Quebecor Inc.

Martin Tremblay - VP, Public Affairs Pierre Dion - President and CEO Jean-Francois Pruneau - SVP and CFO Manon Brouillette - President and CEO of Videotron Julie Tremblay - President and CEO of Media Group

Phillip Huang - Barclays Capital Greg Macdonald - Macquarie Vince Valentini - TD Securities Jeff Fan - Scotiabank Drew McReynolds - RBC Capital Markets David McFadgen - Cormark Securities Yaghi Maher - Desjardins Securities

Ladies and gentlemen, welcome to the Quebecor conference call. My name is Martin Tremblay, Vice President of Public Affairs, and joining me to discuss our financial and operating results for the first quarter of 2016 are Pierre Dion, President and Chief Executive Officer; Jean-Francois Pruneau, Senior Vice President and Chief Financial Officer; Manon Brouillette, President and Chief Executive Office of Videotron; and Julie Tremblay, President and Chief Executive Officer of our Media Group.

You will be able to listen to this conference call on tape until August 12, 2016 by dialing 877-293-8133, conference number 1197769 and passcode 90393-pound. This information is also available on Quebecor's website at www.quebecor.com.

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 regulatory authorities. Let's now move on with our first speaker Pierre Dion.

Thank you, Martin and good afternoon everyone. We are very pleased with our financial and operating performance for this first quarter of 2016.

Overall we posted revenue growth of 5% and our operating income also grew a solid 5%. JF will quickly review our performance in a few minutes.

In the quarter we continued to position our company for future growth with the acquisition of Fibrenoire, which provides fiber-optic connectivity services to businesses. This acquisition combined with our two data centers located in Montreal and Quebec city will complement our business solutions offering and will further contribute to strengthening our leadership in that segment.

Our revenue and profitability growth continued to be supported by strong results from our wireless services. As Manon will explain later, we attracted 27,000 mobile subscribers in the quarter while growing ARPU by 8%, resulting in revenue growth of 30% in the quarter for this service.

Our quad-play bundle, outstanding customer service, data-rich packages and state-of-the-art LTE network remain key differentiators of our service offering. In our Media segment, the 2015 Vividata survey results confirmed the leader ship of our urban newspapers in the province of Quebec with more than 4 million readers on a weekly basis on any of our print, mobile and web platforms.

The print version of Le Journal de Montréal maintains its leadership with close to 2.5 million weekly readers. On April 12, we launched our Molto application, a digital magazine newsstand allowing all-you-can-eat consumption of our popular magazines available on smartphones and tablets.

Once again TVA broadcasted the French language version of the popular show La Voix and attracted an average of 2.6 million viewers for weekly gala, for market share of close to 60%. This is another example of TVA’s ability to broadcast value added content that continues to play a centerpiece role in Quebecor’s multi-platform content strategy.

Finally, on April 7, our sports and cultural event management subsidiary, Gestev announced the launch of Gestev Entertainment which leverages its 25 years of experience and expertise in event management as well as the credibility of its brand. In an effort to become an industry leader in the live entertainment industry, Gestev becomes our official brand for all events and concerts that we will produce.

I will now let JF review our consolidated financial results. JF?

Thank you, Pierre. Quebecor's revenues were up 5% in the quarter to $975 million with revenues growing in all of our segments.

Revenues from our telecom segment grew 5% to $773 million. Quebecor's EBITDA was up 5% as well to $355 million.

Our telecom segment recorded EBITDA of $359 compared to $344 million recorded last year. Quebecor reported net income attributable to shareholders of $70 million in the quarter, or $0.57 per share compared to $29 million or $0.24 per share reported 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 $68 million or $0.55 per share, compared to $41 million or $0.34 per share reported in the same quarter last year. Quebecor Media’s consolidated free cash flow from continuing operating activities increased from negative $38 million in the first quarter of last year to a positive $4 million this quarter.

