BCE Inc.

Good morning, ladies and gentlemen. Welcome to the BCE Q3 2019 Results Conference Call. I would like to turn the meeting over to Mr. Thayne Fotopoulos. Please go ahead, Mr. Fotopoulos.

Thank you, Donna, and good morning, everyone. Joining me for the call today are George Coe, BC's President and CEO, Marco Bibich, Delta Chief Operating Officer, and our CFO, Glenn LeBlanc. And as most of you know, this is George's last annual conference call before he retires at the beginning of next year. As a reminder, our Q3 results package and other disclosure documents, including today's slide presentation, are available on VC's Investor Relations webpage. However, before we get started, I want to draw your attention to our safe harbor statement on slide two. Information in this presentation, remarks made by the speakers today, will contain statements about expected future events and financial results that are forward-looking and therefore subject to risks and uncertainties. These forward-looking statements represent our expectations as of today and therefore are subject to change. If you claim any obligation to update looking statement except as required by law. So on that, let me hand over the call for the last time to George.

Great. Good morning, Fain. Good morning, everyone. Thank you for joining us this morning. Let me turn to the highlights of the quarter, and I'm going to turn it over to Mirko and Glenn and wrap up with a couple comments before we go to Q&A. We clearly had a very, very strong third quarter from a wireless perspective, our strongest third quarter on record. with net ads up $204,000 in the quarter, or approximately 15%. Also importantly in the competitive market we had, we saw a 1% increase in our average revenue per subscriber, and we saw a decline in post-paid churn to 1.12%. Delivered strong revenue growth to 3.5%, and even with those strong gross ads and net ads, drove 7.9% EBITDA growth. And I also found it interesting that our service revenue in the traditional way, quarter over quarter last year was about 70, and this time about 91 million. So really nice and strong underlying core service revenue growth. So from a broadband perspective, our overall growth of 294,000 subscribers, up 8.4% year over year. Our fiber strategy continues to pay dividends for all our investors, where we saw 58,000 total internet net ads up approximately 10% on the year. Also important in that season, we saw positive RGU net ad delivery on the wireline footprint. I think we'd all agree media had a very strong quarter with higher revenue and adjusted EBITDA and cash flow, which Glenn will talk to. And quite proud on my last call, it was our 56th consecutive quarter of year-over-year consolidated EBITDA growth with 5.6% in the quarter. Our product leader differentiation is truly paying off, enabling us to leverage the growing demands of the digital ecosystem. Our wireless network speed leadership is enabling us to take market share and not become a price shop. Our focus execution across all bell segments together with a declining capital intensity ratio drove a strong 17.3% cash flow growth in the quarter. With that, let me turn it over to Mirko to take you through the results, and Glenn, then I will wrap up with a few comments before we go to Q&A. Thank you.

