Quebecor Inc.

Good day, everyone, and thank you for standing by. Welcome to Quebecois, Inc.' 's financial results for the second quarter 2023 conference call. I would like to introduce Hugues Simard, Chief Financial Officer of Quebecois, Inc. Please go ahead.

Ladies and gentlemen, welcome to this Quebecois conference call. My name, as was said earlier, is Hugues Simard. I'm the CFO. And joining me to discuss our financial and operating results for the second quarter of this year is Pierre-Claude Péladeau, our President and Chief Executive Officer. Anyone unable to attend the conference call will be able to listen, as usual, to a recording by telephone or webcast. Access details are available on our website at www.quebecorps.com. The recording will be available until November the 11th. As usual, I also want to inform you that certain statements made on the call today may be considered forward-looking, and we would refer you to the risk factors outlined in today's press release and reports filed by the corporation with the regulatory authorities. I will now turn the floor to Pierre-Cal.

Merci, Hugues, and good afternoon, everyone, or good morning, depends, you know. Yes, it should say good morning. Sorry about that. far away. So I am happy to report today the financial and operational results of our first quarter of operations consolidating the activity of Freedom Mobile. As you know, we closed this very important transaction on April 3rd and have been hard at work to put in place the numerous key milestones and realignments needed to execute our carefully planned, crucial back-to-school season. We are in the midst of it right now, and I have to say that I'm very pleased with the engagement and performance of our teams to further enhance freedom markets position and to reinvigorate the competitive dynamics in Canada. As we have said many times before, For us to succeed in our new endeavor and for true wireless competition to succeed and last in Canada, we need fair, reasonable roaming and ambiental rates that are in line with the government and CRTC objectives. In that context, we are pleased with the July 24th decision by the CRTC in the final offer arbitration process between GEDECOR and Rogers, which choose our position in setting the rates for access to Rogers' wireless network. The decision indicates that the CRTC and its new leadership are committed to increase competition in Canada telecom industry while encouraging network investment. The rates selected by the CRTC, which are in line with international rates, will enable Quebecor and its subsidiary to offer plans that are more affordable, accessible, and competitive across Canada to the benefit of consumers. We could not be more encouraged and positive with the new competition leadership at the CRTC, especially compared with the previous one, with whom we sometimes had to wait two years or even more to have a decision. Quick, effective decision-making is clearly to the benefit of all Canadians. That being said, our negotiations with the two other incumbents, no surprise there, remained difficult and no agreement had been reached yet. despite our repeated good faith at that. We had no other choices than to submit another request for final offer arbitration before the CRTC. We have just recently started the FOA process with Bell. In addition, it is essential that incumbent carriers be required who offer TPIA services through aggregated FTTH facilities for us to become a truly fort national player in wireless and wireline services in the rest of Canada. There are no justifiable reasons to slow down access procedures other than dilatory games being played by the telcos. In comparison, We and other cable operators have always diligently provided access to our coax network to TPIAs, even the ones wired at very hefty prices by Bell. Quite simply, we need to gain swift access to Bell and other incumbents' SDTH to compete directly with them and offer greater speed access at lower prices. The only reason why Bell offered the same 1.5 gig on STTH at $90 a month compared to $60 a month in Montreal, well, you have guessed it, is that TPIAs and others don't have access to a competitive price on STTH. Actually, going by the regulated STTH access rate of 129.79 cents. Bell is selling its gig at a loss, supposedly. While on the regulatory front, I would like to add that with respect to the new Broadcasting Act, Bill C-11. The CRTC and the government must introduce more regulatory flexibility and lighten the regulatory framework that is too burdensome for us from an administrative and financial standpoint. We must impose on foreign platforms a contribution obligation dedicated to Canadian content rather than an obligation to have Canadian programming expenditures to preserve the competitiveness of Canadian companies and not accelerate the decline of our Canadian broadcasting system. And to quickly remedy the precarious situation of private television, it is imperative to immediately withdraw advertising from all CBC Radio Canada platforms to put an end to unfair competition and raise for ratings. Finally, we welcome the adoption of Bill C-18 on June 22nd. As you know, following this passage, Meta announced that it would block Canadian media content on its Facebook and Instagram platforms, and has just recently started doing so. And Google announced that by December of this year, it will no longer offer Newslink in Canada. In response, Quebeco withdrew all advertising investment from its subsidiary and business unit on Facebook and Instagram. And in solidarity with the Canadian media, the Quebec government, the federal government, numerous municipalities and organizations have suspended their advertising of META, and several organizations have announced that they are redirecting their advertising investments towards the news media to the detriment of web giants. CEDECOR has long argued that to preserve the industry's sustainability and vitality, original content from the various platforms had to be included in this bill. Creation of a payment system is necessary in view of the web giant's market dominance. These platforms use the content produced by Canadian news organizations to generate a significant portion of the interaction of their network and must pay a fair price for it. Before turning to our operational results, I would like to highlight that Québécois on a consolidated basis had generated $455 million in cash flow from operation in the second quarter of 2023, and an increase of 26% over the same quarter of 2022. Lutron, with the addition of Freedom, improved its cash flow from operation by 25%, to $462 million, and its EBITDA also by 25% to $608 million in the quarter while maintaining the best margin in the industry. National performance is better than bells and tellers and allow us to start paying down debt as opposed to borrowing to service our dividend policy.

