Aug 8, 2013
Executives
Thane Fotopoulos George Alexander Cope - Chief Executive Officer, President, Director, Chief Executive Officer of Bell Canada, President of Bell Canada and Director of Bell Canada Siim A. Vanaselja - Chief Financial Officer, Executive Vice President, Chief Financial Officer of Bell Canada and Executive Vice President of Bell Canada
Analysts
Gregory W. MacDonald - Macquarie Research Richard H.
Prentiss - Raymond James & Associates, Inc., Research Division Jeffrey Fan - Scotiabank Global Banking and Markets, Research Division Dvaipayan Ghose - Canaccord Genuity, Research Division Simon Flannery - Morgan Stanley, Research Division Glen Campbell - BofA Merrill Lynch, Research Division Maher Yaghi - Desjardins Securities Inc., Research Division Tim Casey - BMO Capital Markets Canada Drew McReynolds - RBC Capital Markets, LLC, Research Division
Operator
Good morning, ladies and gentlemen. Welcome to BCE's Second Quarter 2013 Results Conference Call.
I would now like to turn the meeting over to Mr. Thane Fotopoulos.
Please go ahead, sir.
Thane Fotopoulos
Thank you, Audrey. And good morning to everybody on the call and the webcast.
With me here today is Bell's President and CEO, George Cope; as well as our CFO, Siim Vanaselja. We released our second quarter results earlier this morning.
All the usual information, including the news release and the slide presentation for this call, are available on BCE's corporate website. Following a review of the presentation by George and Siim, we'll move on to Q&A and take your questions.
However, before we begin, I want to remind you that today's presentation remarks by both George and Siim will contain forward-looking statements that represent our expectations as of today and, accordingly, are subject to change. We do not undertake any obligation to update any forward-looking statement, except as may be required by Canadian securities laws.
A number of assumptions were made by us in preparing these forward-looking statements, which are subject to risk. Results may differ materially.
Details on these risks and assumptions are in our filings with the Canadian Securities Commission and with the SEC, which are also all available on our website. So with that out of the way, I'll turn it over to George.
George Alexander Cope
Great. Thank you.
Good morning, everyone. Thank you for joining us this morning.
Let me just start by saying that I'm very pleased with our second quarter results. The strong Wireless service revenue growth and EBITDA growth, supported through the healthy postpaid metrics that we're reporting this morning, drove a strong quarter for the company.
As well, we saw an acceleration in our Fibe TV net additions, providing some improvement in our Wireline operating trends. In a tough environment, we saw Bell Media report this morning some strong financial results in a tough advertising market.
Overall, our demand and pricing strategies, combined with our cost discipline, continues to support a steady growth of EBITDA and, importantly, stable Bell EBITDA margins of around 39%. Also strategically, after obviously a lengthy process, we're successful in the completion of the Astral Media acquisition on July 5.
Overall, during the quarter, we advanced all of our key 6 strategic imperatives forward in Q2. Turning to Slide 5.
From the Wireless perspective, all of the metrics moving in the right direction, particularly postpaid churn ticking down ARPU growth as we see customers migrate more and more to LTE devices and data usage; tight controls in our retention spending, driving a strong quarter of 96,000 postpaid net adds; and overall, as I mentioned, strong Wireless growth supported through 21% Wireless data revenue growth. In terms of the Wireline business, we had one of our stronger quarters from Wireline data growth perspective, driven by 3 areas of the business, most importantly Fibe TV with over 50,000 net additions in Q2 supporting growth of data revenue, combined with continued to see some steady improvement in our Internet results particularly as we grow the IPTV footprint where we saw 12,000 net adds in the footprint of IPTV and clearly, therefore, negative adds outside the footprint.
The solution of that continues to be the expansion of our IPTV footprint, which will extend into this year and continue into next year. And also, for the first time in quite a period, we saw a stronger result from our Bell Business Markets area.
IP connectivity growth, up 6.4% year-over-year. So overall, actually quite pleased from the Wireline perspective in terms of our data revenue.
As well turning to the next page. We did see an improvement in losses from the NAS perspective, both on the consumer side and on the business side.
And that reduction in our losses year-over-year from a percentage term allowed us to see a slight improvement in the rate of decline on revenue. So overall, better results on NAS, and that again being driven from the pull-through of our strong IPTV net additions.
The media business, I think, had a good quarter in, as we mentioned, a tough advertising market. Overall, the support of our subscriber revenue growth from our specialty TV business and BDU agreements that we've entered into, combined with the strong NHL end of the season with the playoffs, allowed us to grow in the quarter.