Thank you, George, and good morning, everyone. I'm going to start on slide 6. And as George mentioned, we had another excellent quarter of subscriber results for Bell Wireless. Total net ads of 204,000. That was up 15% over last year. And as George mentioned, a record number of new customer additions for a Q3 and best overall subscriber performance in almost 13 years. And although all our peers have not yet reported, we believe we led the Canadian industry in terms of market share of net customer additions. So a great result for the Bell Wireless team that continues to execute at a high level quarter after quarter. Our post paid net ads totaled 127,000, which is a strong result given that includes significantly fewer year over year customer additions from our long term contract with the federal government. And if you normalize for that government contract, post paid net ups were up nicely over last year. As George mentioned, this reflects our Bell Mobility network speed leadership superior sales channel execution, and lower post-paid churn, even in the face of greater market activity driven by the introduction of unlimited data plans and new device financing options that we, of course, matched to remain competitive. The important takeaway here for investors is that with the harmonization and simplification of rate plans across all carriers, the key point of differentiation that customers are now focusing on is network performance. And on that front, we clearly come out ahead. For prepaid, with the ongoing success of Lucky Mobile and our national retail distribution agreement with Dollarama, we continue to deliver excellent results. Our total prepaid net ads were 77,000 in the quarter, 81% higher than last year. Undoubtedly, we're taking market share in this segment, and over time it will serve as a good source of postpaid subscriber growth as we convert customers over to postpaid service. Lastly, again, as George mentioned, blended ABPU grew around 1% this quarter, even with the dilutive impact of the unlimited data plans. So a rather noteworthy achievement that we maintain positive ABPU growth in the face of some of the most significant structural changes that have hit the Canadian wireless industry in a number of years. So I'll turn over to slide 7 on Wireline. An excellent quarter for Internet with more than 58,000 retail net ads. in what is typically a seasonally more active quarter for the industry. That number is 9% higher than last year, reflecting a record number of gross customer activations and lower churn. And as a direct result of our steadily growing fiber footprint, we added 78,000 new subscribers to our FTTH customer base. Our direct fiber footprint, which now encompasses more than 5 million homes and businesses, offers speeds of 1.5 gigs, as you know, I think you'd be hard-pressed to find any other market anywhere that comes close to this. So the footprint advantage that we're building positions us very well in our consumer and business segments over the long term to significantly grow broadband market share and Internet revenue, which you all know yields an EBITDA margin as high as voice. On the IPTV front, we added 32,000 net new subscribers, which is a very solid result given the already high rate of customer penetration in our current five markets, relatively minimal new service footprint growth for TV, the increasing maturity of all TV, and continued over-the-top substitution. Notwithstanding these healthy internet and TV sub-results, we continue to work aggressively to maintain product leadership in the home with more advanced features that keep us ahead of our competitors in the marketplace. For example, and most recently, we launched the second generation of our whole home Wi-Fi pods that enable two times the speed of the previous model, while allowing for more devices to run simultaneously on a larger coverage radius. And on the TV front, all our customers can now pause and rewind live TV on any device with the 5TV app. This new feature joins Download & Go, Restart and Wireless TV and a growing list of innovations that have helped make Bell the number one television provider in Canada. And I wanted to also call out what was really a good NAS result this quarter. Residential local line losses improved 10% over last year as we cycled through the market shift from three product to two product service bundles that began mid last year. So to conclude on wireline, a really strong quarter overall from an RGU perspective with positive total retail net ads, including NAS and satellite TV, delivered in our wireline footprint for the first time in nearly four years. Clearly, this is a testament to our broadband network investments and broadband leadership that continue to pay dividends for us. I'll move to slide eight now on media. Another stellar quarter for Bell Media, where our market-leading ratings and programing together with a sharp focus on cost control, delivered improved operating profitability, and more importantly, strong cash flow generation. We had continued leadership in terms of viewership for CTV, with the most top 10 shows nationally, including The Amazing Race Canada, the number one program of the summer, and the top Canadian series of the 2018-19 broadcast year. And CTV is also off to a strong start for the important fall season, with the highest audience levels of any network during Premier Week. Turning to specialty, and TSN in particular, it was once again the country's top specialty network, not just in the sports category, but also among all specialty channels overall for Q3. That speaks to the breadth and quality of our premium sports programming, which this past quarter included U.S. Open tennis with average audiences which were 71% higher than last year, thanks to the history-making performance of Bianca Andreescu. In fact, the women's final was the most watched tennis broadcast ever on TSN, averaging more than 2.6 million viewers, which was even higher than the 2019 Stanley Cup final. And an equally strong performance in the quarter for our top-rated French-language sports network, RDS, where viewership among total viewers was up 16% over last year. And for Bell Media's English entertainment specialty channels overall, they posted record audience growth in the latest broadcast year with a 21% increase in viewership among adults aged 18 to 49. And most notably, when we talk about English entertainment specialty, the Comedy Network became Canada's most watched specialty service, finishing with a record 61% growth. Bravo grew its core audience by 26%. making it the most watched year on record for that channel, and Gusto had its best year on record as well, reporting a 49% increase. Lastly, you'll see from our press release yesterday that we announced that we've partnered with Warner Brothers International Television to bring HBO Max programming to Crave and CTV. This new long-term exclusive deal, which extends our long-standing partnership with HBO, is the first agreement to distribute the highly anticipated new content outside of the U.S. And on that, I'll hand it over to Glenn for a review of our financial results.