As of the end of the quarter, our net debt to EBITDA ratio was 3.4 times, up from 3.1 times reported as of the end of the first quarter of last year mainly as a result of the repurchase in September 2015 of 0.5 billion worth of shares held by Caisse de dépôt et placement du Québec. Available liquidity of approximately $1 billion as of the end of the quarter, full access to capital markets financing and free cash flow generated by our operations are more than sufficient to cover new term debt maturities.

In the quarter we purchased and canceled 40,000 Class B shares. Since we initiated our normal course issuer bid program in 2011, approximately 6.5 million Class B shares have been purchased and canceled.

Finally, after a 40% increase last year, our Board of Directors approved a 29% dividend increase this year from $0.035 to $0.045 per share on a quarterly basis. Over the last two years, dividends on common shares increased by 80% supported by our growth in wireless services and our solid financial profile.

Our dividend policy will continue to be reevaluated on an annual basis by our Board of Directors. I will now let Manon review our telcom segment operations.

Thanks, JF and good afternoon everyone. In the quarter we recorded a growth of 18,000 RGUs, an impressive result considering that all cable, telco operators among the largest in Canada, reported net RGU losses in the quarter.

Over the last 12 months we recorded growth of 158,000 RGUs. In wireless services, we are also proud to report net subscriber growth that surpassed that of any of the incumbent operator in Canada.

As of March 31, we reached 796,000 activated lines and unmatched net increase of 27,000 lines in the first quarter of this year and 134,000 lines over the last 12 months. Wireless ARPU grew 8% year over year from $46.02 recorded in the first quarter of last year to $49.66 in this quarter.

Monthly churn rate was down compared to the preceding quarter at 1.27%. Our unlimited wireless music streaming offering continues to be a key differentiator.

Interestingly the number of streaming service providers forming part of our offering doubled in the quarter. Turning to broadband access.

We added 10,000 subscribers in the quarter compared to 6000 added in the first quarter of last year, and a net increase of 35,000 customers year over year. As of March 31, our internet penetration rate reached 92% of our cable TV customer base, 5 points higher than last year.

On the cable TV front, we recorded a decline of 15,000 customers in the first quarter compared to a loss of 12,000 recorded for the same quarter last year. Over the last 12 months.

We added 78,000 customers to Club illico, our over-the-top video service for a total of 265,000 subscribers as of March 31, 2016. Our multi-platform TV usage grew 11% year over year fueled by our cloud positioning and by our premium content strategy.

We recently signed a long term agreement with NBC universal providing Club illico members with access to the most recent feature film. In cable telephony, we recorded a loss of 12,000 lines in the quarter mainly due to cost cutting.

However we maintained our market share lead in this challenging environment. Our bundle strategy continues to be successful.

As of March 31, 82% of our residential customers were bundling two services or more and 16% were bundling four services, an increase of 1 point year over year in each case, further contributing to our higher ARPU. Total ARPU grew from $132 in the first quarter of 2015 to $141 in this quarter, a 7% increase driven by wireless ARPU growth and bundling success.

We continue to expect minimal impact on ARPU from the skinny basic package mandated this March 1 by the CRTC. Videotron introduced pick and pay packages more than 10 years ago in order to provide customers with more choice and flexibility, and as of today approximately 80% of our cable TV customers subscribe to such packages mitigating the impact of the new regulation.

On the financial front, telecom segment’s revenue amounted to $773 million in the first quarter compared to $734 million in the same quarter of 2015 for a 5% growth. With the strategic acquisition of Fibrenoire as well as our investment in data center, we confirmed our commitment to the business segment and to the growing need for connectivity and cloud computing.

In the first quarter, revenues from our business segment grew 24% explained by our acquisition strategy, RGU growth and increased wireless ARPU. We reported EBITDA of $359 million in the first quarter compared to $344 million last year for a 4.4% growth, favored by disciplined pricing and our operating leverage.

We recorded our highest ever quarterly wireless EBITDA in this first quarter. Cost of acquisition for new wireless subscriber was down 15% from $497 in the first quarter of last year to $421 this year.

Bring your own device is increasingly contributing to lower COA. We generated $161 million in cash flow from operations, a decrease of $3 million from the first quarter last year due to higher CapEx.