I will now review our operational results starting with our

telecom sector. In telecom, this is our first quarter at DL on Freedom Mobile, where our teams are focused on delivering on our promises of more competition and lower prices for Canadians. Despite insidious efforts by TELUS to block the transaction, as we all learned in front of the competition tribunal, Remember the code name, Project Fox, where Quebec oil was described as a danger? Well, we succeeded with the support of pro-competition policies of the Government of Canada, who has determined to offer Canadians truly competitive prices. Quite simply, we have been doing what we said we would, with the addition of 10% more domestic data to all existing Freedom subscribers and a price freeze on existing plans for all current and future customers. We have also launched our 5G services on July 27 and have significantly improved the network connectivity through nationwide coverage, seamless roaming, and affordable international mobile plans. Consolidation of freedom added over 1.8 million subscribers to our wireless customer base, in essence, doubling it at 3.6 million RGU's. Despite a second quarter characterized by intense competition and quick reactivity, we managed to record 49,000 wireless net ads in that period. Turn rate on post-paid customers increased 0.2% this quarter, mostly due to the addition of freedom where we are determined to reduce turn with our 5G network deployment, improve reliability and connectivity, and move a portable plan. seamless and over from one network to another without interruption or drop calls, which is now functional between Freedom and Rogers as it has been between Gideon and Rogers in Quebec as part of our joint network agreement, now gives all carriers access to essentially the same network. So it is ironic. to see Bell Flanker Brands Virgin boosting that it runs on a network that is larger and faster than Freedom. Certainly not the first or the last that we see ID the suitable ads from Bell. While we focus on reinvigorating our newly acquired Freedom brand outside of Quebec, we did not take our eyes off of our own market, as shown by our 34% combined share of gross ads in Quebec for our two brands, Videotron and Fizz combined. According to our Léger Survey, or E-Léger Survey, by far the largest combined share of gross ads of all operators in Quebec and a quarter. This clearly demonstrates The strength and complementary of our brands, and without a doubt, confirms Videotron as the leader in wireless services in Quebec. Our wireless EBITDA more than doubled to $251 million in the quarter due to the addition of Freedom Force, as well as increases in service revenues and set sales. Wireless ARPU decreased slightly following the acquisition of Freedom Mobile, as expected. In broadband, we posted 5,300 net ads this quarter, excluding third-party resellers despite the increasingly competitive market environment. Internet ARPU improved by 76 cents, or 1.4%, over the last year, again, resulting from pricing optimization and brand positioning, allowing us to overcome the diluted effect of FIS and lower plan mix. Two, price optimization, improved brand positioning and turn management with continued mitigation of customer decline in traditional services. We continue to generate growth in wireline revenues and margins. The market, again, characterized by ongoing cord shaving and cord cutting, we managed to slow the trend down in television for a sixth consecutive quarter by optimizing the positioning of our brands and the pricing of our ILECO and ILEX platforms, thereby improving our performance. This quarter, we reduced television decline in subscribers by 15% compared to last year. Finally, we are reaching the end of the project Operation High Speed in Quebec Remote Areas, which has now reached 96% of the total planned kilometers. expect to see continued increase in connected homes over the next few months. Moreover, our 5G deployment in the province of Quebec continued to stay on track in terms of operational sites deployed. Turning to our immediate segment, despite advertising market conditions that remain challenging, especially in television, We have continued to invest significantly in the production of unique, differentiated, and highly popular content to ensure continued leading ratings and maintain our position as Quebec's undisputed destination for broadcasting information and entertainment. Our strategy was successful as TVA still dominates its market. increasing its consolidated market share by 0.4 part to 42.7% in a quarter, compared to Radio-Canada, 18.3%, and Nouveau-Pelmedia, 19.4% respective market shares. Nouveau-Pelmedia is also broadcasting four of the five most-watched TV shows in Quebec, including the daily show Indéfendable, with an average audience of over 1.5 million, La Voix, the local version of The Voice, and the new reality TV show, Something What You See, which is the local adaptation of I Am a Celebrity, Get Me Out of Here. That being said, as the economic and technological environments are profoundly transforming, the very foundation of the broadcasting industry in Quebec and around the world, Boutet d'Air continued to generate losses in its second quarter. As nothing unfortunately points out to an improvement in these conditions, we must act and rethink how we operate these businesses. Finally, our sports and entertainment division maintained its Q1 momentum with a sizzling array of major shows in the quarter, including Depeche Mode, Disturbed, Nickelback, and Shania Twain. Second edition of our popular Seagal Festival is already fully booked, and the premiere of our new musical, The Bodyguard, was a great success, which bodes very well for the upcoming 54 shows until November. Finally, the Quebec Rampart, the Rampart de Québec, where Guy Lafleur played in 1969, won the Memorial Cup, beating the Seattle Thunderbirds in the grand final in Kamloops, capping a very successful year of hockey in Quebec City. I will now let you review our detailed financial results.

