end 2016 cash balance of CAD853 million. All of that providing a solid financial underpinning of our 2017 business plan, and increased common share dividend. And as you know BCE's history of financial management has always been a prudent one, and that will not change.

To conclude 2016 was a very good year for BCE on all levels operationally, financially, and strategically. And our 2017 financial guidance reflects the confidence we have in our business prospects for the coming year. And with that, I'll turn the call back over to Thane and the operator to begin the Q&A period.

Thane Fotopoulos: Thanks, Glen. [Operator Instructions] So with that, Valerie, can you please tell the listeners about how to queue up?

Operator: [Operator Instructions] Our first question is from Richard Choe from JPMorgan.

Please go ahead.

Richard Choe: Great. Thank you. 2017 guidance seems like it's a little bit lower than the '16 numbers. How much of this is law of large numbers? Or is this more something competitive that we should be looking for either in wireless or wireline going forward?

George Cope: Well, good morning.

Thanks for the question. First of all, I think from the free cash flow guidance, I'm assuming that's consistent with what people expected to see. Revenue and EBITDA guidance, we understand is within the analyst's expectations. I would say this, though. Glen did call it out just so everyone gets it.

That range of EBITDA, Glen mentioned, is about a 1% impact on the year's EBITDA and that's the regulatory decision. Of course, that flows through one year and then you've lapped it the following year. So for investors, a standalone organic growth, if you will, would be consistent with what you would expect to see from the company. And so that's why we'd normalize that in. Of course, guidance will change with the MTS acquisition.

But I think the important thing is even within that regulatory impact, the free cash flow comfortable, that it's in the range we need, but it clearly was, as Glen called out, an impact on some of the regulatory decisions. The underlying organic business is as you have seen in the past. Hopefully, that's helpful.

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

Aravinda Galappatthige: Good morning. Thanks for taking my question. George, obviously, we're seeing a little bit of pressure on the Internet net adds front as your competitor ramps up their marketing on the high-speed products. And obviously, with the resellers also sort of lowering their prices in response to the new tariff, I just wanted to get your thoughts on sort of the latter end of '17. Do you see an outlook to sort of maybe stabilize the Internet trends, particularly given that you still have a superior TV product?

George Cope: Yes.

It's interesting. We're very bullish on the Internet business. We saw tremendous top line revenue growth there, and that's one of the reasons I called out for the analysts the net adds in the footprint versus not in the footprint. So you can see the 30,000 in the IPTV footprint. Clearly that is executing and we'll continue to do that in '17.

I have to admit we're quite excited about the fiber build-out that will start to have more of an impact for us in '17 across all of our footprint and we'll continue to market that. So I think the prospects for that particular investments has continued to be consistent with what we've said. So the 30,000 that we did within the IPTV footprint, I'm actually quite pleased with. Complete transparency. Clearly, what we don't have that in the DSL footprint, that's where we're seeing some negative growth and the only way to offset that, of course, is to continue the fiber investment, which should pull some share through over time.

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

Simon Flannery: Great. Thank you very much. Good morning.

George, just following on the fiber point. I think you want to get Toronto pretty much done this year and have about 3.5 million fiber-to-the-prem. What happens after that? Is it economic for you to cover most of the fiber-to-the-node with fiber-to-the-prem over time? Or does that start to slow down? And how are you thinking about 5G playing into that? Some of these fixed broadband trials suggest it might be a good way to kind of cover the last few 100 meters. Thanks.

George Cope: Yes.

Well, I mean, I think investors would expect from us 600,000 to 700,000 premises covered with fiber almost every year over the next 7 to 8 years. We don't see a slowing down in the other markets at all. We think we can do within our capital intensity ratio that you've seen, as we pace it out. We think it's clear where the demand is going to be. One of the great benefits to us from a wireless perspective when we see 5G in the marketplace in a number of years out, of course, because we'll have done every neighborhood with fiber, we'll have that backhaul in place if we were to leverage 5G to add additional capacity or speeds in that marketplace.

We don't see 5G for us as a substitution in the urban markets for our fiber strategy. We certainly see -- continue to see where we have fiber, strong market share, much stronger market share than anywhere else we have the product and also, as we mentioned a number of times, the operating cost of it. So I think it's fair to say, as we've said, investors should expect to see that rollout 600,000, 700,000, 800,000 premises over a period of time and you'll see that year-over-year, certainly, over the next five years. And that would include almost every major market we cover.

