Quebecor Inc.

Ladies and gentlemen, welcome to the Quebecor conference call. My name again is Marc Tremblay, and joining me to discuss our financial and operating results for the first quarter of 2019 are Pierre Karl Péladeau, President and Chief Executive Officer; Hugues Simard, Chief Financial Officer; Jean-François Pruneau, 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 August 9, 2019, by dialing (877) 293-8133; conference number, 1245055; 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 would refer you to the risk factors outlined in today’s press conference and reports filed by the corporation with regulatory authorities. Let’s now move number – sorry, let’s now move to our first speaker, Mr.

Pierre Karl Péladeau.

[Foreign Language] And good afternoon, everyone. First, I’m very glad to report that Quebecor Board of Directors have declared yesterday a quarterly dividend of $0.1125 per share on both Class A and Class B shares, up from $0.055 per share, more than doubling it.

And going forward, we remain committed to our dividend objective of reaching 30% to 50% of our free cash flow within the next three years. Now on to our first quarter results.

Our telecom operations continue to perform well, propelled by the continuing growth of our wireless services. As Jean-François will explain later, we continue to lead the market with a share of growth subscribers as of 30%, our best performance in the first quarter since launching our wireless service in 2010 as well as an excellent operating leverage.

Furthermore, we continue to invest in the rapid evolution of technologies toward 5G to bolster our growth. First, with our involvement in the open-air laboratory where trials are ongoing and many smart living applications are being developed.

We also acquired 10 spectrum licenses in the low-frequency 600 megahertz band, throughout our territory in Québec and the greater Outaouais region, another strategic step in our push to sustain – even accelerate our unparalleled growth and leadership in the wireless services in Québec, thereby contributing to a healthy and durable competitive environment benefiting the customers. The next step in our road to 5G will be the auction of 3.5 gigahertz spectrum expected in 2020.

As this band is not currently licensed for mobile applications and is largely held by Inukshuk – a joint venture between Bell and Rogers – it is imperative that ISED be determined to clawback a significant portion of Inukshuk’s spectrum holdings, and reauction it for flexible use, allowing the deployment for mobile applications such as 5G. In addition, it will be crucial that new entrants and regional players be afforded the same ability to compete against the incumbent as in the past auctions.

With regards to our media operations, we announced this quarter the acquisition of Incendo Media, a producer and worldwide distributor of televised content. In addition, we closed the acquisition of a travel specialty channel, Canal Évasion; and a food specialty channel, Zeste, from Serdy Média.

This transaction will improve our revenue mix by improving our subscription revenues and decreasing our exposure to advertising revenues, which continue to be challenging. I’m very pleased with TVA viewership ratings, which gained more than two points at 38.3% for the first quarter of 2019, and even reached an all-time high of 38.8% in recent days.

Our Sports and Entertainment Group also had a busy and fruitful quarter, with several shows at Centre Videotron from internationally renowned artists such as Bryan Adams, MUSE, and KISS. In addition, our production of Seul Ensemble, Serge Fiori, in collaboration with Cirque Éloize, a series of 28 shows at Théâtre St-Denis in Montréal is a huge success with more than 36,000 tickets sold, and an occupancy rate of more than 80%.

I will now let Hugues review our consolidated financial results.

[Foreign Language] Before reviewing our financial results for the first quarter of 2019, I remind you that on January 24 of this year, Videotron closed the sale of its 4Degrees data center operations for an amount of approximately $262 million, fully paid in cash. Accordingly, a gain of $97 million was accounted for in the quarter.

We have reclassified the 4Degrees operating and cash flow statements as discontinued operations in our income and cash flow statements. Quebecor’s revenues were up 3% in the quarter to $1.03 billion.

Revenues from our Telecom segment also grew 3% to $841 million. Quebecor’s EBITDA was up a little more than 1% to $421 million.

Excluding a favorable impact related to a nonrecurring gain from a CRTC adjustment recorded in the first quarter last year, consolidated EBITDA grew 4%, and 7% had we not retroactively applied IFRS 16. Our Telecom segment recorded EBITDA growth of close to 1.5% to $423 million.

Excluding again the impact of the non-recurring gain recorded last year, our Telecom segment EBITDA growth exceeded 4%, and the same 7% had we not retroactively applied IFRS 16. We reported a net income attributable to shareholders of $189 million in the quarter or $0.74 a share, compared to a net income of $57 million or $0.24 a share reported last year.