Merci, Pierre-Cal. So turning to our financial results, our telecom segment generated $462 million in cash flow from operations, a 25% increase. And EBITDA also increased, as Pierre-Cal mentioned earlier, 25% in the quarter, and EBITDA margins stood at 51%. Revenues reached $1.2 billion, up 32% compared to the same quarter last year. And while the addition of Freedom Mobile accounts for most of the revenue growth, The Videotron and Fizz brands continue to deliver growth in wireless and internet service revenues. On the OPEC side, the increase of 42% in the quarter compared to last year is due to the consolidation, of course, of Freedom Mobile. As the cost containment initiatives on the Videotron and Fizz sides continue to pay off, translating into our increasing and industry-leading EBITDA margin on those brands. The Ecom CapEx spending, excluding the acquisition of Spectrum licenses, was up $28 million in the quarter as compared to last year, solely due to our investments in Freedom Mobile. In the quarter, we continued to increase our investment levels on key initiatives such as LTE Advanced, 5G network extensions, and geographic expansion in all markets. On a consolidated basis in the second quarter, Quebecor's revenues reached $1.4 billion, up 25%. Revenues from our telecom segment were up 32% to $1.2 billion, mainly due to freedom. Revenues in the media segment decreased 4% to $180 million in the quarter, while our sports and entertainment segment grew 8% to $49 million. Our adjusted cash flows from operations increased $94 million in the quarter, 26%. to $455 million, once again demonstrating our continued operational and financial discipline. Adjusted cash flows from operations for telecom also grew $92 million, or 25% to $462 million. Becker's EBITDA was up 23% to $605 million in the quarter, mainly due to the impact of the Freedom Mobile acquisition. The telecom segment generated $608 million, up $120 million, or 25%. Quebecor reported a net income attributable to shareholders of $174 million in the quarter, or 75 cents per share, compared to a net income of $157 million, or 66 cents per share, in the same quarter last year. Adjusted income from continuing operations excluding unusual items and gains or losses on valuation of financial instruments came in at $182 million or 79 cents per share compared to $162 million or 68 cents per share last year. For the first six months of the year, Quebecor's revenues were up 14%, 2.5 billion, and EBITDA was up 12% to $1.05 billion. EBITDA from our telecom segment grew 14% to $1.08 billion for the period, an improvement of $134 million. As at the end of the quarter, our net debt to EBITDA ratio was 3.52 times, up from 3.27 times reported at the end of the second quarter last year, and has improved since the closing of the transactions. On April the 3rd, 2023, Videotron entered into a new $2.1 billion secure term credit facility with a syndicate of financial institutions to finance the acquisition of freedom. The term credit facility consists of three tranches of equal size, maturing in October 2024, April 2026, and April 2027, bearing interest at banker's acceptance rate, secured overnight financing rate, Canadian prime rate or US prime rate, plus a premium determined by Videotron's leverage ratio. Available liquidity of $1.6 billion at the end of the second quarter, and our growing free cash flows will be more than sufficient to fulfill our commitments and maintain our very strong balance sheet. During the first six months of the year, we didn't purchase any Class B shares. And please note that the board on that topic, upon termination of the August 2022 program, has approved the renewal of the program for one additional year. We thank you for your attention, and we'll now open the lines for your questions.

All right. The first question comes from Mar Yagi from Scotiabank. Please go ahead.

