Quebecor Inc.

Martin Tremblay - Senior Vice President and Chief Legal Officer Pierre Karl Péladeau - President and Chief Executive Officer Jean-François Pruneau - Senior Vice President and Chief Financial Officer Manon Brouillette - President and Chief Executive Officer, Videotron France Lauzière - President and Chief Executive Officer of TVA Group

Jeffrey Fan - Scotiabank Global Banking and Markets Phillip Huang - Barclays Capital Canada, Inc. Maher Yaghi - Desjardins Securities Vince Valentini - TD Securities Equity Research Tim Casey - BMO Capital Markets

Good morning, ladies and gentlemen. Welcome to this Quebecor conference call.

Again my name is Marc Tremblay, Senior Vice President, Chief Legal Officer and Public Affairs, and Secretary. And joining me to discuss our financial and operating results for the fourth quarter and full-year of 2017 are Mr.

Pierre Karl Péladeau, President and Chief Executive Officer; Jean-François Pruneau, Senior Vice President and Chief Financial Officer; Manon Brouillette, President and Chief Executive Officer of Videotron; and France Lauzière, President and CEO of TVA Group. You will be able to listen to this conference call on tape until June 14, 2018, by dialing 877-293-8133, conference number 1229124 and passcode 48006#.

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 will 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, Mr. Pierre Karl Péladeau.

Merci, Marc, and good morning, everyone. I would like, first, to welcome France Lauzière, our new CEO of TVA, who is attending her first conference call.

So I can only be pleased with our financial and operating performance for the full-year as we posted a $99 million year-over-year EBITDA growth, our best performance since 2009. All of our segments contributed to this exceptional result.

Once again, our Telecom segment led the way with the leading 6% annual EBITDA growth fueled by $99 million or 19.5% revenue growth from our mobile services as we passed an historic milestone when we added our million subscriber connection to our mobile telephony service in November, and mark of the invariable stature that we have achieved in Québec mobile market. Our broadband services also managed to stay ahead with the recording of our highest subscriber growth since 2013.

We are obviously excited about our partnership with Comcast to develop and deliver an IPTV service-based on our X1 platform, which will allow a more user-friendly navigation across a diverse selection of content including our own value added content. Our Media Group also posted an excellent results in 2017, primarily driven by the outperformance of our TVA Group led by France Lauzière was appointed as I mentioned earlier, President and CEO in the course of the year.

Advertising revenue growth from our broadcasting activities, subscription revenue growth from TVA Sports and increase in volume for our soundstage and equipment rental activities at MELS, paved the way to a 46% EBITDA growth from TVA Group. Overall, our conventional and specialty channels attracted viewership market shares of more than 37% in 2017, a 1.7 share increase over 2016.

In the space of just a few years, TVA Sports attracted nearly 1.9 million subscribers and viewership market shares nearing those of our competing sports channel which has been an existence for a decade. This is why we believe that January 2018 CRTC decision on the fee for carriage payable by Bell TV is inequitable, and while we filed an obligation in the Federal Court of Appeal for leave to appeal the CRTC decision.

Finally, based on the Vividata-filed 2017 survey, our urban daily newspapers remain leaders in the news category with more than 4 million multi-platform readers on a weekly basis. As for our Sports and Entertainment segments, I am pleased to see that crowds keep coming to our events.

In our second year of operation, we attracted close to 845,000 people to our sports and cultural events and the Videotron Centre ranks fourth in gate revenues in Canada according to Billboard. Our success in the future, therefore, heavily relies on our capacity to attract more events in the Videotron Centre from hockey games to live concerts and corporate events.

Once again, I am quite confident that the appointment of Martin Tremblay as the Head of these activities will contribute to the continuous success of this segment. I will now let Jean-François review our consolidated financial results.

Thank you. Before reviewing our financial results for the quarter, I’d like to inform you that during the fourth quarter of 2017, we changed our organizational structure and transfer our book publishing and distribution operations and music distribution and production operations from our Media Reporting segment to our Sports and Entertainment segment.

Accordingly, prior period figures in the corporation segmented reporting have been reclassified to reflect these changes. I refer you to our MD&A and our press release for complete review of the changes that it entails.