Thanks, Marco, and good morning, everyone. I'll begin on slide 10 with consolidated financial results for Q3. We posted another strong quarter of results consistent with our guidance targets for 2019, reflecting positive top-line growth and higher year-over-year operating profitability at all Bell operating segments. Total BCE revenue was up 1.8% year over year, which together with the favorable impact of IFRS 16 accounting and cost savings delivered a healthy 5.6% increase in adjusted EBITDA and a 1.5% increase in margin. Consistent with this EBITDA growth, as well as the net Mark-to-market gain on equity derivative contracts attributable to the increase in BCE's share price in Q3, net earnings increased 6.3%. Adjusted EPS was down 5 cents compared to last year due to lower year-over-year tax adjustments, which I will detail later in my presentation. Lastly, and perhaps most importantly for a dividend stock like BCE, free cash flow grew a strong 17.3% this quarter to approximately $1.2 billion. on positive and higher year-over-year contributions from all three Bell operating segments. This fully supported our more than $1 billion of capital spending in the quarter. Let's now turn to Bell Wireless Financials on slide 11. Although George and Mirko have said this, I can't help but repeat. Simply put, another quarter of excellent results. Despite the diluted impact of unlimited data plans, we enjoyed strong, sequential quarterly revenue growth. Total revenue was up 3.5%, the result of industry-leading subscriber growth, higher year-over-year prepaid contribution, effective reprice management, as well as greater sales, mix of higher-valued smart phones and rate plans that drove 6% increase in product revenue. In terms of operating profitability, adjusted EBITDA grew 7.9%, even while Bell Mobility delivered its highest number of quarterly growth activations ever. This was driven by a high revenue flow through to EBITDA, disciplined spending on promotional back-to-school offers, and the favorable cost benefit of IFRS 16. On the capital spending front, although our capital intensity ratio remains low, we continue to invest in employment of small cells and fiber backhaul in preparation for 5G. Because of our significant wireline fiber investments, as well as our network sharing arrangement with TELUS, we were able to maintain an industry-low wireless capital intensity of around 7%, which is contributing to a reduction in BCE's overall consolidated CI level. Moving to wireline on slide 12. Consistent with previous quarters, data service revenue grew 3.3% in the quarter. This was as a result of continued healthy residential internet and TV revenue growth of around 3%, as well as increasing business customer demand for fiber and bandwidth that drove IP broadband connectivity and business service solutions revenues up 7% and 3% respectively. However, total wireline revenue growth moderated this quarter, This was a result of steeper year-over-year voice revenue decline of 7.1 compared to around 5% in the first half of the year, a year-over-year decrease in low-margin business data equipment sales that can be rather lumpy from quarter to quarter, and the lapping of the Axia acquisition at the beginning of September. With growing broadband Internet subscriber scale, improved operating profitability at built business markets, and lower year-over-year operating costs, Wireline EBITDA increased a healthy 1.4%, driving a 50 basis point increase in margin to 44.2. And more impressively, this was achieved despite an acceleration in voice revenue erosion in the quarter and the storm-related costs we incurred because of Hurricane Dorian in Atlantic Canada. Turning to Bell Media on slide 13, continued strong financial performance was once again this quarter, as Merkle mentioned. Total revenue up 2.7% year-over-year in what is a seasonally low quarter in the media industry in general. Subscriber revenue increased 7% year-over-year, a result of significant growth in Crave customer subscriptions over the past year and the flow-through of higher rates for our enhanced Crave streaming service launched last November. Advertising revenue up 1.9% year-over-year when you exclude the $10 million in non-recurring revenue generated in Q3 of 2018 from FIFA World Cup soccer. This increase reflected stronger year-over-year conventional TV performance, which benefited from the federal election, as well as higher year-over-year revenues at specialty TV news services, CP24 and Astral out of home. Lastly, similar to previous quarters, adjusted EBITDA growth was exceptional, increasing 24.2%. This was driven by a flow-through of higher revenue and a 4.4% year-over-year reduction in operating costs that benefited from both the positive impact of IFRS 16 and programming cost savings as last year's results included the sports broadcast, as I mentioned, of the FIFA World Cup. Let's turn to adjusted EPS. Slide 14 summarizes the main components of adjusted EPS for Q3, which was 91 cents per share, down 5 cents compared to last year. Higher adjusted EBITDA drove 11 cents of year-over-year growth, but was largely offset by higher depreciation and net interest expense due mainly to the adoption of IFRS 16 accounting. In aggregation, IFRS 16 had an approximate 1 cent unfavorable impact on EPS in the quarter. Also negatively impacting adjusted earnings this quarter was lower year-over-year tax adjustments, as last year's results included $0.08 of EPS from favorable resolution of uncertain tax positions related to our acquisition of MTS. Lastly, as is typically the case in Q3, we picked up our share of operating losses from our minority interest equity position in MLSC, which similar to last year, totaled $0.03 per share. This arises from the fact that Q3 is seasonally a low quarter at MLFC, as there are no gate or other game-related revenues generated during the summer offseason for hockey and basketball. Let's turn to free cash flow on slide 15. We generated close to $1.2 billion of free cash flow this quarter, bringing year-to-date cash generation to more than $2.9 billion, or 15% higher than last year. This very strong growth was a result of higher adjusted EBITDA, lower cash taxes that reflects the timing of installment payments versus last year, as well as the favorable reversal of working capital from Q2 attributable to higher customer receivable collections. This quarter's results also reflected higher interest rates due to the imputed interest on the lease liabilities under IFRS 16. Regarding financial activities in the quarter, we took advantage of a low interest rate environment to complete a 10-year, $550 million Canadian public debt offering in September. At 2.9% coupon, this was the lowest financing rate we have ever achieved on a 10-year MTN issuance. This maintained our after-tax cost of debt at a historic low of 3.1%. This ensures good predictability in debt service costs while helping to insulate against future interest rate volatility. And more notably, we have no near-term financing requirements as our next maturity only occurs in April of 2021. Lastly, despite the unfavourable impact of the lower discount rate due to the decline in Treasury bond yields, the Bell Canada defined benefit pension plan remains fully funded at a solvency ratio of 102%. This has been enabled by a relatively high proportion of fixed income investments in the pension plan, which now represents 71% of our asset mix. And as a result, no special voluntary pension top-up contributions are expected to be made at the end of this year. This is quite a shift, and I was looking yesterday Less than eight years ago, our solvency ratio was sub-80%, at 79%. Over those eight years, we have had to put $3.5 billion in special deficit funding into the pension plan. And when I look out to the future, that is an incredible burden behind us on free cash flow. So when I think about the future and the state of our pension plan, I'd like to think that that $3.5 billion is in the rearview mirror. and certainly not something we face in the future. To wrap up on slide 16, with three quarters of strong consolidated growth already reported, we remain firmly on track to deliver on the financial guidance targets that we provided at the beginning of the year. Entering Q4, we remain competitively well positioned with strong operating momentum across our wireless and wireline broadband businesses. and market-leading media assets that generate substantial cash flow for reinvestment in this business. As we begin to look out to 2020, BC's cash flow remains strong and reliable, with growth opportunities ahead from fundamental business performance, continued capital spending and cost efficiency gains, cash tax benefits from accelerated depreciation, and a stronger pension solvency position. All of this while positioning us to deliver ongoing expansion of our leading broadband networks and continued dividend growth next year. That concludes my remarks, and I'd like to turn the call back over to George to make a few closing comments.