Good morning. I wanted to ask you, As you indicated, it looks like Videotron and Fizz continue to have strong results on gross loading in Quebec. But I was wondering if you can share with us your initial views on the performance of Freedom in Ontario and Western Canada since you acquired the business. What are the key highlights that you found so far in terms of the relaunch? And maybe how has the loading behaved since you acquired the business? And just to follow up on that, during the acquisition review, you indicated that offering a bundled wireless internet service is essential to reduce churn on the Freedom brand. I assume that you don't need access to Fiber to the Home to launch internet because you have access to the Rogers network. So should we expect this service to be launched shortly or it will take some time? to see you guys offer a bundle product in the marketplace. Thank you.

Thank you, Maya. So I'll try to answer as efficiently as possible. We all saw that the market became suddenly more competitive in Ontario. Well, I guess that we should not be surprised. We're looking, you know, to move ahead. We were looking, obviously, also to respect the conditions that we agreed upon with the government as the capacity to take over freedom. And prices reduction was announced. We were not even there that flanker brands of our competitors, of incumbents, you know, were in the market with much lower pricing. will this continue well i guess you know the landscape is changing dramatically and yes this is probably why i'm doing any politics here but if i was i would certainly you know consider this this possibility that you know having a fourth national player will certainly have this this resolve and this is basically what we what took place um since you know the closing of the transaction So we can't completely anticipate what will take place in the future, but this is certainly, you know, where we are today, a different world and a different landscape. So we will continue to offer, and as you probably saw, we're moving one step to the other. We announced new pricing. We announced nationwide 10% more data. And obviously, you know, you will easily understand. I will not give you details for competition reasons, but you can anticipate that there's other things to come. And it will be known in the marketplace in due time. But this is certainly not the end of a competitive environment. I would say it's probably the opposite. It's the beginning of a more interesting thing. All the regulations and thinking of legislative or government and administrative authority administration are to get this activity more competitive. It's not only a wireless activity, it's a telecom activity, so you need to include other things, which is certainly something and will have the capacity of doing so elsewhere. The acquisition of the media was in the anticipation of getting in the wireless business outside of Quebec, and it fits with our marketing strategy moving forward.

I don't know, Hug, if you have anything to add. No, I mean, just in terms of loading, as Dacal said, this was our first quarter, so certainly we haven't fully rolled out the plan that Dacal was referring to and the various steps that we had referred to earlier. So we'll see. Now we're in the midst of back to school, and let's see how the... how the autumn comes around. But, you know, Maya, we won't give you guidance on the, certainly on loading, but, you know, I think it's to be expected the Q3 will be more, will continue to be more just as competitive and as Q2 was with probably more activity.

I was writing to our employees and thanking them. Different achievement that we've been able to realize since the of the transaction, and it's finished by, stay tuned.

Exactly. As to your second question, in terms of bundling, this is something that is part of the various steps that we talked about. That's another one that's coming. It'll be, as we've said, we're staging these things as we go along, and it is to be expected over the next... weeks and months, but, you know, we won't give you a specific timing as of this morning.

Great. Thank you, and best of luck.

All right. Next question comes from Jérôme Dubreuil from Desjardins. Please go ahead, Jérôme.

Merci, bonjour tout le monde. Thanks for taking my question. The first one is on wireless. I just want to make sure that I understood right that wireless in the quarter was 251 million. And is this coming with some sort of higher spend that we should expect in the third quarter given the launch of 5G and maybe a step up in advertising? How should we basically model these margins going forward?

Jerome, yes. So, first of all, yes, $251 million is the consolidated wireless EBITDA. And I think it's fair. What you said is a fair portraying of the coming quarter with, you know, as we've said, you know, it'll be, you know, the fall is seasonally more important. more active and more promotional. I think it is to be expected that we will invest a little bit more in advertising and in branding. I think your expectation is there.

It still looks like a very strong margin. The second one is I'd just like you to expand a bit on your position on the TPI review. Obviously, you're targeting more bundling in the rest of the country outside of Quebec. However, the bulk of your EBITDA is still coming from your broadband business in Quebec, and that could potentially be affected by a lower TPIA rate. So I just want you to expand a bit more on your positioning on that front. Thanks.