Simon Flannery: Thank you.

On the speed point, can you just give us a little bit of color? What kind of speeds are resonating? We've heard some others talk about the percent taking 100 megs plus. So if you've got any stats around that?

George Cope: I'm not going to disclose the competitive, but clearly from our perspective, the 1-gig capability on fiber puts us -- and then we have, as everyone knows, the ability to even take that speed up further as required. We think we're setting ourselves up for where we need to be tomorrow. And all I can tell you is every one of our customers keeps migrating to higher speeds. And to be clear, there is no doubt of the demands of the speed, and we see it on Wireless as well.

If you look at the usage on Wireless where we have LTE-Advanced, you just see the incredible demand for video services on Wireless growing, not just on the Wireline side.

Operator: Thank you. Our next question is from Greg MacDonald with Macquarie. Please go ahead.

Greg MacDonald: Thanks and good morning, guys.

George, I asked a derivative of this question last quarter and I'm going to ask it again. The gross add numbers, we haven't seen Telus yet, but continue to be very good, Rogers, yourself. I suspect this is a sustained industry trend. Also ARPU, I wonder if you might comment -- quantify to the extent that you can on what assumptions of sustainability on the gross add trends in particular you're assuming for your guidance. Can we assume sustainability of certain trends? Are these types of trends our base case or are they best case scenarios when you're thinking about the wireless guidance, in particular?

George Cope: Yes.

Well, couple of things. It is -- we don't give, as you know, gross add guidance and the -- and also the model. You can tell from the EBITDA growth. You'll be able to do the blended and get pretty close to each of the divisions what we would expect to have. But obviously, very, very strong net add results from our reporting this morning.

I think it is a little bit consistent with what we said the last while, in terms of seeing the growth. If you look at the results of maybe some of the newer entrants, not as strong as they have been in the past. We think there is some maturity at their base. So you get an opportunity to have some of that base churn back our direction. We're clearly seeing that.

Immigration policies in this country driving a significant immigration and that, of course, adds a growing marketplace for us. And this demand, as we've talked about in Wireless in Canada, a number of people having two products now, one for business, one for personal, I think that's another driver that's going on across the board. The maintaining of that, of course, that's a hard one. That's what the analysts do. What we try to do is try to make that happen.

We'll have to see how that unfolds as we go forward. I think it's fair to say everybody has been pleased with the results again this quarter, to see this acceleration in growth. Of course, we've got one more competitor report. So it's hard to know everything until we get the complete picture.

Greg MacDonald: Right.

But you've been reasonably conservative in the past. Can we assume that that's -- if we see sustainability of these gross add trends in particular, is it safe to assume that you've got some buffer in the guidance number for that?

George Cope: Well, what I probably would say is, we pride ourselves on not missing guidance in the nine years -- eight years that we've been executing on this. So that will clearly be our goal, and I think it's fair to say for the investor community. The growth in ARPU has been, I think, the surprise piece on top of the growth and that's just because people use the product more and more. It's not about pricing, it's about the use.

If you think about it, use is up 41% year-over-year and ARPUs are up 4%. So clearly it's not about pricing, it's about the marginal use of the product, and that lends well for shareholders in the wireless space.

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

Vince Valentini: Yeah. Thanks very much. Hopefully, I can just have one quick clarification and then a question. Clarification, Glen, is can you give us the exact number on Q9 for the fourth quarter in terms of revenue and EBITDA? And the question, probably more for George. You clearly -- you articulate you're doing better on Internet subs in the areas where you have IPTV versus just DSL.

But you still have something like 2.7 million homes where you haven't upgraded to fiber-to-the-node. Is there any change in your thinking given the Internet trends you're seeing that maybe devote a little bit more capital to footprint expansion over the next couple of years versus just solely focused on 600,000, 700,000 new fiber-to-the-premise?

George Cope: That's a good question. First of all, on the very specific like Q9, we're not releasing the specific guidance on that, but it's fair to say some of the regulatory impact seem to roughly wash up with what will be benefit from Q9, quite frankly. So analysts can kind of assume that's been a bit of a wash, unfortunately linked to some of the impacts on the repricing on the Internet through the regulatory process. On the footprint expansion versus no, I can tell you, we know -- the Street doesn't know the number of subs we have in that outer footprint versus the footprint where we have FTTN.