Great. Thanks, Glenn. We'll open up for questions in a moment. Just a few final comments from me before we go to Q&A. I actually believe this morning is actually my 100th investor call, and it will be my last as a public company CGO. My first was actually in 1994 for ClearNet, 25 years ago this month. I'd like to thank all the investors and analysts from around the world who have supported the companies I have been CEO of. And in particular, your unwavering support for the BCE turnaround in Canada. Your company, BCE, is in a tremendous hands going forward under Merkel's leadership. and a stable executive team, second to none in the world on telecom experience and expertise. I plan to remain keenly interested as a large shareholder going forward. I believe there is no other telco in the world with an asset base better ready to deliver on all the promises of broadband 5G wireless and a fiber world combined with an extraordinary and appropriately sized media asset going forward. Clearly, VCE is uniquely positioned to leverage the broadband digital ecosystem going forward for years to come. With that, thank you all. Over to Thane.

Great. Thanks, George. And I just wanted to take the opportunity to say what an honor and pleasure it's been to work with you as well over the past 14 years. So before we start the Q&A period, Donna, just keep the conversation as possible. I'd ask that you limit yourselves to one question in every follow-up so we can get to as many of you in the queue as possible in the time we have left. So with that, Donna, we're ready to take our first question.

Thank you. If you have a question and you're using a speakerphone, please lift your handset before making your selection. If you have a question, please press star 1 on your telephone keypad. If you wish to cancel the question, please press the pound sign. Please press star 1 at this time if you have a question. There will be a brief pause of participants register. Thanks for your patience. And the first question is from Richard Cho from JPMorgan. Please go ahead.

Hi. George, I just wanted to ask a big picture question for your last call, and you kind of mentioned it a little bit in your final remarks there. But as you look out going forward in terms of the next few years, do you see more of an opportunity with 5G in the wireless business or with the fiber build? now that a lot of it has kind of come to fruition and you're going to be finishing it up over the next few years?

Well, actually, first of all, Richard, thanks for the question. It's been tremendous working with you over the years. My view on that is I don't know whether that's one or the other. I think I get equally excited on both. I mean, on the fiber side, you know, we're more than 50% through the journey. We probably found it is a clear strategic advantage to You know, the speeds that Merkel talked about today, it just sets us up for the evolution of that growth. And, of course, with 5G, you know, it is a whole other level of wireless. Every 10 years I've been in the industry, people talked about the maturing of the wireless industry, and then there would be an evolution to the next level of technology, and we saw another acceleration in growth. And so that opportunity going forward is probably the piece that I'm going to regret the most, not being a part of that journey. So, you know, very positive on both. And then, of course, I know investors know this, but I think the unique part of our asset, and I would have to say it wasn't really quite foreshadowed as it's turned out so positively, is everywhere we're building our wireless network, we have a fiber network. And so our overall transition costs, the 5G... I think investors are going to be very pleasantly surprised how tight we can keep capital intensity going forward and make those happen. So I think we're positioned with both, and then I think they will actually come together more than ever before, and the integration of wireless and wireline at the network level and in the customer area will be quite different than it is today five years from now. Thank you.

