Quebecor Inc.

Thank you. Good afternoon, everyone, and welcome to this Quebecor conference call.

My name as you just heard is Hugues Simard. I'm the CFO of Quebecor and joining me to discuss our financial and operating results for this first quarter is Karl Péladeau our President and Chief Executive Officer.

Anyone unable to attend the conference call will be able to listen to a recording by telephone or webcast. Access details are available on our website at www.quebecor.com.

The recording will be available until August the 10th of this year. As usual, 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 authority.

Let me now turn the floor to get Karl Péladeau.

Merci, Hugues and good afternoon, everyone. This quarter has been marked we all know unfortunately by the war in Ukraine a sad and difficult situation affecting all Ukrainians that we have been actively working to support the Ukrainian people living in Quebec, first by adding that 24 Hour News Channel, Ukraine 24 to our television programming lineup, and make it accessible to all clients for free.

We also suspended international calling charges for all calls made to Ukraine from Canada for our mobile, residential and business clients. In addition, [indiscernible] have launched a new program to help all Ukrainian arriving in Canada, providing them with a six month all inclusive and 20 gigabytes per month mobile plan at no charge so they can maintain contact with their loved ones both here and abroad.

Finally, we donated 1000 used or refurbished smartphone to the Ukrainian Canadian Congress and its partners so they can give them to family in needs. These initiatives are in addition to real-time continued support for communities in crisis both here in Quebec and abroad.

On the regulatory front, we welcome the Competition Bureau conclusion after rigorous investigation that the proposed Rogers-Shaw merger would substantially prevent or lessen competition in wireless services in Canada. Such competition has already declined and that the best remedy remains true and effective, growing and disruptive competitor will bring down prices for the benefit of the Canadian consumers.

This is completely in line with our position which we have stated publicly on numerous occasions mainly at the best. For us the only way to encourage lasting competition and lower prices for Canadians is by entering that Freedom and Shaw wireless assets end up in the hands of financially viable, long-term wireless operator like Quebecor, we have demonstrated the ability to compete effectively against the big three, win market share and bring down prices.

What we have achieved in Quebec as simply not happened in the other markets in Canada were quoting the Competition Bureau “Competition has already declined. A fact also acknowledged publicly by main competitors CEO who candidly declare a competitive intensity between two potentially merging parties is not quite there as it used to be.

And that's probably benefiting the entire industry.” So clearly, a much quieter market in the rest of the country, quite different from what we are experiencing in Quebec where, as in a tale of two solitudes, a rendering team between Quebec and Canada, the competitive landscape and promotional activity level remains much more intense, an environment in which we try to discipline management of our operational expenses and investments, while offering the best products, unparalleled customer service, and constant innovation.

Another way to foster competition in wireless is obviously through MVNOs which were mandated by the CRTC last year. On that front, we look forward to a framework detailing the terms and conditions of the incumbent MVNO access services.

We expect the CRTC to make a quick ruling on these terms and conditions so that parties can negotiate MVNOs tariff rates, and Canadian can start benefiting from new competitive alternatives. In parallel, trying to expedite things we have approached all three incumbent carriers who initiate commercial discussions, but perhaps not surprisingly, you have either refuse our approaches outright and not engage in various stall tactics designed to delay the start of meaningful negotiations.

So as a preliminary conclusion is important to repeat that we have many alternatives to expand our business beyond our historic footprint of Quebec, where our goal prospects are obviously more limited as compared to 10 years ago. On a related matter, we are pleased with the CRTC decision on determining conditions of seamless roaming issue on April 6, this is a constructive decision that will ultimately reduce the prevalence of trunk call when moving from the regional carrier network to a national carrier network, thereby eliminating an important competitive disadvantage for regional carriers.

Quebecor also welcomes the Tabling of C18 bill by the Minister of Canadian [indiscernible], the outcome of numerous representation made by Quebecor and many other Canadian media organizations and associations. This bill will regulate negotiation between the web giants and local news outlets to ensure fair and equitable compensation for the use of their or our content.

The creation of a payment system is necessary in view of the web giants market dominance. These platforms use the content produced by Canadian news organizations to generate a significant portion of the interaction on their network and should be required to pay a fair price for it.