Quebecor’s revenues were up 1% in the quarter to $1 billion as revenues from our Telecom segment grew 5% to $841 million. Quebecor's EBITDA was up 6% to $412 million in the quarter.

Our Telecom segment recorded a 7% EBITDA growth to $389 million. We reported net income attributable to shareholders of $66 million in the quarter or $0.27 per share compared to a net income of $123 million or $0.50 per share reported in the same quarter last year.

The decrease is essentially due to an unfavorable variance related to their fair value of our convertible debentures and an increase in depreciation expenses resulting from an adjustment to the depreciation period of certain telecom network components. Adjusted income from continuing operations, excluding unusual items and gains or losses on valuation of financial instruments, came in at $79 million in the fourth quarter or $0.33 per share compared to $85 million or $0.35 per share reported in the same quarter last year.

The decrease is mainly explained by the increase in depreciation expenses. Quebecor Media's consolidated free cash flow from continuing operating activities increased from $122 million in the fourth quarter of last year to $133 million this quarter, explained primarily by lower current income tax expense, EBITDA growth and lower CapEx, partially offset by an unfavorable change in non-cash balances related to operation.

For the full-year, consolidated revenues were up 3% to $4.1 billion and EBITDA was up 7% to $1.6 billion. Adjusted income from continuing operations excluding unusual items and gains or losses on valuation of financial instruments came in at $330 million or $1.37 per share compared to $306 million or $1.25 per share reported last year.

Effective January 1, 2018 we have adopted on a fully retroactive basis, the new rules under IFRS 15, which specifies how and when we should recognize revenue. The adoption of IFRS 15 will have significant impacts on our consolidated financial statements, mainly in the Telecom segment, especially as a result of our wireless handset subsidy model.

In total, the retroactive adjustment that will positively impact our 2017 revenues amounts to $22 million, while the positive adjustments to our 2017 EBITDA will amount to $35 million. As of the end of the quarter, our net debt to EBITDA ratio was 2.5 times down from 3.2 times reported as of the end of the fourth quarter of last year.

Available liquidity of more than $2.2 billion as of the end of quarter, full access to capital markets financing and free cash flow generated by our operations are more than sufficient to cover near-term debt maturities. In the quarter, we purchased and canceled 2.5 million Class B shares.

Since we initiated our NCIB program in 2011, approximately $19.7 million Class B shares have been purchased and cancelled. I want to remind you that our Board of Directors approved in November, a 2-for-1 split, applicable to our multi-voting Class A shares and subordinated Class B shares.

As a result, our total share count and dividend per share have been adjusted accordingly. I will now let Manon review our Telecom segments operations.

Thank you, Jean-François, and good morning, everyone. In the quarter, we exhibited growth of 35,000 RGUs driven by the addition of 34,000 wireless lines and 12,000 Internet subscribers.

For the full-year, we exhibited growth of $116,000 RGUs or 2% from the end of prior year. Our overall growth was once again largely driven by our wireless service and we are proud of surpassing the million customer milestone during the quarter.

As of the end of December 31, we counted 1,024,000 activated lines. In the quarter, we recorded net growth of 34,000 lines compared to 26,000 lines last year.

Wireless ARPU grew 3% year-over-year to $53.56 in this quarter from $51.96 recorded in the fourth quarter of prior year. Our BYOD offers continue to attract a significant share of our growth hand.

Our monthly churn rate declined from 1.3% in the quarter from 1.5% last year. Our strong performance across all metric demonstrates once again our ability to anticipate customers need to a competitive offering.

As of November 15, 2017, we launched our Club illico mobile app, which was offered for a limited time to all of our new mobile subscribers a great way to differentiate our mobile offering. As of December 31, 32,000 customers have downloaded the app reflecting the need for relevant and unique video content on mobile devices.

The app is now offered with all premium mobile packages and it’s designed to increase ARPU and reduce churn. On a different note, we launched in the fall of 2017 our Voice over LTE service and more recently became the first Canadian carrier to support toll free international calling over Wi-Fi.

This initiative testified to our commitment to further differentiate our service offering and continue to enhance customer experience. In our broadband services, we recorded growth of 12,000 subscribers in the fourth quarter.