And a quick follow-up from Erica. How do you look at the transition in terms of the – transition to unlimited plans and device financing, what's your view on how you're going to manage that over the next few quarters?

First, thanks, Richard. We're always going to be competitive, so that's the first principle. What we're doing, as you see from the results, is there's a really strong focus on execution here, on repricing base management. Of course, we have unlimited plans competitively matched for those who want them, but we also have a whole host of other types of plans, share plans or otherwise, unlimited and not unlimited, so that we can land customers on the right price point for them, but also for ourselves and our metrics. So there's a difference between having unlimited plans to be competitively matched and have that for your subscribers, There's a difference between that and force migrating everyone to those plans as rapidly as possible. So, you know, key thing, effective base management, putting people on the right plans for them and for us. And on device financing, we mentioned in Q2 that we had some IT work to do to be in a better position competitively with those. We've gone through that work, and you'll have seen as we start Q4 that We're more competitively, better competitively matched on device financing, and we're seeing a sales mix shift to those plans as we go along.

Great. Thank you.

Thank you. The next question is from Jeff Van from Scotiabank. Please go ahead.

Thanks. Good morning, and let me just congrats George on a great career at Bell, and it's been an honor covering you all these years. I want to just continue that line of question around the device subsidies. I think there is a bit of a debate going on in the market. I think some carriers want to just only offer installment plans and EIPs, whereas some carriers might be looking to either keep that option open or just maybe not shift to no subsidies as quickly. Can you talk about the choice that you – want to continue to maintain in the market for consumers? Are you thinking more about going all in on the EIPs or will you continue to leave that option open? And then just a related follow-up to the unlimited. I guess one question for overage is, without having this forced migration and faster decline on overage, you do have a higher mix, I guess, relative to some of your peers, is there a risk that we could see that fall faster for any reason, or do you see your ability to kind of manage that continue in the foreseeable future? Thanks.

Yeah, well, two comments I'll make. One, on the device financing versus subsidy, we'll meet the demands of the consumer and be competitive. On whatever front, we're not passionate about either. We're passionate about what the customer wants, so that'll be our focus. I think there's some real merit on both approaches, and we'll stay in the market. As Mirko said, we're making sure we're competitive across all of it, and we think there's a lot of... intelligent in some of the concepts that are in the market, so we'll follow those, but we'll always stay competitive and don't have a passion on either, to be quite frankly, where we make the most money and our consumers and customers have the best choice will be that focus, and that's what Merkle's driving. And on the overage, I find it's one of the strangest questions I've got, is let's accelerate the person who's accelerating the fastest on how that's a less risk approach. We've managed our bases. I think our wireline maybe is where you ought to look, everyone, and look at our management of our NAS and those things over the years. We know we have to meet the customer demand. Merkle said we've got to be competitive, and we'll make sure consumers have maximum choice, so there are some plans that may be different. So we'll just manage our business, and Merkle will, as we always have, and we'll leave competitors to do what they think is right.

Thank you.

Thank you. The next question is from Aravinda Galapatik from Tannacore Genuity. Please go ahead.

Good morning. Thanks for taking my question, and my best wishes to George as well. I wanted to touch on the regulatory side. Obviously, we have a couple of items still very much alive. On the wireless front, the prospect of MVNO mandated access, you know, if it sort of pushed through with Make Canada, one of the very few countries with – with that kind of regulatory regime. You know, when you kind of think about sort of the comments coming from the regulator as well as on the political front, how do you see that just playing out? And perhaps, and this might be a little bit premature, what are the options available to an incumbent as you look to manage through a scenario like that?

Thanks. Okay, thanks for the question. Our focus is going to be on the regulatory hearings coming up in the early part of next year. And really the approach going in is to focus on the facts. And we just had a CRTC report a couple of months ago which found significant declines in mobile prices. That's on top of a recent StatsCan report that also found that prices have decreased quite significantly by more than 50%. We all know just from our price plans ourselves, whether it's Bell or Virgin, that the data prices per gig have dropped dramatically over the last three, four years, and that's without even factoring in the price impacts of unlimited plans. So on pricing, huge movement being delivered by facilities-based competitors across the country. That's a fact, and that's a compelling fact. And from a policy point of view, it's not just about price, right? It's got to be about coverage and quality of networks. And we are at an important fork in the road here. We can't sacrifice coverage and quality by making the wrong regulatory decision, especially as we're on the cusp of 5G. And it's unfortunate. We've seen some regulatory decisions over the summer that have gone too far, and they've actually had direct impacts on capital investment by ourselves, but not just ourselves, by our peers as well. And we've heard some of the commentary from a couple of our peers just in the last week about how regulatory decisions have affected their investments. And the Bureau has warned about this. If you go too far in a regulatory decision, it will impact investment, and that's not good for the country. So going into next year, those are the key points. Positive movement for consumers on prices, and let's always be mindful about investment. because we want to lead in coverage and quality as well.