Maybe, Gilles, I could mention again that, you know, we've been always offering TPIAs. In fact, you know, we were the biggest provider of outside connection to broadband. most of the TPIAs in Quebec. If, you know, historically we were to restore a little bit, you know, the landscape in Canada, Quebec was the area where you would get the highest penetration of TPIAs compared to whatever, Ontario on the western side. And as naturally, you know, they were considering that cable, or the COAX hybrid would be the best network to deliver either broadband or television. This is technically on top of which that if you were to go FTTH, just don't think about it. It was not accessible. First, Bell will give any source of reason to forbid access, and if you were to achieve After efforts and efforts and efforts and efforts, you will have a price which makes no sense to offer a broadband pricing offer below $120, where the retail price was, let's say, between $50 and $70. This is the environment that, you know, we've been living. So we are used to compete with DPIAs. We are used to offer different kind of marketing approach. And we are used also, you know, to generate revenues from our networks and different sources. We hope that we will be able also, as DPIAs, as we were, and this is interesting, Jérôme, maybe I would like to... I'll repeat that for some of you that forgot it. But, you know, Bell had a monopoly in the ABTB area where they own the telecom business in Quebec and the cable business, Cablevision. And we decided, you know, to offer services there as a DPIA. You can't imagine. In fact, you know, we're in front of the tribunal because it took so long. to get access to their network. And now it's an issue of having access to the polls, and we're not the only ones that are having problems to have access to the poll. But we started as a TPIA, and we succeeded pretty quickly of adding a significant market share. So then we are, or we decided that we will build our own network after our customer base is justifying it. So all those things is about our experience and proposes, you know, certainly a learning curve of what we will do in the future. So we look forward to have access as quickly as possible, and we feel that, again, the CRTC and with this co-competitive policy will accelerate our capacity to have the STPA access and then being able, you know, to offer a bundle of services.

Great. Very helpful. Merci beaucoup.

All right. Next question comes from Vince Valentini from TD Securities. Please go ahead.

Yeah, thanks very much. Let me start with a couple of balance sheet and cash flow questions just to make sure we're all on the same page. Your debt seemed to come in lower than I thought and I think many people thought. post paying for freedom. Hugh, are there any significant restructuring or transaction costs that were not incurred in the second quarter that may, you know, the cash may go out in the third or fourth quarters instead?

No, no, no. We are, you know, our transaction fees are all in this quarter. There were a few actually in the previous quarter, but the rest of it is in this quarter, about $12 million.

all in there okay and how about capex related especially related to 5g we've all seen that you launched the 5g network in several cities so I assume that money got spent in the second quarter or is there somehow a working capital thing where you you you got the equipment from vendors and didn't have to pay for it till till later is there any cash impact potentially timing issues there

No, no, no, there are no timing issues. And I mean, if anything, Vince, it is a little bit the conversation we, I think we had had in the past saying, you know, one of the positive surprises, I think when we got to, when we finally got our hands on Freedom was how advanced they were in terms of almost being ready to turn the 5G on in many markets, you know, so a lot of that investments had already been made. So we, you know, we made the rest this quarter and we're in a position to launch in the main market. So, But no, to answer your question specifically, there's no mountain coming in front of us. There are no surprises coming in front of us, no. Okay.

Yeah, I appreciate the answer. Just when we see such a big variance versus our estimates, we just want to make sure we're not missing something. The last piece of this line of questioning is just on the lease liabilities. We see in your statements that it's gone up about $220 million. from the end of Q1 to the end of Q2. That's not as much as we expected. Is there any risk that the rating agencies and S&P would have a different way of valuing the lease liabilities so that they may come up with a different leverage ratio than 3.52?

Slightly, yeah. There always is, and you see that in their reports. There's always a little bit of a tweak. We're hardly ever exactly, certainly not to the second decimal equal to the leverage between the various calculations of S&P or Moody's, or actually even between themselves, they're slightly different. So there's probably a little bit of tweaking there, but nothing major. And we've already been through that with them, and it's not going to be major. I mean, the main difference that you're referring to is obviously the way Shaw used to value leases as opposed to how we value leases at Videotron, and that explains the difference from what you were expecting to what we ended up putting on the balance sheet. But as you know, Vince, this is all accounting, right? I mean, at the end of the month, we're still paying these leases and going on with life.

Okay. Changing topics to operating costs, just to follow on Jerome's question a little bit, the marketing and advertising costs probably go up in the third quarter and the fourth quarter as you ramp up and in their busier promotional seasons. That seems clear. I'm wondering on the other operating costs, there were certain deal benefits that you negotiated with Rogers, things like roaming and backhaul. Did you achieve a full three-month run rate of all of those savings in the second quarter, or is there any potential improvement in the pace in Q3?