The increase is explained by the gain on the sale of 4Degrees and a favorable variance in the valuation of financial instruments. Adjusted income from continuing operations, excluding unusual items and gains or losses on valuation of financial instruments, came in at $111 million or $0.44 per share, compared to $90 million or $0.38 per share reported last year.

Quebecor Media’s consolidated free cash flow from continuing operations activities – operating activities rather, decreased from $104 million in the first quarter of last year to $15 million this quarter, explained primarily by an unfavorable variance in the noncash balances, partially offset by lower current income tax expense and lower CapEx. As of the end of the quarter, excluding letters of credit issued in December 2018 as preauction deposit for the 600 megahertz spectrum auction, Quebecor Media’s net debt-to-EBITDA ratio was 3.1 times, up from 2.4 times reported as of the end of the first quarter of last year, due mostly to the purchase of the shares owned by the Caisse de dépôt, but sequentially down from 3.2 times at the end of December.

Available liquidity of $1.3 billion as of the end of the quarter, full access to capital markets financing and free cash flow generated by operations are more than sufficient to cover near-term debt maturities and to provide for the settlement of our recent spectrum purchases. In the quarter, we purchased and canceled 1.3 million Class B shares for a total investment of more than $39 million.

Since we initiated our normal course issuer bid eight years ago, approximately 32.4 million Class B shares have been purchased and canceled. Finally, I would like to add to highlight rather, that on April 17, Moody’s upgraded QMIs corporate family rating and all of its corresponding instrument ratings, from Ba2 to Ba1.

At the same time, it also upgraded Videotron’s ratings. I will now let JF review our Telecom segment’s operations.

Thank you, Hugues. Good afternoon, everyone.

Before reviewing our operating and financial results for the first quarter, I’d like to highlight a few notable distinctions that we received in the first quarter, namely Québec’s most admired telecom company for a 14th consecutive year as per a Léger survey. For the third year in a row, customers have rated Videotron as the Canadian mobile provider that delivers the best customer experience according to Forrester’s Canada Customer Experience Index 2018 – and that despite our limited regional presence.

We are obviously very proud of these distinctions as they reflect the quality of our employees and our continued focus on delivering the best experience to our customers. Coming back to the first quarter results.

we’re pleased to report strong operating results, fueled by subscriber growth exceeding expectations from our wireless services. This clearly succeeds in the Urban and Young segment of the market, which complements our Videotron mobile brands fairly well.

In the quarter, we recorded growth of 23,000 RGUs, which combined with strong operational leverage, allowed us to deliver an EBITDA growth exceeding 4% when we exclude the favorable impact of a nonrecurring gain recorded in the first quarter last year relating to the retroactive ruling in respect to domestic wireless roaming rates. Wireless services continued to lead our revenue growth.

As of March 31, we reached 1,194,000 activated mobile lines, supported by a growth of 40,000 lines in the quarter, almost doubling last year’s growth, which contributed to a 12% service revenue growth in the quarter. Despite a very competitive market environment, especially on the handset cost subsidy front, we maintained our leading position in gross activations market share for a ninth consecutive quarter.

Our growth was obviously favored by Fizz, and we captured close to 30% of total gross activations in our market in the quarter, a significant improvement over last year. Wireless ABPU slightly decreased to $52.50 from $53.25 recorded in the first quarter of last year, resulting from the increasing share of BYOD customers in our total customer base.

In the quarter, our monthly churn rate was stable year-over-year at 1.3% and sequentially down from the fourth quarter of last year. Our strategy continues to focus on engaging over the long term the customers we signed up under our BYOD programs through unique bundle offers, value-added content and superior customer service, allowing us to control churn rates and increase customer lifetime value.

As Pierre Karl mentioned earlier, we recently announced the purchase of frequency wireless spectrum licenses in Québec and the Outaouais region for a total cost of $256 million. We’re very satisfied with the outcome of the auction, and we are decidedly engaged on the 5G path through among other things, the open-air labs for Smart Living in Montréal.

By combining our wireless and wireline assets, we will provide a unique and seamless experience and fully explore the 5G capabilities, which will allow us to maintain our leadership and customer experience. In broadband services, we posted growth of 6,000 customers in the quarter.