My only addition to it is the Canadian government and the CRTC's policy directives have the concept that network infrastructure is critical to the country. We have four wireless infrastructure providers, possibly at the end of this year more than the United States has if there's a merger. And we're all on the cusp of 5G bills and providing, other than one country in the world, the best 4G networks on the planet. The balance is correct. That will be the position, and I'm highly confident the government will see that appropriately given the competitive outcomes in the marketplace that we're seeing. With that, next question.

Thank you. Thank you. Thank you. The next question is from Vince Valentini from TD Security. Please go ahead.

Yeah, thanks very much. Two things. One, Glenn, the free cash flow growth, you're at 15%. year-to-date, the guidance range is still only 7% to 12% growth for the year. Is it possible you're trending a bit ahead of your original plans, or is there something to be expected in Q4 in terms of lumpiness in working capital or CapEx or something? And a second question for whoever wants it, can you give us any update on data usage trends on wireless on an overall basis, and if you care to, for customers who are migrating to Unlimited plans if you're seeing some benefits of people using the phones more.

Thanks. Hi, Vince. It's Glenn. I'll jump in on the first. As I said, I'll reiterate guidance for all of our metrics, 7% to 12% on free cash flow. Remember in my opening remarks, I told you that there was a decrease in cash taxes paid that we enjoyed in Q3. That was due to a timing of an installment. That's going to reverse itself out in Q4. And CapEx will pick up notably, again, reconfirming where we think CapEx will land. It'll pick up in Q4 as we continue to expand our fiber to the home and we continue to make investments in wireless to the home and our small cell deployment for 5G readiness. So sticking to the guidance, we're very, very pleased with the performance here today and the 7-12% outlook for the year.

And on We Are, Vince, We Are, it's Mirko. We are seeing... data usage growing, including, of course, for those subscribers who are on unlimited plans. Next question, please.

Thank you. The next question is from Mayor Yagi from Desjardins. Please, go ahead.

Thanks for taking my question. George, I'm sure you'll be missing being on the next conference call come February. We're really warm listening in. Go ahead. I'm sure. But more seriously, we will miss your insight and vision for an industry. But talking about vision and insight, I wanted to maybe just ask you a big picture question. And as you are leaving the company, I'm hearing you guys talking about 2020 preemptively about the dividend and and so forth, but I wanted to ask you maybe a little bit longer timeframe here. As you see some of the industry changing metrics in the wireless industry changing with ARPU under pressure, maturity in the sector, and also some maybe increased regulatory environment headwind. How confident are you that a company like BCE can sustain its 5% dividend growth model longer term? And I have another question to come, a more detailed question on the quarter.

Okay. Thanks for the light question. Appreciate that. But, you know, seriously, you know, if you think, if you just step back for a minute and think of the last 10 years and what under Merkle's leadership we're going to see in the next 10 years, And when I look at it, first of all, Glenn talked about, you know, he gave the incremental money, but it was $4 billion that we, you know, $4 or $5 incremental dollars over the 10 years into the pension. That's not going to happen. So we free up with a business that's much larger than before, $5 billion of cash flow over the next 10 years that we had to incur the last 10 years. We're halfway through the fiber journey. The costs for 5G for us will be remarkably lower than most because of our fiber infrastructure. Exactly. And so when you think about the industry structure going forward, you know, at some point we hit an inflection point. There's always on the CapEx issue, and Mirko will take us through how that will see. You saw a creep down this year in our capital intensity, and under Glenn and Mirko's leadership, we'll see how that evolves. But if you really mull it out, it is clear that a lot of these significant investments on the fiber are behind us and the pensions behind us. And then your other comments about the maturing business and And what happened, you know, as I said before, every 10 years of wireless since I started in, most people on the call, but anyway, 1985, the day it started in Canada, people have talked about the evolution and the maturity of the industry. And then what happens is we move to the next level of technology. And now we're seeing 30% growth in usage again. And you get into, you know, autonomous vehicles and what 5G is going to do. I'm frankly really optimistic. As I said, I'm going to be a really long-term shareholder on this story.

Good to hear. Okay, and my more short-term nature type question. So when you are looking at this transition to unlimited, you're not seeing the same tremendous negative impact that other companies are seeing right now. But can you talk a little bit about what – might occur during the next couple of quarters as you transition more and more of your customers to unlimited. I know you're working on base management and trying to bring in this transition slowly into your base, but if we are at, let's say, minus 1% R2 right now in the third quarter, are What is the outlook for ARPU growth in the next two to three quarters, and when do you think this decline will revert?