I think the answer to that, Vince, is that there's going to be some put and some takes. I don't think we've – we certainly haven't really experienced all of the various synergies or positives OPEX savings that we will get from the various deals that we've made or the various, you know, changes that we're putting in place. At the same time, you know, there will be probably on the other side a few other investments that will be needed. So, you know what, it'll be, I think there's more positive ahead of us than the negative, certainly, but there will be puts and takes on the OPEX side.

And I think that we can say that, you know, we're really at the beginning of the integration process. and there will certainly be other savings that will show up in the future.

Okay. And the last question I have, hopefully for you, Pierre-Carl, but you feel free to jump in if you want. The pace of customer ads at Freedom, you've already been asked about it a couple times. I want to ask just in a different way. You seem pretty happy with how things are going, and maybe it's a bit more of a marathon than a sprint, and you're gradually rolling out all of your new tactics, we obviously haven't, the bundling isn't there yet, we haven't seen the Fizz brand yet, so there's obviously more things to come in the future. So given where you're at in the evolution, are you satisfied with the number of customers you're adding on a weekly or monthly basis, or are you looking at the team and saying, hey, this is not good enough, we need to be doing a lot more sub-ads than this in the Freedom territory?

I would say that it's definitely... We are and I am very satisfied with what we've been able to achieve in this short period of time. RGU are certainly something. Net ads is certainly something that we watch on a daily basis. But also financial results and the free cash flow. We were just buying a company and you generate significant free cash flow after paying the interest that you need to pay on that you load for financing this transaction. This is the equation right now, and there's no real reasons to think that it will change in the future. So when we see our competitors buying companies, buying TPIAs at crazy prices, buying customers and buying revenues, not being able to achieve EBITDA increase, where their debt is increasing and their leverage is deteriorating, you know, we basically, you know, accomplished the complete opposite. So, in terms of RGUs, you know, we will continue to work very hard. We think that we have many other tools in our basket which we will use in the future. We do not have a specific target because we don't know how the market will react, but we will certainly react according to the market. So we see the future as very positive.

Wonderful. Thank you very much. Thanks, Vince.

All right. Next question comes from Matthew Griffiths from Bank of America. Please go ahead.

Thanks for taking the time. On the 5G deployment, I was wondering if you could talk about how much, you know, what the timeline is to complete it. Obviously, you've listed the cities where you've already launched, but, you know, what do you think the timeline is to get through that? And on the radios that are being deployed, Do they also accommodate the C-band spectrum?

Sorry, we're not sure that we have your second question.

Yeah, your second question wasn't very clear. Can you repeat it, Matt?

Yeah, sure. On the radios that you're deploying for 5G, do they also operate in the 3.8 gigahertz spectrum bands? Or would the acquisition of the additional spectrum down the road necessitate a revisiting of sites?

Yeah.

Well, maybe we'll give you also additional things, but what we think it's worth to mention, Matthew, is we're not going to, again, you know, we mentioned it earlier, but, you know, we were not completely surprised that, the company was well advanced with their 5G deployment. As you can imagine, you know, we're in this business, so we work with all the suppliers, and suppliers give us, you know, the capacity to understand where they are on top of, this is also, you know, public information. There are some maps concerning, well, which is managed by the government, which is also available so deploying it was something that you know was was easy to do and and therefore we did it quickly 5g is of importance but you certainly if this is what you're doing in your day jobs following the industry and you've been seeing ericsson nokia samsung slowing down in terms of revenue of 5G. There was a lot of people two years ago or three years ago thought that the 5G will be the end of the world, a paramount of success, and that would be the possibility to monetize and the next gold rush. We were prudent regarding this kind of inflation semantic And then, you know, we certainly consider that 5G is of importance. This is why, you know, we are invested in the business and we're already in good position. This is also why, you know, we bought Spectrum and the 3500. And what we're having now for Freedom and under Quebec Core with the 3500, that Freedom already had. A piece of it was Spectrum that previously was sold from Deautron, from Quebecois, to Shaw. We have a very interesting range of Spectrum. We're moving ahead in new auction shortly. And our relationship with our suppliers give us many alternatives and double band and equipment where, you know, it's quite interesting. Also, what we're seeing is equipment moving in the right pricing direction for us. It's not something that is going sky to the roof. I think it's still seriously reasonable. And then, therefore, for us, maintaining a normal curve in terms of investment, nothing that we need to rush. I mentioned in my speech that we believe that we share completely the perspective of the authorities where MVNO is available only for the companies that participate in the auction. And for the auction, if you buy Spectrum, you need to build in seven years down the road. So you have access to MVNO, you have access to roaming, but you have an obligation to build. So we have in front of us those years, which we will use to make sure that our network will sit with the way that we will service our customers. As a little bit, as I described earlier, regarding the ABTB area, the region where at one point it, certainly more profitable for you investing and then avoid paying roaming that you need to pay when you're on another operation network, another operations competitive network.