We reported service revenue growth of 5% driven by both customer and ABPU growth. We recently introduced our 400 megabytes per second internet service across our entire network, thereby meeting needs of customers looking for increased capacity and speed.

We recently launched our residential Fizz Internet service, exploiting the same successful 100% digital customer experience as Fizz mobile. And so far our new service is well accepted by the customers.

We are capitalizing on the strong momentum of Fizz mobile in our effort to develop a complementary Internet offering in order to effectively compete with the Internet resellers. In cable TV, we recorded a decline of 15,000 customers in the first quarter, similar to last year.

And in cable telephony, we recorded a decline of 19,000 customers also similar to last year. As of the end of the quarter, 432,000 customers surprised to Club illico, our OTT video service, a growth of 11,000 customers in the quarter.

The shooting of a third season of our popular original series, Victor Lessard, is underway with the release scheduled this fall. We continue to focus on exclusive and locally produced content in order to differentiate our product, allowing us to leverage the value of Club illico to attract customers to our telecom services, including mobile, and to reduce churn.

On the technological front, we continue to develop our new connect-in-home experience. Employee trials are well underway in anticipation of a commercial launch later this year, with now approximately half of our entire workforce testing Helix.

We are confident that Helix will revolutionize not only the way we support our customers in their digital home, but also provide a customer experience that goes beyond connectivity and entertainment. On the consolidated financial front, revenues amounted to $841 million in the first quarter compared to $819 million in the same quarter of 2018, a 3% growth.

This growth is primarily due to RGU growth, mainly in mobile and Internet services. In our B2B segment, revenues increased by 4% in the quarter, mainly due to RGU and ABPU growth.

Generally speaking, churn rates are stable despite increased competition. By offering our customers accessible and innovative products, such as Wi-Fi Pro, cloud communications and wireless backup, we continue to focus on customer experience and cross-selling to grow our business.

In the quarter, we recorded EBITDA of $423 million for a year-over-year growth of close to 1.5%. As mentioned earlier, our growth exceeded 4% when we exclude the impact of the nonrecurring gain recorded last year relating to the CRTC retroactive ruling, and 7% had we not restated 2018’s financials when applying IFRS 16.

Service revenue growth and ongoing cost containment initiatives contributed to our EBITDA growth. Our ability to maintain industry-leading EBITDA margins without compromising customer experience demonstrates our continued focus on cost and our ability to leverage operational efficiencies.

For the first quarter, we generated $244 million in cash flow from segment operations compared to $224 million during this same period year. Net CapEx, including acquisitions of intangible assets amounted to $179 million in the first quarter, a decrease of $15 million from the first quarter of last year.

Wireless CapEx amounted to $13 million in the quarter. We’ll now turn it over to France to review the Media segment performance

[Foreign Language] Good afternoon. TVA group recorded operating revenues of $134 million in the first quarter, a slight year-over-year increase.

The increase in broadcasting revenues is mainly due to the acquisition of Évasion and Zeste specialty channels on February 13 of this year. And to a 2% increase in the advertising revenues of the other specialty services, partially offset by a 3% decrease in TVA Network’s advertising revenue.

On the ratings front, our overall viewership market share reached 38.3%, up 2.1 points from the same period of 2018, fueled by the excellent performance of our specialty channels, which increased 1.8%. The increase was driven by the strong performance of TVA Sports and LCN as well as the acquisition of Zeste and Évasion.

Magazine publishing revenues declined 11%, mostly due to a 17% decrease in advertising revenues, resulting in part from a reduction in the number of issues published combined with a 10% decrease in newsstand revenues and the sale of The Hockey News. Mels revenues increased to 13% in the first quarter to $13 million fueled by growth in postproduction, resulting from the acquisition of Audio Zone on August 27, 2018, as well as an improved volume of activities.

These increases were partially offset by lower revenues from some stage, mobile unit and production equipment rental. TVA group’s EBITDA reached $4 million for the first quarter, an increase of $0.6 million compared to the first quarter of last year.

Our broadcasting activities reported EBITDA of $2 million, a decrease of $0.6 million over last year. The magazine business recorded an EBITDA of $1.9 million, up $0.7 million; while Mels posted an EBITDA of $0.1 million, $0.6 million higher than last year.