For the full-year, we grew our subscriber base by 54,000 customers, our best annual performance since 2013. On the cable TV front, we managed to record a decline of less than 9,000 customers in the fourth quarter despite a challenging environment as we were essentially completing the fourth migration of our customers from analog to digital services.

Our OTT service, Club illico posted nearly 362,000 customers as of December 31, an increase of 47,000 customers’ year-over-year. This solid performance result primarily from our strategy focused on producing original content in series such as Victor Lessard, L'Academie, Pablo Escobar documentary, and the recently released series targeting teenagers, La dérape.

In January, we launched the third season of our first ever original series, Blue Moon, and we each record eye statistics with over 1 million viewings in only 10 days following its release. In cable telephony, we recorded a loss of 17,000 lines in the quarter.

In our B2B operations, revenue grew 10% for the full-year, fueled by our data center business and the growth of [indiscernible] as well as the success of our bundled offerings. Wireless lines grew 26% from the end of last year also contributing to our overall revenue.

Customer satisfaction remains the best in the industry and we continue to solidify our market position. Videotron continues to receive coveted distinctions.

In the fourth quarter, a Léger survey published in Les Affaires ranked Videotron as the best telecommunication retailer in Québec for a sixth consecutive year. On the financial front, we recorded revenues of $841 million in the fourth quarter compared to $805 million in the same quarter last year for a 5% growth.

For the full-year, we recorded revenues of $3.3 billion for a 4% growth. This is primarily due to RGU and ARPU growth mainly in mobile and Internet.

We reported EBITDA of $389 million in the fourth quarter compared to $365 million last year for a 7% growth. For the full-year, EBITDA grew 6% to $1.5 billion.

Overall, our financial performance highlights our right balance between subscriber, revenue, and EBITDA growth as well as our continuous commitment to improve operational efficiency. In the quarter, we grew wireless EBITDA by more than 60% and we posted similar growth for the full-year.

Cost of acquisition for new wireless subscriber was down 3% in the quarter to $390, again, impacted by the success of our BYOD offers. From a cash flow perspective, we generated $213 million in cash flow from segment operations in the fourth quarter, an increase of $38 million over the same quarter last year.

For the full-year, we generated $833 million compared to $660 million during prior year. Our Wireless business generated positive cash flow for the first full-year since we launched in 2010.

Net capital expenditures, including acquisition of intangible assets amounted to $176 million in the fourth quarter, a decrease of $14 million over the fourth quarter of prior year and including $33 million spent on our mobile infrastructure. Net CapEx amounted $701 million for the full-year, $88 million lower than prior year and including $90 million spent on our mobile infrastructure.

In 2018, we expect our CapEx spending to range between $725 million and $800 million including IPTV investment program as well as wireline and wireless network maintenance. Let's now turn the floor to France for the review of TVA Group’s result.

Thank you, Manon. Consolidated revenues for TVA Group decreased $14 million or 8% in the fourth quarter from $169 million to $155 million.

Broadcasting revenues decreased 9%, explained by a 6% decrease in advertising revenues and a 15% decrease in subscription revenues from our specialty channel. Advertising revenues from our conventional TV channel declined 10%, while advertising revenues from our specialty channel services grew 10%.

Magazine publishing revenues declined 17% to $24 million, mostly attributed to 23% decrease in advertising revenues on same-store basis mainly in the women's decorating and cooking categories. New plans and subscription revenues both declined by 13%.

MELS revenues increased 10% in the fourth quarter to $17 million with the increase coming primarily from soundstage and equipment rental activity, but partly offset by a decrease in post production revenues. Consolidated EBITDA grew $1 million to $23 million in the fourth quarter.

Our broadcasting activities reported EBITDA of $16 million compared to $17 million reported last year, while our magazine recorded stable EBITDA at $2 million. MELS recorded EBITDA of $4 million, an increase of $2 million over last year.

For the full-year, our consolidated revenues amounted to $590 million and a decrease of $1 million or less than 1% year-over-year. Advertising revenues from our broadcasting activities increased 5% to $270 million and subscription revenues from our specialty channel increased 4% to $125 million.