I will now review our operational results starting with our telecom segment. Videotron is actively pursuing its 5G deployment in the province of Quebec, providing increased speed, expanded connectivity and minimal latency.

And first of all focus on high-density urban areas. We're continuing to expand and are ahead of schedule in terms of operational sites deployed.

Operation high-speed which will deliver high-speed internet to 37,000 households in several municipalities across the province is proceeding well. Despite a tight specialized labor market, we are aiming to accelerate the deployment over the summer months and easier weather conditions.

On the wireless front, we are pursuing our path of increasing profitable growth with 24,500 net adds during the quarter, capturing once again, the largest combined share of growth adds in Quebec with more than 31% of our two brands Videotron and Fizz according to Léger survey. Churn remain stable and wireless EBITDA increased 16% in the quarter.

Consolidated wireless ARPU for the quarter improved by $0.62 or 1.6%. Over the same quarter last year, due to higher plan mix especially for Fizz, lower discount and higher roaming and data usage revenues more than offsetting the diminishing dilutive effect of Fizz.

In wireline internet subscribers growth was 5300 during the quarter and 51,200 year-over-year, continuing its steady growth in the midst of highly promotional environment, and a developing trend of uncompliant Internet connections and usage and larger multiple dwelling units. Internet ARPU decreased by $0.94 or 1.7%.

Over the last year essentially due to the dilutive effect of Fizz, which accounted for 50% more customers in our internet base than last year. Our Helix activation reached 88,500 for the quarter, bringing our total Helix subscriber to over 1.3 million as of March 31, 2022.

A good performance in a shrinking and increasingly competitive TV distribution segment. As we mentioned last quarter, we are continuing to optimize the migration process from illico to Helix, which is proving to be more challenging than initially anticipated, with the addition of significant costs over the last few quarters, namely new platforms, systems, development and integration teams, while realizing growing but still limited benefit to date, from the commissioning of older platform supports contracts and other cost reductions to come.

That being said, key long-term strategic benefits such as self-install, which reads 70% over the last quarter are kicking in and translating into lasting operation cost reductions. With more than 520,000 subscribers across Quebec, Club illico and Vrai, our new video subscription platform that is dedicated to exclusive, unscripted lifestyle documentary and entertainment content continues to invest in the production of local differentiated content from various horizons with the introduction of brand new content offered.

In the first quarter, the two-themed fan favorite series made a comeback to new original series debuted and the production of a new season for two of our most popular show was announced for [indiscernible]. [Indiscernible] is also proud to have launched many international productions including the movie Alain, which was available on our platform soon after its theater release.

Thanks to the impressive numbers of new original productions available every month, plus equal and they are fast becoming the reference for original content in Quebec. As a reminder, Quebecor increased its investment in production and acquisition of content by more than 40% in 2021 compared to the previous year and the better part of those investments was made towards original content.

In our media segment, TVA continues to dominate this market, increasing its consolidated market share by 1.2 market share to 40.6% in the quarter and broadcasting four of the five most watched TV show in Quebec, including Le bonheur Star Académie, which attracted more than 1.5 million viewer each. Activity was also strong in Nelson production facilities and audio services, as well as in general our production and distribution business, which delivered more than 20 films this quarter.

Turning to our financial results and starting with our telecom segment. Videotron generated 345 million in cash flow from operations in the first quarter an increase of 10% over the same quarter last year.

With EBITDA growing 2% year-over-year and EBITDA margin reaching 50.9% compared to 49.3 last year. Revenue decreased slightly by 1.2% in the quarter as compared to last year, mostly due to lower wireline equipment sales from Helix as a migration naturally slows from peak last year.

On the OpEx side, we are starting to see material reduction from the various initiatives implemented over the last year translating into our increasing and industry-leading EBITDA margin. Another clear impact of our cost reduction in this year is 23 million decrease in CapEx this quarter.

We are reducing overhead, simplifying our technological team structure and systematically conducting a much more discipline, rigorous analysis of all development projects to ensure optimized scope and more agile development and thus reduce investment. To be clear, we are continuing to invest just as significantly and sometimes more in our key strategic initiatives such as LTE advanced, 5G rollout, IT system migration, network performance optimization, network extensions and operation high-speed in remote areas.