Cash flow from segment operations was negative $1 million in the quarter, an improvement of close to $1 million over last year mainly due to our EBITDA growth. Let me now turn the floor back to Pierre Karl for his conclusions.

[Foreign Language] So after a good start in the first quarter, we will spare no effort to keep the momentum and ensure that we reach once again our growth and profitability objectives for 2019. As ever, we remain focused on delivering the best client experience, superior operating performance, excellent returns to our shareholders, and thus maintain our leadership position as the customer and enterprise go to reference in telecom, news media, culture and entertainment.

Thank you for your attention, and we will now open the lines for questions.

Yes, thanks. Good afternoon.

A quick question for me on the wireless side. Obviously, Fizz is a category that is very nascent for your guys.

And I’m just wondering if you know what market share you think is attainable for you guys over time. And how rapidly is that market share growing for you?

I know it’s very early days though, I’m just wondering what do you think the opportunity is here?

Yes. Thanks for the question, Phil.

Well, first of all, our overall market share right now is about 18%. Before launching Fizz, if you recall, we were essentially capturing about 20% to 22%, 23% gross additions – market share gross additions on a quarterly basis.

So obviously, growing the market share and has – as churn is very much under control, I should say, naturally, would have been grown – would’ve been growing to that level. That being said, now that we’ve launched Fizz, our share of gross adds is approximately 30% right now, or very close to 30% right now.

So I really think that demonstrates that the potential is very high for us, and we can certainly even though in the past we were saying that 25% is achievable overall without launching Fizz, now that we’ve launched Fizz, I think that we can definitely get higher than 25%.

So the momentum we saw in the quarter, I was wondering if you can comment a little bit into Q2. Has that momentum accelerated or sustained, the strong momentum we saw in Q1?

And also I was wondering, if you’ve seen from a competitive environment standpoint, whether – we’ve seen the other – the Big 3 sort of report, and they all sort of – I guess, suggest or comment that there has been a pull back in terms of activities, I was just wondering if – to what extent that might have contributed to the strong momentum as well.

Two things I would say here. The first thing is well, with respect to the Q2 momentum, it’s essentially the same as in Q1.

So no – it’s still very positive with respect to subscriber adds. That being said, I would – I’d like to note that I don’t know what our competitors are saying with respect to the competitive environment, but I would say that since we’ve launched Fizz, it’s competitive.

It’s quite competitive out there. And especially on the handset cost subsidies, it seems to be the way for the incumbents to react to our launch of Fizz, much more aggressive on the handset cost subsidies.

And in some respect, we have to match, if we want to be – if we don’t want to be out of phase with respect to the competitive environment. So the potential is great.

The momentum is great. The market is competitive out there, but I think that we have the right tools to succeed.

Great, thank you so much.

Thank you, Phil.

I wanted to just dig a little bit deeper in the subsidy model that you have and the BYOD. So two things I needed to just verify with you.

I terms of the quarter, you talked about the increase in subsidy. Is that an increase on a per loading basis or in total?

Because I’m trying to figure out if the percentage of the loading that you’re doing is increasing from being mostly BYOD towards being more on the subsidy model, i.e, similar to or closer to what the incumbents usually do? So it cost per handset or the mix is changing?

I know, I understand the question, Maher. Thanks for the question, by the way.

Well, two things I’m going to say. The BYOD model remains, obviously, I would say, focused for us, especially with the Fizz – with Fizz now, which is currently a BYOD model.

So it’s obviously an area of focus. That being said, I was saying that the handset subsidy or handset cost subsidy – subsidies were quite aggressive out there for the quarter, and we quite had to match in some respect, and we haven’t touched our main brand BYOD pricing during the quarter.

And one could expect that if the subsidies are going up, to have a relatively stable proposition for the BYOD model compared to the subsidy model, that you would have to reduce the pricing on the BYOD model – which we haven’t done. Because it’s Fizz’s job essentially to attract those customers.

So when you look at the main brand, then it seems that in Q1, relatively speaking, our BYOD model was a bit less attractive compared to the subsidy model. We obviously capture a fair amount of BYODs with the main brand, but when I compare it to previous quarter, it was a bit lower.

So because we haven’t changed the pricing structure and the subsidies were going up per handset, essentially, it made our model a bit more attractive for subsidies than for BYOD. So the first answer to the question is on a per handset or per customer basis, it was higher.