Most importantly, though, and the highlight of the quarter, of course, is the completion of our strategic acquisition of Astral, giving us a strong position in the French language market. As to remind everyone, we do retain about 77% of Astral's EBITDA and we'll be divesting other assets.
And importantly, from a mix perspective, now 31% of our media revenue on the TV side would be non-advertising or subscriber risk -- subscriber revenue, which obviously de-risks our revenue stream. Overall, the integration has begun after July 5.
And at this point, we're extremely excited about bringing the 2 teams together and executing in the marketplace on the growth strategy we've since successfully executed at Bell Media for the last 3 years. Finally, just turning to Slide 9.
Again, our revenue mix continues to improve. We now have 83% of our revenue from gross services.
And you can see the growth services revenue in the quarter, up 4.3% year-over-year or $148 million. And also just as important, as we move -- migrate our revenue mix in the quarter, now 8% of our revenue is coming from consumer Wireline voice.
And of course, that decline we anticipate will continue, but overall, therefore, our mix of revenue growth continues to improve. The growth portfolios are growing strongly to offset that cyclical decline we continue to see on Wireline consumer.
And with that, let me turn it over to Siim for some comments on the financials.
Siim A. Vanaselja
Thanks, George. And good morning to everyone on the call.
Thanks for joining us today. I'll begin with our second quarter consolidated financial results on Slide 11.
Our financial performance was solid across the board this quarter, all on track with our guidance. Total Bell revenue grew 1.9%.
That was led by top line performance at Bell Wireless and Bell Media and an improving Wireline services mix profile. Consolidated Bell EBITDA increased 1.5% this quarter.
And I'd note that, in the second quarter of 2012, our EBITDA benefited from favorable onetime adjustments totaling about $25 million, which were related to CRTC Part II fees and the Local Programming Improvement Fund fees that we pay. So those 2 adjustments curtailed EBITDA growth on a year-over-year basis this quarter.
Bell's EBITDA margin remained stable year-over-year at 39.4%, reflecting the flow-through of higher Wireless ARPU, controlled subscriber acquisition and retention spending and the increasing scale of Fibe TV, as well as discipline in our bundled promotion pricing. BCE's adjusted EPS for the second quarter was $0.77 per share, and that compares to $0.97 last year.
Earnings decreased year-over-year due to 2 factors. First was a higher level of favorable tax resolutions in the second quarter of 2012.
And then secondly, mark-to-market losses on equity derivative contracts related to our share-based compensation plans impacted our EPS. And that mark-to-market losses resulted as a result of the decrease in BCE's share price in the second quarter.
Lastly, free cash flow for the quarter was $903 million. That's up 12% year-over-year and a strong result reflecting higher EBITDA and lower year-over-year capital expenditures.
I would say that our CapEx outlook is for the pace of spending to accelerate in the second half of the year, again consistent with our guidance for the full year 2013. So let me now turn to the highlights for each of our operating segments, beginning with Wireless, the Wireless segment on Slide 12.
Service revenues increased 6.1%, driven by 2.7% higher ARPU. That is now 14 consecutive quarters of year-over-year growth in ARPU.
We continued to grow our mix of postpaid subscribers in higher-ARPU geographies and customer segments and increase our smartphone penetration. Wireless data revenue growth of 21% in the quarter continued to provide the solid service revenue results.
Wireless EBITDA grew 8.9%, yielding a revenue flow-through to EBITDA of 66% and a 1.3 percentage point increase in service margins to 45.9%. This was our highest margin in 4 years and a good reflection on our emphasis on profitable postpaid subscriber growth.
Wireless EBITDA, less CapEx, provided a strong contribution to Bell's overall free cash flow, increasing 22.7% year-over-year. So overall, I'd say, a very satisfactory quarter for Bell Wireless.
Turning to the Wireline segment on Slide 13. The rate of Wireline revenue decline improved meaningfully in the quarter to 0.9% as growth in Fibe TV and Fibe Internet drove the considerable year-over-year increase of 6.2% in residential data service revenues.
We saw a slowing decline in voice revenues, which is indicative of fewer NAS line losses compared to last year. In fact, through the first half of the year, we've seen modest positive overall revenue growth in our residential Wireline unit.
Our business market unit this quarter generated higher IP connectivity revenues, which grew 6.4% year-over-year, and data product sales to large enterprise customers also increased. We continued to successfully evolve the mix of Wireline service revenues toward our growth drivers more and more, and that is benefiting our EBITDA profile.