The net CapEx reduction is the result of our rigorous and agile approach with respect to the numerous other development, growth and maintenance related projects. In our media segment, revenues were up 4% in the quarter as compared to last year, driven by television advertising revenues, production and distribution revenues, as well as small increase film production and audio visual services activity.

In the quarter we continue to invest in a wealth of new shows, original production and exclusive content to maintain our leadership in the face of increased competition from proliferating offerings on multiple platforms. This additional investment of 15 million in differentiated content, translating into growing audience market share is allowing us to continue to increase our share of the advertising spend and position us well for the strategic fall season.

But obviously comes with a direct impact on our EBITDA. I will now let Hugues review our consolidation financial results.

Hugues?

Merci, Pierre Karl. For the first quarter Quebecor's revenues reached $1.1 billion down 0.3% from last year, revenues from our telecom segment was down 1% to $903 million, mainly due to the decrease in the volume of equipment sales related to our wireline telecom services, and more specifically, Helix as Karl mentioned.

Revenues in the media and sports and entertainment segments increased 4% and 9% respectively for the quarter. Quebecor’s EBITDA was down 2% to 442 million in the quarter, mainly due to the $13 million decrease in EBITDA in our media segment explained as we've just said, by the increase in our investments in content production and acquisition for the TVA Group, in order to maintain our leading position in TV market share in Quebec.

Our telecommunication segment posted EBITDA up $9 million, or 2% to $460 million. Quebecor recorded a net income attributable to shareholders of $121 million in the quarter or $0.51 a share compared to a net income of 121 million as well or $0.49 per share reported 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 $129 million or $0.54 per share, compared to an adjusted income of 130 million last year, or $0.52 per share. Telecom CapEx spending was down 23 million as Karl mentioned for the quarter as compared to the last year mainly due to the timing investments and all of the main issues that Karl pointed out.

Our adjusted cash flows from operations increased $9 million in the quarter or 3% to $316 million, once again demonstrating the resilience and strength of our business model as well as our continued operational and financial discipline. Adjusted cash flows from operations for our telecom segment grew $32 million, or 10% to $345 million in the quarter.

As of the end of the quarter, our net debt to EBITDA ratio was 3.18x up from 2.67x reported at the end of the first quarter last year, mainly explained by the 830 million investment for Spectrum acquisition across the country in 2021. Available liquidity of 1.7 billion at the end of the first quarter and our growing free cash flows are obviously more than sufficient to fulfill our commitments and to continue to fuel our growth.

In the quarter we purchased and canceled almost 1 million Class B shares for a total investment of $26 million. Please note that we received on April 27 approval from the TSX to increase the maximum number of Class B shares that can be repurchased under this year's program to 10 million shares.

Since we initiated our normal course issuer bid program 11 years ago, approximately 50.5 million Class B shares have been purchased and cancelled. We thank you for your attention, and we'll now open the lines for your questions.

Yes. Thanks very much.

Couple things for me. First, the ARPU decline in internet, Pierre Karl, you mentioned mark down 1.7%.

If you took the Fizz mix changes out of it, would ARPU be up on just the Videotron brand? And even if it's up, I assume it's down less than the strong result you posted in the first quarter last year?

Is there any color you can give on incremental, promotional intensity versus [indiscernible]? Maybe some of that is things getting back to normal after the pandemic, with retail stores and people moving houses a bit more?

Any commentary on that'd be great.

I'll ask Hugues to give you a little bit more details. Vince, but in the meantime, as I mentioned, no, we should say that competition is still intense in Quebec.

And again, we look forward to have disciplined management by making sure that all our expenses are well positioned, to continue to grow our business and this is what we're looking for. So is this situation will remain, I guess that we're positioning ourselves, to make sure that we'll be able to face and win whatever is the kind of circumstances that are taking place.

Specifically on the APRU decline Vince, even excluding Fizz from the equation. Videotron’s ARPU is -- on the wireline is fairly flat in the quarter a number of issues that at play here, as Karl mentioned, of course.