But also because it was – because offers were, kind of, matching the competition, and we have other stuff to offer, like the content and the customer experience that is better and whatnot. Obviously, we capture a fair amount of non-BYOD as well, so number of subs – our number of handsets as well has gone up.

So JF, when you look at Fizz for sure, I mean, that model can’t sustain a subsidy model for sure. But when you look at the Videotron brand, you’ve built it, you attained 16%, 17% market share.

Now you have a lot of subscribers in that business that are on BYOD. When time comes for their renewal, do you expect more of them going forward to request a subsidy for them to stay with you?

And would that mean that your margins that you have built up in wireless could come – not under pressure, but the growth in the margin that you have seen so far might plateau as you recycle these subscribers into a subsidy model?

Well, it obviously depends on the competitive environment. Q1 was kind of special, I would say, and most likely because of the launch of Fizz.

And it depends on so many things. Our job is, obviously, if the subsidies are going up, our job is to increase the ARPU on the subsidized models as well, which we can definitely do, obviously.

So it depends. This quarter was also characterized by an iconic device that was launched like the Samsung S10.

It’s a more expensive device and if the market doesn’t react or doesn’t adjust for this new iconic device that is – whether the price is going up or the cost is going up. So there are so many things out there, but I really think that because we have other tools on price that we will be able in fact to charge more for the content and from – for the customer experience that we offer.

And obviously, for the data consumption. Data consumption is going up and investments are going up.

And obviously, at some point, customers from an industrial perspective, the customers will unfortunately have to pay for that. So I think that the industry will adjust.

And one last question for me, JF. On ABPU or the ARPU that you give us, it’s a mix of Fizz and Videotron.

And I’m trying to figure out how much of the decline in year-on-year is due to the increase in the subscriber loading of Fizz versus the regular Videotron? I.e.

I’m trying to like just figure out the Videotron brand, what’s underlying ABPU growth there?

Well, the impact of Fizz is minimal. We don’t have that many subscribers.

It’s not – we have 1.2 million subs overall. It’s not like we have half of it Fizz and half of it Videotron.

It’s very small in the whole customer base, so the impact of Fizz is minimal. It’s really – the ARPU or the ABPU is going down.

It’s really because of the success of the BYOD program that we had out there for the past two years essentially. And how much we were able to increase that proportion of BYOD customers that we were signing up.

So anything that we want to point to this quarter loading into our overall ABPU is – I think it’s marginal. And Fizz would be marginal.

And in terms of your question with respect to pricing differential between Fizz and our main brand, go on the website, it’s very easy to see.

And as you – as more of your subscriber base start to become a subsidy model, how fast do you expect your ABPU to start turning around and turning positive?

Well, two things. It’s – that one is very hard to answer it.

Depends on so many factors. But that being said, I’m not saying that we’re turning our model to a subsidy model.

I’m not saying that. This quarter for various reasons, we had more subsidized – not from a quantity perspective or a number of subs perspective, but on a year-over-year basis, the proportion of BYOD subs out of our overall main brand subscriber base was lower than the previous year.

But I’m not saying that we are turning our model to a subsidy model, not at all.

Okay. So when do you have a view on ABPU direction here?

We’ll probably know. On a – well, that is an important one.

The – because of the impact of our past success on BYOD – past and future, let’s put it that way. We will have some pressure.

That being said, and that’s one thing that I – that needs to be understood from you, Maher, is the following. On a year-over-year basis, when we are signing up a new subscriber, call it a subsidized subscriber or a BYOD sub – on a year-over-year basis, ARPU is increasing.

When we sign up a customer, it’s a higher price than last year. So the reason why it’s still going down is because we’re – we’ve been piling up the BYOD subscribers in the past at lower price than subsidized, and it reflects in the overall base ABPU.

But on an annual basis, year-over-year basis, when we sign up new customers, both BYOD and subsidized subs pricing is going up.

Okay, thank you.

Next question please.

Yes, thanks. First, Pierre Karl, do you mind clarifying commentaries in the press today about Air Transat – if there is any interest there, is that just something personal to you?

Or is that a Quebecor thing?

Yes, it’s personal, Vince.