Net capital expenditure, including acquisition of intangible assets but excluding spectrum licenses, amounted to $198 million in the first quarter, an increase of $18 million over the first quarter of last year. We spent $33 million on our wireless infrastructure in the quarter mainly for the rollout of our LTE network.

I will now turn to Julie for the Media group.

Thank you, Manon. Consolidated revenues for the Media group grew $6 million or 3% in the first quarter to $221 million, fueled by revenue contribution from the magazine we acquired from Transcontinental, revenue growth from MELS and subscription revenue growth from our specialty channels, including TVA Sports.

Overall, advertising revenues from our broadcasting activities declined 1% in the quarter to $64 million, and subscription revenues from our specialty channels increased 6% to reach $29 million. TVA Sports exhibited subscription revenue growth of 5%.

Our magazine business posted revenue growth of 85% in the quarter to $28 million following the acquisition of Transcontinental’s magazine on April 12, 2015 and MELS recorded revenue of $16 million in the quarter for a 52% growth over last year. Our newspaper publishing business reported revenues of $50 million in the first quarter of 2016 compared to $58 million reported last year for a 15% decrease.

Advertising revenues declined 13% while circulation revenues increased 2% Media group posted an EBITDA loss amounting to $3 million in the quarter compared to a loss of $6 million last year. Our newspaper publishing business recorded breakeven EBITDA for a $4 million decline while our broadcasting business posted a loss of $4 million EBITDA, a $5 million improvement over last year mainly attributable to improved operating results from TVA Sports.

MELS and our magazine business both recorded EBITDA of $2 million in the quarter. Cash flow from segment operations was negative $18 million, a $3 million decline over last year, resulting from higher CapEx mostly as a result of payments in the quarter of accounts payable related to capital investments made in the previous year.

Let me now turn the floor back to Pierre.

Thank you, Julie. Today's dividend increase is just one of several times that we and the Board of Directors are confident about our company’s operating and financial profile.

Actions that we have taken over the past few years, from our investments in wireless services to strategic changes to our asset mix have paved the way to higher distributions to our shareholders. And I am confident that our business prospects will favor other increases in the future.

I thank you for your attention. Operator, please open the line for questions.

Yes, thanks, good afternoon. Just wanted to follow up on that dividend comment that you made.

Certainly great to see the second year in a row, very nice increase to the dividend. And you certainly sounded very confident tone in terms of future free cash flow.

Was wondering if we should view this as a sign that we're going to see more consistent, first of all, more consistent cash flow contribution from the wireless going forward and that you guys do feel greater flexibility to consider capital returns going forward, perhaps on an annual basis?

Thanks Phil for your question. Well, on an annual basis the Board of Directors will look at the dividend policy and we'll look at the cash flow prospects of the business, the financial profile.

And we'll take a decision as to whether we should increase our dividend or not. For the last two years they've confirmed that they have confidence in the business and the dividend increase was necessary.

So I think that the way to read it is, over the next twelve months there will be other discussion at the board level about dividend increases, and if the financial profile remains as it is, we can expect further increases.

And just as a follow-up to that, given you still have a HoldCo structure in place, could you remind us sort of the pros and cons of distributing cash from QMI through a dividend. Is there any double taxation impact or any sort of consideration?

I was wondering whether it would make more sense to perhaps delay bigger dividend increase until you've collapsed the corporate structure in the future, or has anything changed in terms of the way you think about distributing cash out of QMI?

Well, there's no tax implication. The thing is for the last five years I believe the dividend policy at the Quebecor Media level, so to the payments of dividends to both shareholders, was 100 million being distributed to both shareholders, obviously on a pro-rate basis.

Since we repurchased and we brought the Caisse's stake down from 45% to 19%. It means that the cash flow being generated by Quebecor Inc.

HoldCo is not greater – is not higher. And we are obviously now – free cash flow positive at the HoldCo level and we have the ability and the capacity to raise the dividend.

Thank you. The questions on the business solution side, so now that we have Fibrenoire, and 4Degrees Colocation in the results.