It is in internet and TV distribution increasingly competitive. So our ability to increase prices is much lower than it used to be.

And also, some discounts on equipment are continuing and that -- in the midst of the transition that we've talked about, between illico and Helix is also weighing in on this. So even without the diluted effect of Fizz we have to be, I think we have to be fair that our ARPU was fairly stable this quarter.

Anything in terms of the timing of rate increases, the different this year versus last year, even if –

No, same timing, it's just taking us a little bit longer to pick it up. And sometimes, some of these increases are countermanded by as I said, the more discounts either on equipment on the service or people moving on to lower packages -- lower priced packages more or less having to align to competition on heightened promotional activity, as I mentioned a little bit earlier.

Okay. And you mentioned the equipment discounts that the equipment revenue was down quite a bit.

Is that just simply that factor you mentioned? Is there any impact on costs?

Is that part of the reason why your cost reduction was so strong because you didn't have to pay for some equipment or is that not right?

No, that's not right. The equipment, yes, the reason for the equipment, I mean, the migrations were slowed down a little bit, as we said.

So obviously, our equipment revenue, don't forget that for Helix, we're on a different model, right, where we sell the boxes and we finance them over 24 months were compared to the traditional rental model, right? So, obviously, this is, it helps on the CapEx side, of course, and that's a significant chunk, I'm sure you might have or some of your colleagues will have questions on CapEx reduction.

Don't forget that a good chunk of the CapEx reduction has to do with that change in model where we -- if we sell the boxes, we still have to -- from a cash flow perspective, it comes back to the same thing, we still have to buy the boxes. But we don't CapEx them anymore.

So that's a chunk of the lower CapEx, but on the other side, it really impacts the margin on wireline.

Two more, hopefully quick ones. One, I assume the significant increase in homes pass is about 520,000 up is just because you multiple dwelling units, you now count each unit as an individual.

Yes. That's exactly.

It's just a different way to calculate to get the real what we believe that there is the real is the true number of homes pass.

And last one for me. I'll leave the wireless stuff to others.

And I'm sure you won't get off the hook on that. But last one from me would just be TVA and the content cost?

Is that a one quarter thing and something to do with timing issues of the pandemic? Or is this more of a structural change because of streaming investments and content inflation, that you're going to be seeing that this type of escalation in content costs every quarter?

I was mentioning Vince, the competition is intense, I would say that it's not only in the telecom side, we should also have that and became stronger. And we will call generalist broadcasting.

So our TVA, again, and the two other main broadcasters being Canada, obviously, then, therefore, always. And the second, thing, Bell media investing much more significantly in their own programming.

So we consider that remaining number one, is of great importance, because we want to continue to have the main shares of advertising revenues. So, this is why we need to make sure that we'll line up as much as good programming as possible.

I would say the benefit that we have of investing more is also that, “We're populating” our other platforms, namely, our [indiscernible] which is also full of content and have the capacity to enhance and promote our telecom services, because it's included or it's piggybacking on Fizz and illico. So again, it's showing all the convergence game plays and connect all but certainly, we were forced to make an effort -- an investment effort for the last quarter.

And we look forward to continue to maintain our position in the future. I think the second the next question is Jerome Dubreuil?

I will take the wireless question for sure. So I understand, you're still interested in acquiring Freedom.

Obviously, a lot of moving parts here and evolving situation too. But I wonder if you can provide color on where you currently are in terms of dialogue on that front if there is one.

And then as a follow up on this, if you can comment broadly, on the profitability targets that you would need to see on that potential investments in order to make a firm bid of that size?

A lot of questions here, Jerome. For all the questions, I guess, for answers, yes, you would probably consider to be not enough.

I’m not sure that you will understand pretty easily that making comments on this specific situation is certainly not in our best interest. I think that, for the last quarter, and we were not hiding anything here, we mentioned that we would be interested to move forward out of our -- the historical power meter of where we've been able to provide them, telecom services.