Thanks for that.

No, and you know what, I'll follow up and see if I can get some more detail after the call. But maybe I can just ask one other question. You mentioned how you're staging these initiatives as you launch, as you kind of take over the brand and enter the market or re-enter the market as Freedom. I was just curious, I'm not asking about the timing or what the initiatives are, But what is the work that's being done? Are you still working on the systems side? Are you working on the sales and distribution side? Like what are the kind of main hurdles before certain things get launched? Thinking about, you know, Fizz and you've mentioned a little bit already about, you know, bundling internet. So just if you could give any details on what the work is behind the scenes, that would be helpful.

We'll try to give you the details that you're looking for, Matthew, but we have a different DSS system than the other one that we're using at home. But there are also things that are common. So if I was to try to To answer your question, I guess that we're going to be there for the rest of the day. Obviously, as you can imagine, this is a complicated environment. So, specific questions, we'll try to do our best with the questions that you can write for us.

Thank you. Thank you, Matthew.

All right, next question comes from David McFadgen from Cormark Securities. Please go ahead.

Oh, great. Thank you. A couple of questions. So you talk about the 49,000 wireless net ads. I was wondering if you could give us a breakdown. I don't know if you're going to do this any longer, but the breakdown between video con and then freedom. And then can you give us the breakdown of the sub-dates? How many of the subscribers on the wireless side are prepaid?

Um, no, I mean, David, we, we, uh, you know, we've decided not to, uh, not to split obviously for competitive reasons as our competitors do not, um, you know, between, between the various regions when, if we did that, obviously, you know, Videotron and Freedom being on, mutually exclusive regions, you know, that would be fairly easy to derive certain information on Quebec versus the rest of the country. So we're not going to do that. In terms of prepaid and postpaid, you know, freedom had, you know, perhaps a heavier proportion of prepaids than we would have expected or liked, to be quite honest. with a lower RPU, as you know, and that is partly the impact on RPU that we're living through. But our focus really for us is to grow both. For us, prepaids and postpaids are of interest. And, you know, we'll continue to work very hard, you know, at building both. But that being said, you know, we don't intend at this time to, you know, to split them out any further than that. Sorry, David.

Okay. Can you give us an update for CapEx in the years, sort of a range as to what you're expecting now that you've owned Freedom for a little bit? I was wondering if you could comment on how Freedom's plans are resonating with consumers, particularly the one that offers roaming across Canada and into the U.S.

How they're performing?

I'm not sure I understood your second question. You're asking how the plans are performing with respect to roaming in the U.S.? Yeah. I'm not sure. Can you repeat it?

Yeah, well, I'm just wondering if you're getting a lot of consumer interest, consumer uptake on those plans that include the roaming across the U.S. and Canada, because as we all know, when we travel to the U.S., the roaming bill can be quite expensive. So I'm just wondering what kind of uptake you're getting on that.

Well, on that, you know, we are, you know, we're seeing very favorable market reactions on this. So that was clearly, you know, that's something we felt was, you know, was a plus for us and it's working out well, you know, so certainly in line with our expectations there and You know, and this is the season, you know, so I think it was timely. It was a timely introduction for us. And actually, the interest is quite significant. So I have to say that that's performing very well and at the right price, of course, making sure that this is something they didn't have before. And that certainly enhances, you know, the brand value for us. And I think it's working out quite nicely. In terms of CapEx, your first question, no change in terms of CapEx expectancy or guidance. Obviously, this quarter was, I think it's fair to say, probably lower on the freedom side, but that will certainly, you know, change or increase over the next few quarters. So that should get back in line with the guidance that we gave, you know, about the 200-ish yearly guidance that we talked about last time, so. No expected change there.

Okay. Okay. No. Okay. Sorry. I didn't mean to cut you off. Okay. Thanks. Thanks, David. Thanks, David.

All right. Next question comes from Stephanie Price from CIBC. Please go ahead.

Good morning. I wanted to touch on the strategy for regions not currently covered by the Freedom Network. So it sounds like the NBNO, under that agreement, you're able to start rolling out the offers for these regions today. But as you think about building up the national network, would you initially focus on improving the coverage area or the network quality and capacity there?