I wonder two things, number one what would have the revenue been with full participation for the full quarter? Because that 4Degrees acquisition came out March 11 I believe.

So what was the full quarter impact and what was the organic growth on a year-over-year basis?

Well, the contribution for both Fibrenoire and 4Degrees was full. In fact, Fibrenoire was acquired early this year, January 5, I believe.

So it's a full contribution for the quarter compared to last year. And 4Degrees was acquired late February, beginning of March last year, so it's almost full contribution for both assets on a year-over-year basis.

In terms of results, we tend not to disclose those results. But you've got to remember that for Fibrenoire we paid $125 million and the multiple that we paid over EBITDA was standard for this kind of industry.

So it obviously means higher than 10 times. And then you can obviously get what kind of EBITDA we have generated.

In terms of revenues, it's probably I’d say close to $10 million dollars for the quarter.

Okay and organic growth within the overall business solutions business now on a pro forma basis?

When you look at the overall, including Fibrenoire and 4Degrees, the growth of revenue was about 24%. When you exclude Fibrenoire and 4Degrees we're at 12%.

So it's half of it.

So the 24% though is an apples to oranges result to a certain extent, if you were to include everything relative to everything last year, what's the new pro forma growth profile? Is it better than 12?

Well, it’s 12%.

And any kind of contextual update that you can give us on the sort of that segment overall, opportunities for growth, pricing power volume et cetera, impact of the economy?

Two things, let’s start with 4Degrees, sales funnels are very good. As you know we decided to go for expansion in Quebec because it was sold out.

In Montreal, that funnel is very good as well and the great news about it is about 75% of sales comes with product attachment of the ongoing B2B segments. So our assumption of generating growth in the ongoing B2B segment is realistic since the result so far shows it comes to life.

And the economy overall. Thoughts on stable growing –

On the B2B segments?

Yes.

On the B2B, yes, it’s going well. And Fibrenoire is focusing basically on a larger scale enterprise.

So – we’re quite happy because you were mentioning pricing. Of course, our fierce competitor was Fibrenoire in the market, so now that we’ve integrated them.

Actually it remains a distinct company but we make sure that the sales force, they don't fight against each other, so we'll be able to better control pricing and it goes well. But of course at this market, I may say the other players in place are fighting, it’s part of the game.

But I'm very confident that now that we have everything in place, we'll be able to pursue our great performance.

Yes thanks very much. A couple things probably for Manon.

You normally give us some indication of wireless EBITDA and I think last year it was $13 million in the first quarter. Can you give us any ballpark on what that was in Q1 this year?

Yes. They were a bit higher than $20 million.

Thank you. Second, as you mentioned the BYOD impact in the percentage of customers growing from that segment.

You also didn't give us -- I think you normally provide a shed on what your incremental ARPU is for new subscribers, and last quarter was $57. So is it still $57 and is there any risk to that number if more and more people take BYOD plans with no COA – less COA but maybe lower monthly ARPU as well?

Yes, there’s some things regarding that. As for the BYOD, it’s about 30% of gross activation which is aligned with the market.

It's quite new, you're right, because we launched that only last November. As for the gross add ARPU, it’s keeping going good, just to give you some numbers here, 44% goes for $60 and up.

And we're at about 25%, above or $70 up. Basically when you look at the mix of the bring your own device, since the payback time is almost right away, it will have a good impact on the wireless EBITDA on the long run.

Okay. Thanks.

And maybe one last one. Promotional activity versus Bell, and not just in Wireless, but across your wireline services, as well, has anything changed in the past few months in terms of the types of promotions you're giving versus what Bell might be doing more aggressive or less aggressive in the market?

Yes, it's changed quite a bit. What we've decided to do this year is we try to be more bold in our promotion if I may say, being that that what we’ve realized after a few years of fighting aggressively on price point against Bell, with promotions for 12 to 24 months to a certain extent, we decided to step back and try to go on a more shorter period of time.

And since January all our promotions are only about three months. So the assumption would be that the churn will reduce knowing that at a certain point price shopper will get tired of moving from operator every three months.