Our Magazines business posted revenue decline of 18% for the full-year to $95 million and MELS recorded at 13% revenue growth to $67 million. We recorded consolidated EBITDA of $66 million for the year for a growth of 46% as our broadcasting activities recorded EBITDA growth of 87% to $42 million.

MELS recorded EBITDA growth of 58% to $14 million, and our magazine operation exhibited EBITDA decline of 28% to $10 million. Cash flow from segment operations was negative $1 million in the quarter for a $1 million decrease over last year.

For the full-year, cash flow from segment operation amounted to $11 million fairly stable from last year. Thank you, and now the conclusion from Pierre Karl.

Merci, France. So upon my return to the helm of the company earlier last year, I quickly realized that our business was well positioned to continue to deliver superior growth.

No drastic changes to our strategy was required, except for a few realignments that were necessary to further highlight the power of our convergence between content and distribution platforms. I think that our 2017 financial results confirm my initial view.

Looking forward not only our operation are expected to continue to deliver leading financial and operating performance, but we also enjoy a very strong financial position that will provide us with the flexibility required to execute our plan, including the takeout of our financial partner. Following this important milestone, one of the items that we will have on our agenda will be our dividend policy and we intend to work on setting the right policy considering then projected cash flow profile.

Thank you for your attention. And now operator, we can open the lines for questions.

Thanks very much. Good morning, everyone.

I want to just touch on the wireless opportunity with respect to packaging Club illico. Manon, I think you mentioned that there was about 30,000 that downloaded.

Wondering if you can just help us think through this for a second. How popular was this?

I mean it's seems like I mean you have 34,000 net additions, gross adds is probably obviously much higher than that. You only introduced this starting in November.

It seems like it was a very popular attraction for customers to come onto wireless, especially with this Club illico feature. I’m wondering if you can talk about that and maybe just the opportunity as you look forward as well.

And then the second part to that question is really your comment about original content. Can you just help – explain again like where these content costs are being booked and whether they're in the Cable and Telecom business and how much of that is in there and how much of it is, maybe just where they are allocated, so we can kind of see where the cost is going forward, because that cost is obviously an investment, that's helping you to drive the wireless business as well?

Thanks.

Yes, okay. Yes, you're right.

It was a tremendous success when we launched Club illico mobile. What we wanted to do, first was to introduce it to be available to any mobile subscribe in order to build the awareness of that new app.

Since January, we reflected a change in the offer meaning that you have to subscribe to a premium package in order to access Club illico mobile. This means that we'll be able to lift the ARPU with that.

And the other thing that is of interest for us is that since we stimulate consumption of video over mobile and set, of course, it stimulate data consumption at the same time, which should be impacting the ARPU favorably for the future. I don't know if it’s a response – the first portion of your question.

What is the premium package that’s required for you to get that app?

Yes. We call it premium package, package higher than $65 per month.

Okay.

Okay. And as for the cost reflection of Club illico, I mean there's no cost of mobile – Club illico mobile reflected aside, it’s all included in Club illico and you could see those costs reflected in the Internet revenue, actually in the cost structure of Internet.

Okay. That’s helpful.

Jeff, I would just like to add a little bit on this. As you probably know, we built our success for the last decades on convergence.

So it was for us to be able to bring the content on as much as platform as possible on the efficient platform that we’re managing. We will continue on this and since, obviously, that we have a fourth service with our mobile, and we will continue on this direction.

This a little bit of what I said at my conclusion. And we believe that makes a differentiating factor of great interest for us in our shareholders.

Okay, well said. Thank you.

Hi. Thanks.

Good morning. I also have a question on the wireless side.

A couple of weeks ago you guys launched a 2-for-1 iPhone offer. I just wanted to sort of maybe get some color for you guys on the strategy behind this offer and maybe an update on the market environment following the launch of that promotion?

And whether this is still ongoing or has it ended? I think it was for two weeks when it first came out, but I wanted to sort of get an update on that?

Thanks.

Yes. Okay, thanks.

It’s still going on and we also launched, maybe you’ve seen the multi-line rebate, meaning that as much phone as you activate with us in a family you get more and more rebate. This is basically the bundled strategy we have been using for years in the landline area.