So the interesting thing, and unfortunately, maybe the only thing that I will be able to say and I would like to emphasize on this because it's of great importance. And it shows also coupled with the fact that, no one should be worried on the fact that we will continue to be highly disciplined and we're going to manage our capital according to what we consider being in one of the market is looking for.

So the interesting thing is, there is many alternatives. So when you've got alternatives, you've got choices, and then you have the capacity to pick the best way to proceed and achieve your objectives.

And unfortunately, this is the kind of situation that we're in front of for the last quarter, and everything goes by, I would say that those conditions are even improving. I mentioned earlier that the recent decision by the CRTC is seamless and over, maybe it looks like anecdotal or technical, but it shows how the regulatory authorities, this is the way that we're reading it is looking to make sure that competition will be stronger in Canada than it used to be before.

Maybe as strong as what the competitive market had been in Quebec for the last 10 years. Obviously, I cannot read in brief, but my belief is this is what public policy is all about, and obviously, we're looking to piggyback on it.

Yes, I see. And then in terms of the operations, on the cable margins front, decent improvement there, you mentioned the self-install, a couple of other reasons.

Do you think we can expect this is a new trend that, that could be sustainable? Thanks.

Yes. I mean it, as we've said, this is an ongoing.

It's not from yesterday that we are working on many, many initiatives to lower our operating costs and improve our cash flows. And that is certainly something that we're starting to see the benefit of both from a cost standpoint, from -- we talked about self-install, I mean the one thing that maybe we should mention as well is call centers, in all of our customer contact centers are increasingly less costly to us because of our new way to operate.

Technology is improving, which makes for a fewer number of calls per year, per customer or per subscriber. We are better organized.

So we have fewer people to give the service. We have teams that are more integrated.

So other than the -- what we've mentioned that we -- and we've owned up to it. We have a bit of a migration issue on the wireline and we're working on this.

And for -- as I've said before for a couple of quarters, it's going to remain a bit of a challenge. But I mean, other than that, our main initiatives are really starting to kick in.

So I would definitely say that this is something that's on for good for the longer-term.

Great. Thank you.

Great. Yes.

Thank you. A couple of questions.

So when I look at the wireless network revenue was up 10%, I'm just wondering what the wireless EBITDA did. Would it be up similar or 10%?

I'm just kind of wondering how the wireless EBITDA did and the wireline EBITDA did in the quarter?

David, we actually gave it to you this time. It was in the --

Already you gave?

Yes, we said 16%. Yes, I know it's a surprise to all of you because we never said it before, but we actually said it, as Karl said a 16% increase in wireless EBITDA.

Thank you. Okay.

I guess I missed that one. So that would probably -- I haven't done the math, but that would probably imply wireline EBITDA is down modestly, right?

Yes. Well, that's the -- yes, that's the counter.

I mean it's math.

David, you should ask question about the free cash flow too, Hugues will be very happy to answering you.

Okay. Could I miss that one and I'm not fast enough to make calculate and calculate the other?

On the -- David, we -- I think we've talked about our issues and our -- the reasons for the more challenging EBITDA performance in wireline. I think we've covered most of the issues there.

But as Karl just pointed out, if you look at cash flow generation, 10% is significant in the quarter. And don't forget that these -- all of these various initiatives that we keep talking about, they're, for the most part, I mean, some are wireless, some are wireline, but for the most part, they're on both sides.

And this is something that allows us not only to lower OpEx, but lower CapEx. So I think it was a pretty good performance in terms of cash flow generating this quarter.

Yes. No, absolutely.

Maybe just back on wireless, I saw the ARPU was up in the quarter.

Yes.

Obviously, if you look at the prior quarters, it was down for many quarters. Is this a trend that you can continue and start to continue growing or up modestly in announcements?

Well, a couple of things. I mean we -- not as much as our competitors, as you know, but some roaming revenues are back.

It's not the most of it, but it's a chunk of it to be sure. And also as we said, we've talked for many, many months or many quarters in the past, the dilutive effect of Fizz, both -- while both ARPUs were growing, Fizz being at a much lower price point, but this quarter, finally, I think we're starting to get over this.

So yes, to answer your question, I believe that some of these levers are in for the long-term, well, let me hope anyway, I mean things can change, but anyway, should be in for the next little one.