We continue to believe the overlay of the FTTN is the better accretive piece for our shareholders. Having said that, there's a slight increase on our footprint year-over-year from 8.3 to 8.4. So there's a little bit of expansion there. But at this moment, it doesn't look like what you're suggesting or maybe asking, would you do 500,000 more with something to extend the footprint versus overlaying and we don't think that, given where we see our market shares, is necessary the right place to go.

Operator: Thank you.

Our next question is from Maher Yaghi with Desjardins Capital. Please go ahead.

Maher Yaghi: Yes. Thank you for taking my question. I want to ask on taxes and impact on regulatory changes on the EPS.

So when I look at your special contributions for 2015, it looked like, I mean, I think you guys did 250. This year you did 400 of special contribution, yet you're expecting cash taxes to go from 565 in 2016 to 700 to 750. I'm trying to ask -- understand why taxes are going up this much. And is it right -- is it fair to say that the impact of the CRTC rulings on wholesale, the simsub and the taxes -- the higher taxes in 2017 is about $0.10 on EPS from your $3.42 to $3.52 EPS outlook for 2017?

Glen LeBlanc: Good morning, Maher. Yeah.

As I mentioned in my opening remarks, the impact of the regulatory decisions and the one-time tax adjustments that we enjoyed in '16 that don't repeat themselves in 2017, those together have about $0.11 impact. So based on the guidance that we provided, if you add that back, you get to a number that looks more like 2% to 5% EPS growth, normalizing for those two. Look, when you look at the 2017 tax and the guidance number that we provided, obviously, the higher earnings profile that we're going to enjoy in '17 drives a higher tax. There's a slightly higher increase -- modest increase in the effective cash tax rate. So that's driving it.

Naturally, we do get an offset from the $400 million tax pension injection we made, which we enjoyed a tax benefit in the following year. But it's really just a reflection of timing of tax installments and how much we made in tax installments at the end of '16 versus how much we make in '17. So really nothing to read into that.

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

Please go ahead.

Jeff Fan: Thanks. Just a question on the fiber-to-the-home. When you look at your footprint with respect to ARPU, what kind of lift are you getting now roughly? I know you can't give us exact number, but maybe relatively between fiber-to-the-home versus fiber-to-the-node. I'm just wondering, given all the spun you doing, how much, I guess, Internet revenue are you getting from these similar customers who are subscribing to Internet?

George Cope: Yes.

I don't have it top of my hand. We're certainly, maybe we'll have Thane follow up with you a little bit, I don't think -- and we'll come back. But it's clearly because subscribers who are taking fiber are buying the higher-speed packages and so they're clearly taking -- generating a higher average revenue per unit than we're getting on those that have not. The fact that our service revenue is up year-over-year 7% and obviously, our additions on the year are not up 7%. You can do a little bit implication that clearly, customers are migrating to the higher-speed packages.

As we've said before, everywhere we have fiber, churn is better, ARPU is better and market share is better. And we know that and so it really is as investors know, it's the pace that we can go at to make this happen and we, of course, are really excited about getting Toronto done because just how important this market is and the window that we've got to execute on that and to leverage our TV product over this coming year.

Operator: Thank you. Our next question is from Batya Levi with UBS Securities. Please go ahead.

Batya Levi: Great. Thank you. In video, you may have a year of advantage versus cable as they shift to another video platform. Can you talk about maybe how you plan to balance sub-growth versus profitability this year?

George Cope: Well, I would -- I don't want to be -- I want to be sure I'm clear. I would say consistent the way we've done it in the past, in the marketplace.

Our continued leadership on TV, of course, continues. And we think it will continue actually when our competitor launches, given what we're planning to do, but certainly having this window that we hadn't expected is something that we're going to want to make sure we strategically leverage in our results and we'll do that and have to balance that against the financial targets we've provided to the Street. And so I think that's probably -- our practice in the past is probably a best practice. I think that's how we'll probably behave in the future. But clearly, we're going to be pushing our product and the advantages of this product and rolling out other features on the product and leveraging that '17 -- in 2017 because we hadn't expected that window and also, of course, accelerating that Toronto build as quickly as we can to accelerate that window to our advantage as well.

Operator: Thank you. Our next question is from Tim Casey with BMO. Please go ahead.