And what we’ve realized is that Bell shortly after that aligned their promotion tactic to follow our lead, which is a good news. Maybe it's because of, of course, they're fighting in Ontario because Rogers is quite aggressive, we don't know.

But still so far so good. We hope to be able to maintain that, that type of timeline promotion knowing that on the long run it will pay back on the churn.

On wireless first, CapEx for wireless this quarter, wondering if you can help us with that number?

What do you want -- you want to know more detail about –

Just what was the dollar amount for CapEx for wireless?

It was almost the same, only 3 million difference I think.

No, no, it’s higher than that. We've said it in the –

Just a second. $33 million.

We spent 33 million on our wireless infrastructure, it's mainly LTE.

Yes.

And wondering if you have an estimate on a couple of metrics. One, with respect to gross adds, what percentage of gross adds do you think you added in the quarter within Quebec?

And secondly, what's your estimate of the Quebec provincial wireless penetration at this point?

Can I disclose that information? Yes?

We had about approximately – just a second, I am looking to my numbers – approximately 55,000 to 59,000 gross additions. We rank second in our market just following Bell lead, that’s it.

And in terms of wireless penetration, Jeff, our wireless penetration is about 70%, it’s between 70% and 75% in Quebec.

And the 55,000 to 59,000 gross adds, what percentage of the market do you think that is?

Share?

Yes.

It's about 17% to 20%

And last question regarding your ARPU on wireless. You're really closing the gap versus the provincial average, which is around that mid 50 level.

You're at $50 now. Your gross adds ARPU customers -- customers coming in at ARPU, well above $55.

So I'm just wondering, do you think that the Quebec provincial $55 is kind of the limit or do you think you can surpass that, given the quality of the subscribers you're getting?

I think that if we look at the industry globally everybody will improve in the future. So we certainly will, based on the fact that data transit more and more over mobile networks.

So I'm confident and every quarter we improve our metrics and we think we still have room to get to that 55 and then I think that in the future, as mentioned, knowing that everybody is surfing the web and consuming content over their smartphone we might be able to improve that ARPU.

And maybe one very quick one, your unlimited music service, you said you'd double I guess the number of partners or providers that's on that platform. Wondering if you can give us the number of users that you have on that music service right now?

I don't have that number, we can forward it to you but basically it’s every consumer that subscribes to a package higher than $65 a month. So Jean-Francois can forward you that number later on, or tomorrow.

Jeff, just for you to know, it's not a package that you're subscribed to –

No, no, it comes down, you're right. Every time you get you subscribe to any package of $65 and up, you get that service for free.

You don't have to subscribe, you don't have to activate it.

Maybe another way of asking, what is the usage, or is there a way for us to get a sense as to how popular the service is based on usage?

I could tell you that it's popular enough that subscriber instead of going for packages of $55, $60, when we talk about that service, they just jump to the $65 level.

Thanks very much. Just on strategic initiatives, maybe for you, JF, just update us as to whether you have any sense in terms of an NHL expansion timeline.

And then secondly, with some M&A in the sector and maybe a better sense of where Ottawa's position is on wireless concentration, can you provide any update, if there is, on kind of your spectrum options for what you hold outside of Quebec? Thank you.

I will take it, it's Pierre. First of all, on the Quebec team NHL, we're still in the process.

As you know, Mr. Bettman said that if there were to be any announcement whether it's two teams, one team or even zero team, that would be before the end of June.

So everybody's waiting for announcement if there is one from the NHL. So we're still in the process.

So there's no change there. As for the spectrum in English Canada, we're still looking, there's no new news, and we're still looking at all options and as we said earlier selling is definitely an option.

Thanks, Pierre, for that. And if I can add one more, on the wireless CapEx side, I think you've been fairly transparent and clear in terms of your spend this year, including LTE.

Once we get post the LTE build with the deployment of spectrum this year into next year, not looking for specific guidance, but directionally under your agreement, network sharing agreement, should we eventually see an easing here of wireless CapEx beginning next year?

Yes. That's our assumption.