Okay, okay, great. Okay, that's it for me.

Thank you.

Thank you, David.

Hi, good afternoon. I just want to circle back on the national wireless rollout as well.

Just curious about how important a bundled offering, including wireline would be as you look at a national wireless rollout?

I'm sorry, Stephanie, I didn't quite get your -- the end of your question. Do you mind restating it?

I'm sorry, it wasn't a --

Sorry, no problem. Yes, I was curious around the importance of a bundled offering in a national wireless rollout that would include wireline?

Yes. I mean we said -- as we said, our potential expansion outside of Quebec is certainly, I mean, we talked about wireless and -- but there are other opportunities and certainly being able to offer a multiservice or a multiproduct approach or a bundled approach as you call it, rightly so would be an advantage and would certainly we believe make the offering stronger.

I mean, that being said, I think there are many ways to skin this cat and certainly many ways to develop our business outside of Quebec. And bundling is certainly an approach that's been very successful for us in Quebec, and that I believe we need to consider on the -- if we do expand outside.

And Stephanie, if I may add, do not forget that the Internet access is regulated in Canada, and the capacity to offer Internet through a TPIA model is existing. So then therefore, all those possibilities brings and I know that some people would say that selling just one wireless product as an offering, we're not going to be successful.

I guess that we can say that took place elsewhere in the world, why Canada would be so different? Certainly, we're not done publicly talk about our marketing strategy, but we would -- just would like to mention that, again, as you say in many ways this -- skin this cat, but there's certainly many other alternatives or proposal or marketing strategy that we can use to make sure that we will be as efficient as possible in this wireline or wireless market outside of Quebec.

Great color. Thank you.

And then Hugues, I'll ask about the CapEx reduction and how you think of CapEx going forward? It looks like the reduction is mainly driven from the Telecom Group?

Yes. So the CapEx reduction, as Karl stated is really -- is the -- I mean it's a result of a number of things, but mostly our various initiatives to be more disciplined in terms of really analyzing in a lot of detail.

The number of projects that we've got ongoing, the scope of each project and the involvement and the need for all of these projects. So -- and I -- when you really get down to it, and it's -- I mean, it's a lot of work.

But once you get down to it, I mean, a lot of times, you find out that you can be more disciplined, a little bit more tight on cost. And we end up doing many projects -- a fewer -- a lower number of projects, but are still focusing on the important ones.

And as we said, clearly, I'm not talking about the big strategic projects on which we're continuing to invest. And as we've said and some of them even more, but I'm talking about in Telecom as in many businesses, I'm sure, there are a lot of growth related or maintenance related or I mean there are many, many projects that are put in front of us.

And now we are a little bit more systematic in terms of making sure that we optimize these things and do these projects at lower cost.

Great. Thanks so much.

Thank you, Stephanie. Next question, please.

Yes. Good afternoon.

Thank you for taking my call. I have questions related to just the acquisition.

It's just at a very high level. Firstly, given the size of that acquisition, do you feel that you need to partner with anybody?

And secondly, in the event you do proceed with the transaction, like how will you structure it? Would you be using Videotron's balance sheet or would you be doing through this through a separate entity, which is ring-fenced and not really linked to Videotron?

And thirdly, just want to get a sense on your discipline with respect to the balance sheet? You mentioned that quite often in this call, but just wanted to see -- just get for news like how important that, that relevant is?

Thank you.

I'll answer your question, but I just want -- because I really get, Ben, -- from what -- are you an analyst?

Yes.

Okay, with whom?

1832.

Oh the -- okay, 18 -- okay, all right. Well, listen, on your couple of questions, I mean, certainly, we haven't gone in as far as determining whether a ring-fenced or any other, I mean that's -- I mean we're not there yet.

I mean it's -- I think it's a bit early in the process to be able to answer that question at this point. And your other question was respective of our balance sheet discipline, but what was your question specifically, sorry?

Well, I just want -- just respect to the balance sheet, you mentioned a lot of times discipline, just want to get a sense of what your approach would be to just with respect to the balance sheet?

What our -- what would be with respect to the balance sheet? I'm sorry, I can't get what that was?