Yeah, well, first of all, ARPU is irrelevant, right? It's ARPU that matters. That's the first point, because that's the real generation of that. That's the first point. Secondly, I think we think we're in a market where we should take all this over and drive everyone going forward after this, but our very simple view on this is what we said on the last call. Whatever growth in ARPU we were going to see is always going to be moderated by this price change that we've seen in the market. And so you've seen a positive quarter from us on the APU, but not maybe at the rate we've seen the previous quarters. You know, that's what the team will work very, very hard at doing going forward, and that's what we're going to try to manage through. We're also going to see increased usage and opportunities in the market from that. But, you know, increased usage can bring about capex, not revenue growth. So, you know, the real focus for us is to stay competitive, manage it appropriately, and I think our results for today speak for themselves against our relative performance in a market that's now had unlimited pricing through that period, and we're obviously managing it differently. We don't know what our other major competitors reported to report, so I don't think it's correct to say we've seen people with these declines. We've seen one so far on that front. So we're just going to manage the business like we always have with the focus on the cash flow dividend and margins and stay competitive.

That's true, but the question I'm trying to get to, and this is what the companies who are seeing this shift happening very quickly are saying that, or some investors are implying that if you're not seeing right now this negative impact, you're going to see it anyway in the next couple of quarters. Is that a certainty?

Well, what I would say with a certainty, we are seeing clients migrate to Unlimited. And so as a result, the moderation of ARPU, you are seeing it in the results. But our cost management expertise and our ability to focus very carefully, disciplinedly, and our network leadership, of course, makes clients move to us in this market. If you're going to go to unlimited data, you want to be on the network that's the fastest. And it's become a much less complicated sale, and we think our distribution strengths give us that positioning. The market will make its call. We're not going to do ARPU forecasts on a call. I think we try to be as transparent as we can, and I think I would look at our history of managing ARPU maybe as an indicator of how maybe we'll manage it going forward. Hopefully that's helpful, and let's move on to the next question. Thanks for the questions, and thanks for the kind comments.

Thank you, George.

Thank you. The next question is from David Barton from Bank of America. Please go ahead.

Hi, it's Matt sitting in for Dave. Thanks for taking the question. I just wanted to ask about subsidies. In the wireless side, one of the kind of benefits some hope for in this transition that we're going through is the ability to lower the device subsidy. And I was wondering if you guys see the same kind of opportunity on that front in the way that you're managing the transition? And separately on the broadband side, the net ads were strong this quarter, helped by the wireless to the home. And I was just wondering if you could add some color to maybe the contribution between the wireless to the home footprint versus the fiber to the home and what those customers maybe look like versus between the two footprints.

Okay. It's Miracle. So on the device financing versus subsidy, we do – We do see, as we see the sales make shift, migrate towards device financing across the industry. I think there will be success there in reducing handset subsidies, and that will be accretive to either done and cash flow, of course. And on wireless to the home, I'm not going to get into breaking down all the component parts here for competitive reasons, but we're happy with the progress there. Our footprint continues to expand, and we're We're very pleased with the penetration rates we're seeing when we open up a market because, of course, there's untapped demand there. These are areas that either have no service at all or have low-speed DSL. So when you come up with a service like this that can offer next-generation speeds of 25 megabits per second or more, you can imagine that the customer take-up is quite strong. So we're pleased with the progress on wireless services. to the home. So far, we should be passing close to 200,000 households by the end of the year, and that trajectory is going to continue into next year. All right.

Thanks. Thank you. The next question is from Tim Casey from BMO. Please go ahead.

Thanks. George is curious. Did you get one of those big fancy rings the other night?

Well, as I was handing them out, I put one in my pocket on the way through, yeah.

A couple for me. Just one on the progression of Unlimited. Are you willing to share how much your base has transferred over already and any indication of what you think that cadence will be like going forward? And second one, on the fixed side, you know, we've seen an acceleration of cord cutting in the U.S., And you're obviously well positioned for that given the variety of products you have. But I'm just wondering how your thinking and expectations on cord cutting are evolving as, you know, we get a number of streaming options coming online over the next little while.