Well, I mean, you know, MDNOs, it's for us, I mean, it's important at this point for us to continue to grow and to expand our network, of course, and so that certainly is the way we're going. I mean, at some point, as Pierre-Cal mentioned, you know, this is obviously linked with, you know, an undertaking of construction and deployment at some point, so, you know, At the right time, we will have to make the right economic decision as to whether, you know, certain areas are worth pursuing from an MVNO standpoint or not. So, but we're not quite there yet. I mean, at this point, I mean, we're going in both directions that you mentioned, you know, at this point to expand our network coverage. And we'll see how the business goes in the various regions and make that decision when the time comes.

Okay, thanks. And then just circling back on the FTTH wholesale access, just curious around how important that access is for you, just given the preferred rate you have with Rogers. you know, is there a significant percentage of wireless subs that maybe wouldn't, you know, overlap with that Rogers cable footprint here?

Well, it's important because obviously, you know, we know that this is certainly, you know, some competitors would say that, you know, we're the owner of FTTH. You know, cable companies already also have some fiber and this is not something unique. So, we all know that this is a technological, powerful way, you know, to move forward. That doesn't mean that the historical networks are not good. And don't worry, you know, the cable industry also is moving forward with technology. But then, you know, if, to answer specifically the question is because, you know, the wire are there and the density is something of importance. You know, there's a seal in a central office, you know, as we call in the telecom industry, located in Toronto at the, we call it Adelaide, Adelaide, I'm sorry, which is the more dense in Canada. So we would like to have access to this CEO to be able, you know, to have access to the largest amount of people, you know, to a CEO. So is this important? Yes, it is. Is this that will change dramatically, you know, the things that if we were not to have access? No, but I would say that it's not fair for any alternative carrier to do not have access to this specific network where the cable industry had been always forced and obliged. And we did it also as a revenue source, opening it to other carriers. So it's a question of .

Fairness? Fairness, yeah, fairness. Okay, thanks for the color. Thanks, Stephanie.

All right, and the last question comes from Drew McReynolds from RBC.

Yeah, thanks very much, and good afternoon. Huey, just back to Vince's question, you know, I think a little confused on the price tag that was mentioned public through the process for freedom. And I can't really reconcile, you know, that with what's either going through your financial statements or what's being assigned to capitalized leases. So, I mean, we can certainly take this offline, but can you at a high level explain kind of how, you know, you could value capitalized leases perhaps so different than how Shaw was doing it? Just some clarification there would be helpful. Thank you.

Yeah, I mean, Drew, it's basically, I mean, you know, leases are, you know, are valued different ways by different operators from an accounting standpoint. Now, we're talking about accounting, right? Let's be clear on this. I mean, leases are basically, we continue to pay leases, obviously, every month. And we are paying what we were expecting to pay with respect to these leases that are both network leases or retail-related leases. From an accounting standpoint, though, Shaw, we were expecting the number we had in mind when we referred earlier at the time of the transaction to a $2.8 billion transaction. with roughly 700 million of leases for a net 2.1 purchase price. That 700 million was basically valued according to Shaw's methods of valuation leases, which, I'll give you an example, included renewals for most of them. value these same leases according to Videodron, our historical way of valuing them, which is, you know, turns out to be quite different, and that explains the difference between the two. But at the end of the day, this is, you know, this is the accounting valuation that goes on the balance sheet. and due to the new IFRS regulations, as you know. But at the end of the day, you know, it's an operating cost that keeps, you know, going through the P&L and that, you know, will continue to show up, obviously, as we go along. It will restructure and streamline and optimize these leases as we go along.

Thank you. Thank you, Andrew.

And for all, I'm sorry, I cannot just ignore what I had on my desk earlier today. It's not from the equity side. It's from the debt side. It comes from the analyst at BMO, Nicholas Kim. It's six lines, and I'll go shortly with that. We continue to view Quebecor as the most underrated Canadian telco credit. offering investment-grade quality credit exposure at high-yield spreads. With the small near-term investment-grade crossover potential and upside potential, the spread should get significantly tighter with IG. For perspective, Quebec Oil is rated I-mid-double-B with 3.5 leverage, while Rogers is rated Low BBB with 5.1 leverage. TELUS is rated mid BBB with 3.7 leverage. BCE is rated IBBB with 3.5 leverage. So, I would be not, you know, just not mentioning it. I would sleep badly tonight. So thank you all for being with us this morning and look forward to talk to you at our next conference call. Have a nice day.

Everyone, this concludes the Quebec Corps, Inc.' 's financial results for the 2023 second quarter conference call. Thank you for your participation and have a nice day.