Your thinking like -- so like would you lever the company or like how -- just to like separate --

Okay, you're saying separate, right?

Yes, level, yes?

Okay. Well, one thing I can -- I think that we've said a number of times, Ben, is that we -- if you look at our track record for the past many, many years, we've been very disciplined at bringing down our leverage despite continuing to invest very heavily in our networks, both wireless and wireline.

And taking out the case, you'll remember that over four transactions between 2012 and 2018. So -- and despite stock buybacks and dividend increase and all that.

So I believe that we've -- our track record speaks for itself. And we certainly wouldn't want to put ourselves again in a position of more risk from with respect to the balance sheet.

So we will be -- I think you can bet on our track record as I just said to ensure that we're going to be disciplined about that.

Okay, got it. That's fantastic.

My last question was just regarding partnering. Would you look at partnering with someone in this transaction just given the size of this transaction?

I think it's -- I mean, there -- I don't think at this point, we want to make too many comments. I mean that, you don't know that there is a transaction at this point.

So --

No, I understand that.

Whether we would partner or not, perhaps, but I think it's a bit early to look into that.

Okay. Thank you very much.

Thank you.

Thank you.

Hi, good afternoon. Thanks for taking my questions.

The first question is on sort of the -- on the wireline side and the Internet revenues. I know that competitive conditions are tough, particularly in Quebec.

But based on sort of the disclosure in terms of the subs and the revenues, it looks like you had Internet ARPU dropped about 1.5%, which I haven't seen in a while. How should we look at this trend?

Do you -- should we think of Q1 as sort of the -- perhaps the bottom as far as the year-over-year trends are concerned? But -- or based on sort of the timing of price increases and so forth, can we expect to kind of see a little bit more constructive trend from here on?

No, I mean, a couple of answers to this. I don't -- I think some of the -- some of the dynamics that we are living through in wireline, as we said, we've talked about competition, we've talked about our migration that's ongoing between our legacy systems and our legacy offers and products to our new products and the costs associated with them.

And the -- as you're trying to transition in the midst of a much more competitive environment, where some of our competitors are -- have stepped up their promotional activity and intensity, I think it would be imprudent from us to say that this is just sort of a one-time. I think that being said, we -- this is something that some of our cost issues is something that we will get over.

And is the competitive intensity and the -- going to stay, I mean, who knows? I would be a little prudent.

It's -- we see Internet as becoming, as you know, more and more of a commodity. So it's not abnormal that people get more price sensitive.

And Quebec, as you know, has historically been a very price-conscious market. It's one where we know how to thrive though and how to succeed.

So we're confident that we're going to get on top of this.

Thank you. And then just on back to the margins to kind of maybe wrap that up.

When you think of all those moving pieces sort of the redundant costs you're moving through that transition, that component comes off. And then you talked about the different sort of accounting or the way that you're kind of financing the boxes.

How should we think that the margin trajectory, is it sort of maybe flattish in Q2 as well? And then as some of those costs come in -- costs come out, are you able to maybe drive some expansion in the second half, is that still on the cards?

Thank you.

Yes. I think, Aravinda, I think that's a fair characterization.

I would certainly think it's fair to say that flattish and eventually as we're -- as we get -- as we gain more momentum on the cost side with certainly a growth potential towards the end of the year.

Thank you. I'll pass the line.

Thanks, Aravinda.

Thank you. Next question, please?

Hi, good afternoon. Thanks for taking the question.

I just have one related to wireless. You both mentioned many alternatives in front of you.

And I think you're talking about the MVNO route versus a facility base. Based on your history in Quebec, when we look at over the last 15 years going from MVNO and then going to facility base and showing the success that you've had, isn't facility-base really did the preferred route for you over the long-term?

Thank you, Jeff. As you may know, the conditions of the licenses that was released and for which we participate in the auction from IZ [Phonetic] carries some obligation.

And those obligation is to build the network -- your network at a period of 7 year is this completely built in and will never change. I guess that this is the assumption that we will work is, arrangement could be done in that long period of time.