And we feel that with the cord-cutting in the landline telephony, we have to be very attractive and strong in that area to make sure that consumers that leave the landline and take mobile with us, and of course, there's more than one person in household, so it was an opportunity for us to test that. And since it’s been so successful you might see us going further with that bundled approach of mobile within a household.

Got it. And how has the market environment sort of evolved, if at all, since the promotion was launched because from where I'm sitting, we haven't really noticed a whole lot of I guess response from your competitors so far is that accurate?

Yes. I mean what – that thing is, all players, they are playing, we call them the submarine strategy.

You see more and more direct and targeted approach in order for just to keep their tactic confidential, so they're very aggressive. It’s not different quarter-after-quarter I mean since we are – we ranked first in share of growth addition.

Of course, they're trying to be as active as possible, but basically I think that everything we do is to make sure that we are ahead of competition and every quarter if they meet our – match our offer will bring something different, something new in the market and we'll keep doing so.

Got it. And to your point about it being successful would you say that this has become one of the most popular promotion that you guys have launched in the last 12 months?

No. I think that we have a – we've very active.

Every two weeks, every month we launched new promotion and in order to be dynamic and every time I mean that's what explain our success actually. So it's a variety of tactics and strategies well executed.

That’s very helpful. And then maybe last one on this.

With the new IFRS accounting and different way of accounting for the subsidies in terms of what you've observed in the market, have you noticed any sort of change in behavior whether your competitors are a little bit more willing to discount on hardware just because the impact on – it doesn't have the same level of effect on EBITDA?

No. We haven't seen any change so far regarding that.

And Phil just to add on that. On a cash basis nothing changes, so we build our strategies over cash flow or not over EBITDA or EPS.

Got it. Thanks very much guys.

Yes. Thank you.

This is Maher. I wanted to ask a question on how should we look at media.

Usually I don't ask a lot of questions on media, but in the case of today's results just wanted to see how do you see the growth or I guess the trend in 2018 for the media division. We ended the quarter – we ended the year at little bit weak point let's say.

Can you talk about the trends there that you're seeing? And I have a follow-up on the balance sheet after?

Yes. As you know the media business is bringing many assets from newspapers to television.

So therefore, we cannot have a complete and global answer. Trends are different from one asset to the other.

I was trying to mention to you, our specialty channels are doing well, the subscription revenues are going up in certain areas, in others, less. Our generalist television market share is growing.

Something that we've been doing for the last few months is because we have the capacity of regrouping all our assets together. Commercially, we have also there what we can consider being an advantage to our competitors.

Some will be only in newspapers others will be only in television. We have this bunch of assets that should be all commercialized.

That requires obviously a new change, a new perspective. We need to train our sales representative going in this direction, but we consider that we have all those assets and we have to continue to succeed.

In relationship with our Telecom business, someone asked the question earlier regarding how we distribute the cost of our content in our Telecom segment? We will continue to have multi-platform possibility to broadcast our content.

So some are produced by Videotron by – on the Club illico and then we only can distribute this on other platforms. That brings additional audience and other capacity unit to sell advertising on it.

So we will continue to work all those assets together and we believe that we will be able to enjoy a superior growth in a landscape which is certainly not as favorable as it used to be in the past.

Great. And just in terms of the cost structure, in both media and I guess this question both relates to Telecom and Media.

In the current environment where technologies are evolving, we've seen other companies in the sector announced some significant cost reductions. Do you guys have the ability or the flexibility to push on some cost reductions in the near to medium-term future and to generate a bit more margins in media as well as revenues declining right now?

Well, I think that we always have been known as disciplined managers. We're running lean operations.

We will continue in this direction. But I think also it’s important to mention and to emphasize the fact that we will continue to work on our revenue side, since we have all those assets available to commercialize efficiently.

And if I may add Pierre Karl, we have to keep in mind that in terms of Telecom, we generated best EBITDA margin across Canada with 47% EBITDA margin. It’s way ahead of other player and now we keep of course having operational efficiencies, program in place to make sure that we stay in that level of margin.

Thank you.

And just to mention as an examples, it’s probably more of an illustration, but last week we renewed our labor agreement at Personnel de Québec and we decided that we will shutdown one press line machine. So we were able to reduce our headcount accordingly, so we will – these are obviously, all – it's a bunch of little things, but this is our job to make sure that we will continue to run this company as more as efficiently as possible.