Good, thank you. I didn’t want to have to ask JF about airplane pricing next year in addition to BYOD.

Yes. So back to wireless – sorry, JF.

Did I miss you – did you give us EBITDA for wireless in your prepared remarks? And if not, can you give us some ballpark whether you want to strip out the CRTC onetime item or not?

No. We haven’t.

And in fact, that’s an important question, Vince. We will no longer provide a year-over-year growth of wireless EBITDA because it has becomes so difficult.

We were doing it on an Excel spreadsheet, two accounting structures. Because as you know, our model is so much integrated, we have people working on wireless and wireline, call centers and whatnot, and allocations of cost here and there and the allocations should have changed, but we’re not changing them because we want the year-over-year EBITDA growth to be comparable.

So it has become a nightmare for us and not really productive for our business. We were doing it essentially for you guys, and I’m sorry for not providing the information, but from a pure operations perspective, it was not that productive.

So we decided that we’re going to end with the Q4 results that information or to provide that information. So no, we have not.

That being said, when I will provide you with anything that you want to know with respect to the wireless business that may have an impact on our, call it, overall EBITDA. And in Q1, those are really simple.

We have the nonrecurring. And by the way, just for you guys, if the nonrecurring was negative for us on a year-over-year basis – so a gain last year and a gain that we’re not recovering this year obviously, so impacting our growth.

That means that for the incumbents, it’s the opposite. They haven’t – they had an expense last year, and this year it’s easy to beat.

So when looking at our results, you need to consider that as well when you compare with the incumbents, or with our competitors. So the nonrecurring gain last year is an easy one.

The second one is obviously Fizz, and some startup losses that we generated over the quarter because it’s a new service, because we don’t have scale yet. And obviously, because we had some operational hiccups, which added to our cost structure for Fizz, which hopefully will be nonrecurring in that respect.

So those are the main two elements. And the third one is the one that I discussed with Maher.

We had a few million dollars more of handset subsidies costs because of the market environment in Q1.

That’s good color. Just to come back on that Fizz, to make sure I understand it.

The IT issues, are they resolved now? Or is it still something you’re trying to fix with your third-party vendor?

And did that have any impact on ABPU as well if there was any service credits that you had to give to the initial Fizz customers?

Yes, that’s a good question, Vince. In fact, it is – well, we haven’t seen any other hiccups since the April one, which was early April in fact.

We haven’t seen any additional because we have taken some mitigating measures. That being said, we’re still trying to stabilize the platform.

We’re working with our third-party vendor. And what we did to compensate for the hiccups, we extended the period of rebates or launch rebates to – or launch discounts to our customers, all of them.

We extended that up until, I believe it’s July, three months. So we extended the discounting period, which was supposed to end in April, so we extended it.

Thanks.

Thank you, Vince. Next question, please.

Thanks, good afternoon. So if I’m – just carrying on, on Fizz.

JF, you’re saying that the momentum is still quite good through April. But we also had – you also had some technical issues.

So I guess, what you are saying really is if you didn’t have any of those technical issues, the results would even be stronger. Is that the way to think about that?

Our ARPU would be higher, because we extended the discounting period. So it’s – if we had not – if we didn’t have any hiccups, ARPU would have probably gone up.

So it’s not really impacting your gross adds or nets on Fizz as a result of the technical issues that...

No. Who knows.

The discounting period has been extended. So obviously it helps on one end.

And – so who knows. But it definitely helps.

It’s the way for us to compensate for the hiccups.

Okay. And the, kind of, customer profiles that you’re seeing coming in on Fizz, I’m wondering if you can share some of that with us, the type of customers, what they are buying in terms of the service.

Very – and that is – that was the reason why we launched Fizz essentially. Very complementary to our Videotron main brand, and by that I mean, more urban.

So Montréal, especially, close to 50%, it’s not bang on 50% of our new subs are from Montréal. So very, very urban.

Obviously, very connected, so younger audience. We kind of over-indexed in the 20 to 35 years old, compared to our main brand.

And more non-Francophones than with our main brand.

What about data buckets? I mean, this group – this age group doesn’t sound like they’re light consumers of data.

No. They are not really.

It’s very similar to Videotron’s brand. 2 to 8 gigs, essentially.

Okay. And then just switching over to BYOD, I mean there’s a lot of talk and moving pieces that impacts your ABPU as a result of BYOD.