Certainly, this is something that we will and we should look at is the cost of technology in terms of facility base is moving downward. And our experience as of today is that this is the trend that we're facing.

We were in Barcelona recently at the International Summit at the Mobile World Congress. What we're seeing the Open RAN Technology give us good perspective on making sure that you'll be able to build your network at probably more decent prices than what you've been forced to historically.

That creates a competitive environment from manufacturers to a new business model. We understand that this is not clearly actually completely full frame and fully efficient.

But like any technology, new technology, it's improving what the time goes by. So yes, we've been building our business on the model facility base that gives you flexibility, that gives you, obviously, the profitability.

And there is no reason at this stage, we look forward to change the business model.

Okay, thank you.

Thanks, Jeff.

Is that we have a last question?

Yes, thanks very much. Good afternoon.

Hopefully, three quick ones here for me. Just on the MVNO framework, Pierre Karl, can you just update us, do you have any sense of when you'd expect to kind of get these terms and conditions from the CRTC?

Secondly, maybe for Hugues, on the capital returns that obviously, Quebecor has been quite active on over the last 3, 4, 5 years of dividend growth and buyback, did you kind of get a little more conservative on that in the near-term pending the outcome here on wireless? And then lastly, I know very small part of the business, but the sports and entertainment just with everything normalizing here kind of through the rest of the year hopefully and sustainably going forward.

Just what do you expect in terms of that segment and how to model that going forward?

Good. Just I'm taking note.

Okay. I'll do the first, Hugues will do the second, I'll do the third.

Okay.

We unfortunately don't control the CRTC agenda. We know obviously that we're actively pursuing the different requests.

I don't want to be too technical, but, yes, this is a matter that sometimes when you go in the details, I'm not saying the devils there, but sometimes this is the kind of environment that you'll see. As you kind of easily expecting the incumbents are not running to offer their services.

So every type of possibility to refrain the slowdown will be used to make sure that competition will rise as late as possible. Our understanding is that the CRTC knows this kind of game very well.

Are they accepting it, I don't know, but I think that looking forward to accomplish what the public policy is looking for, which is encouraging competition will bring us some results, I would say probably soon, that will make shortly a year that the decision was proposed. So that therefore, we look forward regarding our regulatory colleagues that are entertaining discussions with CRTC that these are times the work frame should come shortly.

On the stock buybacks, Drew, as you know, this is something that historically we've been -- how would I qualify it may be opportunistic about. And as we believe that our stock is -- continues to be undervalued.

We -- this is certainly something that we'll -- we intend to continue, whether we'll flex it up or down will depend on, I think on many factors. But it certainly is something that we can flex down should our need for capital be needed elsewhere.

But at this point I think it's a bit early to tell you of a specific strategy on that front. In terms of capital returns, I guess the other point would be dividends.

I think we are probably in the right spot for dividends. So that's another thing as well that we'll see as it goes along what our strategy will be.

But we're in the pretty good spot right now and pretty much within the range that we had set for ourselves in terms of payout. So I guess we'll see over the next few months whether some opportunities do materialize or not and whether there's opportunity for us to continue to improve capital returns.

And I would add quickly before going to the third question is that with the level of dividends that we're paying, and as you know, we mentioned that we were looking to have a global -- not a global, but an overall policy as the Board of Directors is establishing it a few quarters ago, buying back shares allow us to refrain paying dividends on the shares being bought. So mathematically, it is profitable.

So this is a question of balance, I mean, we're making improvement in terms of earnings per share and cash wise also. But obviously, you don't want to go to the end of it and leverage your balance sheet too much.

The third question about our sports and entertainment section, I would say that business is starting to come back. We have a few concerts that are taking place right now.

We will continue to do so. Our key minor league hockey that is [Indiscernible] Quebec, in fact, our team help all the Quebec just had a great season, they participate in the playoffs that are taking place right now.

So bit by bit, and you're right to say that this is not a significant part of our EBITDA, but we're looking forward to position ourselves as a profitable operation.

That's great. Thank you.

Thanks, Drew.

I think that we do not have any more questions. So to all of you, we'd like to thank you to participate in this conference call.

And we'll talk to you at our next quarter conference call. Thank you so much.