Thank you. And JF, I wanted to ask you what's your level of comfort in terms of leverage as we get closer and closer to, it seems from what you guys are talking about a good resolution on – and for QMI?

What kind of leverage you are comfortable to take the balance sheet up to? And just some housekeeping questions here.

What was your net addition market share in wireless and EBITDA wireless in the quarter? Thank you.

I’ll start with the leverage targets and/or the maximum threshold that we would hit for projects such as buying back the case or distributing cash to shareholders and we've been I think quite transparent in the past with the four times threshold and there is no indication that this is going to change.

Can we share the information about the EBITDA in mobile as for the second question?

It grew more than 60%.

Year-on-year in the quarter?

Yes, year-over-year. Yes.

It’s the same for a full-year and fourth quarter, more than 60%.

And the market share for gross addition?

Yes. In terms of share of gross add we ranked 23% and we are in market share now at 16%.

Great. Thank you very much.

You’re welcome.

Thanks very much. First, on IFRS 15, JF, can you just fill in some of the blanks?

Are you going to continue to report ARPU the way that you have in the past and somehow blend in equipment revenue and service revenue? Or are we going to see ARPU materially drop starting in Q1 to adjust the service component?

Yes. To be determined, to be honest we haven’t completed our analysis on that.

We’re looking at what the competitions going to do and what the industry is going to do. But that’s something that still under analysis.

And in terms of the just reported financials, are you going to give us restated numbers for 2017 for every quarter? And if so, when would we get those?

Yes. That’s our plan.

And the when portion…

Probably in the next one.

Okay. Sorry for the housekeeping stuff.

Bigger picture question, so maybe for Pierre Karl, if you want, or whoever wants to answer. But you mentioned the priority of getting the case deal done and then reviewing the dividend policy.

Two-part question, one, you've got $841 million of cash. You've had most of that cash for some time now since you sold the spectrum.

Is there something happening in the background with the case that's precluding a deal from getting done yet? Or should we be expecting something very soon given that?

And then the second part of the question is the dividend policies. Is it fair to assume that you'll have to increase your debt leverage to do the case deal and then whatever you do with the convertible debentures this year as well so that you need to pay that debt back down maybe towards three times EBITDA or less before we'd see any substantial change in the dividend?

Or do you think you could start a much higher dividend payout immediately when your debt leverage is high? Thanks.

Thanks, Vince. I’ll start with – by the end.

As you know the yield on the dividend of Quebecor is the lowest of the industry. As you know we move from highly leverage environment.

Obviously, a many years ago, remember that we were even higher than seven times. True and I think this is very important because we built our credibility in the financial market by saying that we will reduce our leverage and this is what we constantly did.

We at certain point decided that the leverage was too high, so we cut the dividends and we reestablished it a few years ago. As Jean-Francois mentioned to you, the debt to the debt ratio is at 2.5 times.

And in regard with the first part of your question, we will continue as we mentioned and there is no surprise there and there is no new things. That was the scenario.

That’s the case our partner was considering by taking their stake out of the company. So we will continue on this director.

Obviously, there is nothing that we’re going to be able to say before announcement, and an announcement will be made, we will continue to live with the guidance’s that Jean-François mentioned to your earlier regarding the leverage level.

Thank you, Pierre. The next question is going to be the last.

That we will answer to.

Hi, good morning. Any details you can give us on planning and potential deployment of X1?

And also any update you can give us on how you are approaching 5G on the wireless side?

Yes. As far XFINITY you will understand that I don't want to share a lot of information.

The only thing I could tell you is that the team is full speed integrating the technology. We wanted to be to the market as fast as possible, and of course, we want to leverage that platform as much as we can.

So we'll give you more information close to the launch because we really want to keep our strategy as safe as possible. As for the 5G, of course, we're looking at it.

Basically the trend is every technology that we're allowed needs to be 5G-ready as much as we can. So we are very active in that area and we will be ready to be there along with the party when time comes.

End of Q&A

Good. So thank you for all of us and look forward to talk to you again at the next quarter.

Thank you.