Tim Casey: Thanks. George, just to follow-up on that.

Can you provide a little more color on what happened in the quarter in terms of TV adds? I mean, obviously, there would be disconnects on the satellite side. But you did go negative in sort of net adds. And just wondering how you think about that and what we should think about trends in '17. As you highlight, you've got a window here before your major competitor in Toronto launches a new product.

George Cope: Yes.

I think it's a good question. I think, you go to Page 7 on the deck, we were positive TV adds actually and our Wireline footprint is clearly where we focus the most on given the history of what the satellite was versus where we're focused. So we're positive TV adds in our footprint. And you can expect even within that footprint, we obviously don't have a lot of base left of satellite customers in our IPTV footprint. And so, again, that's where we're seeing the net add strong TV growth.

And I think it's clear, we are very bullish on our TV business as we go into 2017 with the product features we have, and now it's just executing as we've done in the past to continue to see IPTV growth gains. I'd still like to see satellite a little better, keep working on that. And we'll hope that in '17 that -- those results on satellite are little better than they were last year. For sure, that's one of the goals we have.

Operator: Thank you.

Our next question is from Drew McReynolds with RBC Capital Markets. Please go ahead.

Drew McReynolds: Thanks very much. My question was just answered. But another one for you, George.

Just in terms of the promotional environment both on Wireless and Wireline, we see couple of quarters where it's really intense and then a little easing off. But big picture, how do you see the promotional activity playing out? I guess, from an investor perspective, Canada has always been a very disciplined market, promotionally intense but overall disciplined. And just wondering what your thoughts are on that type of equilibrium, particularly as you see some maturity overall in the industry play out?

George Cope: Well, I mean, I would say this. I think it was -- and Glen called it out, I mean, it was an extremely competitive fourth quarter in the Wireless marketplace. There were a lot of promotions.

Investors can see that in the higher costs of acquisition. But clearly those investments are significantly net present value positive for investors because you see that they've a top line revenue growth we are getting. And I think what's really exciting about that is coming on the back of customers using our products more and not through industry wide on Wireless price increases being overlaid into that market any significant way other than where you've seen some of it to offset some of the dollar impacts that we've seen in the market. It is a highly competitive market by different segments and different people aren't in the market with their TV products. So they'll leverage some other products on pricing.

We have to just be competitive with that. We're trying to always find that balance between the two. We think we are within our results, and we think our competitors, they're public companies as well, have that continual pressure between the competitive marketplace and performing financially. I don't expect a dramatic change in the marketplace in Canada in 2017.

Operator: Thank you.

And our last question is from David McFadgen with Cormark Securities. Please go ahead.

David McFadgen: Okay. Thanks for squeezing me in. So just a question on the pension contribution.

So now that the solvency ratio is up to 94%, do you think that you've done these one-time contributions going forward?

Glen LeBlanc: David, it's Glen. Well, thanks for your question. Look, you tell me what interest rates look like into the future. We're very pleased that our solvency funding ratio remains consistent to what you've seen in the past at 94%. And as I mentioned in my opening remarks, modest increase in interest rates gets us to the ultimate objective, which is a fully fund position and sizable cash flow savings when that occurs.

I'm not going to attempt to be a crystal ball on interest rates and what that does between now and the end of the year. Our hope is that we start to see a modest pickup in interest rates, which is going to migrate us off to that fully fund position and obviously, if that happens, then further injections wouldn't be required. But hard for me to speculate on that. Our objective, keep the pension in a healthy funded position, and I think we've done that nicely over the last number of years.

George Cope: And the only thing I would add on because we're wrapping up the call, as to Glen's comment, it is what's unique about our cash flow profile for our company.

Investors will have a view on interest rates. So they'll use those to look at our company, but clearly an increase in interest rate for us is an odd thing for our capital structure, but it'll actually end up with generating cash flow for us, not the other way around, because of the significant pension investments we've had to make and investors know we've had to do this over a number of years. So I think we are in an excellent position at the 94% position we put ourselves in. And if interest rates are up, we are in a much stronger position, and if not, we are very well funded. With that, I want to thank everyone for taking the time this morning.

We're very pleased with the results and let's hope those wireless momentum in the country continue.

Thane Fotopoulos: Absolutely. Thank you, George, and I'll be available throughout the day for any further questions or clarification. So now, thank you for your participation, 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.