This is a big year for LTE, so far we activated 700 new sites with the 700 megahertz spectrum. So we should finalize that rollout by the end of the year, so you could assume that next year and the following years it will reduce.

Yes, hi. I have a number of questions.

So last quarter, you gave us the new activation ARPU. I know it was $57 plus.

I know you've given us that 44%, or $60, and 25% of $70 plus. But could you give us the actual new activation ARPU?

Do you have that?

That’s the same as the Last time.

So it’s around $57.

Yes. Around $57.

And then, JF, could you give us an update on total CapEx? Has it changed?

You mean the guidance?

Yes.

No, the guidance hasn’t changed. So we're still in line with guidance.

And then you talked earlier in your prepared remarks about 80% of your cable TV subscribers choose channel packages. So can I assume that 20% just take the basic service?

No, you can’t. Good question.

Just give you some number. We are at about 0.5% of our customer base that are on skinny basic package.

And as of gross addition, it's only 10% of activations that take the skinny basic.

What percent would be on I guess basic before skinny basic came in? Do you have that?

Oh I don't have it. No, I don't.

It’s not a lot because – no, I don't have it unfortunately. We can send you that information later if you want.

And just on the BYOD, can you give us any idea of what the difference in ARPU is for BYOD customers?

When you look at price points for activation and they get a rebate that goes around 10% of the monthly package, so it's not the ARPU, of course, it's the average monthly fee. So I don't have that information.

Yes, thank you for taking my questions. I wanted to ask you a more big picture question here, relating to Gestev and your sports and entertainment business.

I mean, when you look at your business on the telecom side, it's doing very well and profitability is improving. But I assume, just as that venture is taking a lot of -- consuming a lot of time from management, and I wanted to know eventually what you think this business is going to be worth longer term.

Could you maybe talk a little bit about your long-term prospect for that business, and when do you think you can achieve your goals in that?

This is Pierre, I will take this one. As you know what we've done in the last year or probably now eighteen months ago actually is we really structured Quebecor in three main divisions, right – the telecom sector, the media sector and the sports and entertainment sector.

So just so to tap your first comment, we have separate resources, telecom versus media and versus sports and entertainment, so we're not concerned in terms of how much resources we put in, in different efforts. Manon has her own team, and Julie has their own -- she has her own team and Benoit Robert manages the sports and entertainment sector.

We think that sports and entertainment is definitely growing, we see it around the world, we see it everywhere. Of course we want to minimize the losses as we start this new division.

A great news for the first year with le Centre Vidéotron. We'll be talking about 105 different events we will have for the first year of le Centre Vidéotron, 1.1 million people will go through the le Centre Vidéotron for the first year.

The Remparts averages 13,800 spectators per game which, we just broke the Canadian Hockey League record this year with a total of 470,000 spectators for -- this junior major team. So these are incredible numbers for a first year start-up like we're having.

And you know what we have the opportunity too, with the acquisition of Gestev three years ago, these guys were in the business for 25 years, they're really king in sports and entertainment events. So now we're just putting all that together under the same brand name which is going to be Gestev, that's what we announced last month.

And we want to be one of the key players in Quebec and we think there's good profit to be made, great margins and also just another interesting is statistics. We've done 150 different corporate events with great margins at the le Centre Vidéotron since September, 150 corporate events of all kinds.

So a lot of diversification in that sector and a lot of upside and of course, as you know it's like sports -- like TVA Sports this is a long term -- this is a long term commitment for a business that is going to be growing and growing.

How much are you expecting to invest capital in that business or what's your envelope of capital that you are willing to put to use on that segment?

It doesn't move the needle, Maher. If you look at our last year results, obviously last year were impacted by the fact that we had some pre-operating expenses but now that the business is operating on a nice run rate basis, it doesn't move the needle.

So I think and we expect that soon we're going to be breaking even and making profits. So in terms of capital allocation and capital commitment, it’s almost –

So it's separate resources in terms of human resources and financially it’s not material for the company. End of Q&A

Okay, thank you everybody. This is the end of the question period.

Thank you.