But maybe one way to think about it is what is your BYOD ABPU for the customers that’s in your base?

It’s definitely lower than in the subsidized ones. We are signing up a subsidized one at about $60 right now.

BYOD, on the main brand would be, I would say – I would probably say high $30s.

Okay. And I guess, the final question, very quick one.

There is a bit more discussions on the type of loading and the type of adds that carriers are putting on, including lower value tablets, et cetera. In your adds, can you confidently say these are – a lot of them are smartphones, phones, high-value, not a lot of tablets and...

Yes. we don’t have a – well, yes, we a few tablets, but it’s really, really marginal.

Really, really marginal. It doesn’t move the needle, I would say.

Thank you, Jeff. Next question, please.

Great, hi. A couple of questions.

So JF, given you said Fizz really isn’t having much of an impact on the ABPU right now – just given there aren’t that many subscribers relative to your total base – would a reasonable trend be, given the number of BYOD customers you have, to expect that the ABPU would kind of be down like about 1% going forward? But we would expect higher net adds, just given what we saw in this quarter and the success of Fizz, would that be a reasonable outlook?

Well, I will not provide any guidance specifically. But yes, because of the share of BYOD subs in our total base, I think that it’s going to reflect in our ABPU growth.

But again, at the benefit of not having to subsidize the handset cost.

Right. I’m just wondering what kind of – a reasonable expectation would be going forward.

And then just on the NCIB, I think you guys have maximized it, so are there plans to renew it?

Well, we’re – we can’t do anything as – until August. And we’ll be considering renewing it at that point.

But right now, we’re gonna take the time, and – but we’ve been happy with that in the past, and depending on how the stock performs, this is probably something that will continue to make sense for us. But we’ll see in August.

Okay. And then, can you just give us an updated CapEx number you expect for the year, including spending of intangibles?

The guidance that we’ve provided is...

725.

725 to 775 or 800, I believe.

Yes.

That is the guidance that we’ve provided, and we are on track.

Okay, guys. Thank you.

Thank you, David. Next question.

Next and last, I think. I’m not even sure that there is one more.

Is it?

Yes, there should be one more.

Hi, thanks for taking the question. Just some quick ones.

The issue that you’re experiencing with Fizz on the startup, is that something that is just with the wireless Fizz launch? Or is that something that is also going to affect the broadband?

It’s only wireless. It’s only wireless.

With respect to the core network, it’s only wireless.

Okay. And maybe if you could just give us some idea of your plans to deploy the 600 megahertz spectrum, so on the timeline and when you think you can get it lit up?

And also just, kind of, following on the change on not giving us an indication about the wireless EBITDA growth year-over-year, what would you point to as kind of the key metric that you kind of are most focused on in judging the wireless business?

Yes. Well, with respect to the 600 megahertz, it’s obviously the low frequency band that has been identified for the 5G.

So it will be very much tied with our deployment of the 5G technology. We are in action, obviously, with the 5G technology we’ve spoken about, and we had an announcement in fact, I believe yesterday morning, with respect to our open-air lab where we are testing 5G technology when we’ve put out there an antenna.

And it’s a real test in real applications with real people and real businesses and whatnot. So we’re already in action, but the deployment, we are starting – we are currently doing the LTE Advanced, and the next phase will be 5G.

So I don’t expect that it’s going to be for a while. I certainly see, before deploying the 600 megahertz, maybe a year, maybe two years, because it’s really at the 5G.

With respect to the – where we – to build the model, what’s most important. In fact, it’s not that difficult to build a wireless model.

The revenues is your revenues assumption, ARPU and sub adds. So that, so that’s quite easy, so obviously related to assumptions, but still.

And then with respect to the gross margin. In wireless services, the gross margin excluding subsidies is usually about 75% to 80%, then the other variable is really subsidies, and it’s related to how many – what is the proportion of – and that’s an assumption as well – of BYOD subs versus subsidized subscribers.

And then it’s the operating expenses, and the operating expenses is essentially mostly fixed, not completely. It’s more like a step function, but from quarter to another, I would say it’s mostly fixed.

So in order to build a model, that should be quite...

Okay. Thank you all.

So again, always happy to talk with you and release our results. And we’ll talk to you at the next quarter.

Thank you and good evening.