Thanks. Sure. Well, the first answer is no. We don't share competitive intelligence on pricing in the marketplace. Our results speak for themselves. We won't be sharing how that mix is changing. And then, you know, on the broadband side, wireless versus wireline substitution, you know, and the evolving ecosystem that we got between the two, if you look at the Canadian marketplace and our fiber at 1.5 into the home, you know, that movement to Wi-Fi in the home is going to continue because those speeds are still dramatically ahead of where we are in wireless. And as we evolve even to 5G, very different than our neighbors south where, you know, there's clearly a more cable dominance on one side and 5G as a strategy on the other. I think 5G will be complementary to broadband, not a substitute in the marketplace to what's going on in the home. Simply because of what our peer TELUS has done in the West, And what we're doing here is to kind of put Canada at the forefront from a fiber perspective. So, you know, there will obviously be some cannibalization at some extent over time simply as we move to these programs. But in terms of superior speed and access to the digital video content that people want in physical locations, it's hard to imagine people not accessing, you know, what Merkle's team is going to lead out as to, you know, from one and a half to five to ten gig services. Thank you.

Thank you. The next question is from Adam Ilkowitz from Citi. Please go ahead.

Hi. Good morning. Thanks for taking the questions. And, George, it's been a pleasure to get to know the Canadian market with you over the years. Two questions. One is, as equipment financing becomes more popular, how do you plan, Glenn, on managing the costs of financing those handsets for your customers? And then secondly for Merco, as you look at the asset base you have that you're inheriting from George, it's obviously quite complete within the market. Is there any chance to monetize any non-core assets or look at the wireline business in a different way that could perhaps improve the growth rate or improve efficiencies in a more rapid fashion?

I'll jump in first. And the first question, Adam, on managing the cost of moving to the installments, Look, I spoke earlier about what we've done and how opportunistic we've approached the market, how we continue to do long-term financing at what are historic low rates. No one's balance sheet in this industry is any larger and stronger than ours. So we do not see this as a challenge. We will absolutely move with the market and ensure that we have offers in place that are competitive and as far as The ability to manage the cost, as I say, look at our balance sheet and track record on being opportunistic.

And in terms of the assets, to answer your question, I think back to George's previous answer, I think it was in response to Meyer, about looking forward. And when you think about what the opportunities, the tremendous opportunities this company has looking ahead, it's because of the asset base that we have that we're so well positioned to capitalize on those in the future. So I'm quite happy with the asset base we have, and we're going to continue on some of the things that you already know about, including the fiber footprint and wireless to the home. Look, we're always looking constantly at the surface value, so we're going to continue to do that in corporate development, but I'm really happy with the asset base, and that's how I'd answer your question right now.

Thanks so much.

Thank you.

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

Thanks very much. Good morning. And for the second consecutive quarter, George, just congrats on just a phenomenal run. Two questions for me. First, maybe can you provide an update on wireless market expansion in Canada in perspective, obviously, out of the gate with a soft Q1, but certainly looks like – the market has come back from that perspective. And then secondly, either for you, George or Mirko, big picture, when does it become more obvious to most folks that the wireline asset that you have is really kind of a big asset here relative to your peers? Is it you know, is it an application or use case of 5G? Did you change up the commercialized offers out there? I know George, you've talked about CapEx efficiency that may surprise people. Just would love that big picture perspective at this point. Thank you.

So on the market, sorry guys, on the market expansion, You know, I thought one of the real interesting things for our international investors who may not have seen it is the population growth we saw in the country. The fastest, I think, of the G7 or G20, you know, between our immigration policies and organic population growth. And you see 450,000, 500,000 in our country. And as we all know, that's all from a wireless perspective, additional subscriber opportunities. that's, I think, absolutely what makes this country so unique from a telecom perspective, one of the advantages. And then, of course, in our world, the housing starts are just as important. And now that our wireline footprint is 75% of the country, we see that benefit from a broadband site. So across the board, we continue to see, you know, that acceleration in growth. And, of course, we weren't in all the segments, so the prepaid one that Merkel talked about gives us another space where we relate to the party. And, you know, now, obviously, that's truly paying off. And then on the fiber leverage, it's interesting. I think we're seeing it. I mean, I hope the investors think we're seeing it. I mean, we were not leading from a broadband perspective in market share. We had a cumulative market share that was well under 40, I think 35. We just have a fundamental belief, and this isn't a new theory. Everyone on the line knows that because it's clearly the most superior technology in the world, that over time as people move, and on average they move about every seven years, people are going to make those purchases and know that they want glass to their premises. And ultimately, we should see ourselves at an improved market share. And in every market we've done fiber, our market share has improved over time. And I think that's leveraging that asset. And I hope someone's not thinking we're not. And then, of course, on 5G, we've talked about way more to come on that under Mirko's leadership than mine. Hope that's helpful.

Yep, thank you.

Thank you. There are no further questions at this time. I'd like to turn the call back over to Mr. Fotopoulos.

Okay, great. So thank you, everybody, for your participation today. As usual, I'm available for follow-ups and verifications throughout the day. So on that, thank you very much, and all the best to you all.

Thanks, everyone.

Thank you.

Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.