We maintained Bell's Wireline EBITDA margin on plan at 39.1%. And while Wireline EBITDA declined 2.9%, 1 percentage point of that EBITDA decline can be attributed to the benefit I had mentioned that we realized in the second quarter of 2012 from an adjustment to Part II broadcast license fees payable to the CRTC.
Apart from that impact, this was the best Wireline EBITDA result in about 2 years. And we expect our Wireline results to continue to show improvement in the second half of the year.
So moving to Slide 14. Bell Media's revenues grew 4.7% year-over-year in the second quarter.
Subscriber revenues increased 7.9% over last year, driven by step-ups in specialty TV rates. And while advertising demand across the industry continued to be impacted by declining audience levels and reduced spending, Bell Media's overall ad revenues increased 0.8% year-over-year, reflecting the strength of CTV's conventional TV programming lineup and higher viewership levels, particularly for TSN and RDS.
Ad revenue growth was supported by the NHL's condensed playoff schedule, which extended later into the spring, and greater playoffs viewership given the number of Canadian teams that advanced to post-season play. Bell Media's EBITDA was 3.3% higher year-over-year.
As I referenced earlier, EBITDA in the quarter -- in the second quarter of 2012, I should say, benefited from accrual adjustments to CRTC Part IIs -- Part II fees and the Local Programming Improvement Fund. Overall, Bell Media continues to perform very well.
And with the Astral acquisition completed, Bell's growth mix profile will be further enhanced. With the financial synergies we are targeting, we expect Astral to be fully accretive to earnings and free cash flow beginning in 2014.
On Slide 15, we've provided the key components of adjusted EPS, which was $0.77 per share for the quarter. Tax adjustments contributed $0.05 of EPS this quarter compared to $0.15 per share in the second quarter of 2012.
There is no change to our outlook for tax adjustments of $0.07 per share for the full 2013 year, and we continue to work within a 26% effective tax rate. Mark-to-market losses on equity derivative contracts totaled $0.07 per share this quarter, and that compares to a $0.03 gain for the second quarter last year.
Before tax adjustments and derivative losses, adjusted EPS in the second quarter was stable year-over-year, with EBITDA growth offset by increased interest expense, reflecting the increased long-term debt we arranged ahead of the Astral acquisition closing. Our free cash flow summary is on Slide 16.
Cash generation of $903 million in the quarter was 12% higher year-over-year. Our working capital position this quarter reflected higher inventory levels from the introduction of several new wireless handsets, including the BlackBerry Q10 and Samsung GALAXY S4.
We ended the quarter with over $2.2 billion of cash on the balance sheet, which included the proceeds from our $1 billion public debt offering of 7-year Series M-27 debentures, which we issued in June, and that issue has an attractive after-tax coupon of 2.4%. This cash, together with short-term borrowings which will be repaid from Astral asset divestiture proceeds, was used to fully finance the closing of Astral shortly after the end of the quarter.
With the Astral closing, our leverage ratio is now at 2.4x EBITDA. And I want to say that, that ratio should decline back to about 2x EBITDA over the next 24 months as we generate growth in EBITDA and apply cash flow generation towards debt reduction.
Finally, as you may have seen, we recently announced plans to redeem early Bell's Series M-20 debentures in the amount of $1 billion, and that is scheduled for August 9. The redemption will be funded with short-term borrowings and then refinanced with longer-term debt at an appropriate time.
Looking ahead, the financial performance of all our operating segments is on track very well to deliver the consolidated guidance targets that we provided back in February. With the Astral acquisition completed, we will begin to include Astral's operating results in the third quarter within our Bell Media segment.
And with that, we're revising our 2013 financial guidance for both revenues and EBITDA. With the inclusion of Astral for the second half of the year, we are increasing Bell's consolidated revenue guidance to the 2% to 4% growth range.
Our EBITDA guidance has increased to the 3% to 5% growth range. We are maintaining our adjusted EPS guidance for 2013 at $2.97 per share to $3.03 per share.
Astral, as I said, will be accretive, but it will be modestly accretive to consolidated earnings in the second half of the year given that Astral will not be integrated onto Bell's IP, financial and HR systems and all of our governance policies aligned until the beginning of 2014. So we don't expect to benefit significantly from any operating synergies until that time.
As well, with the equity derivative losses we've absorbed in earnings this quarter, which I believe is attributable largely to market concerns and uncertainty over Verizon's possible entry into the Canadian wireless marketplace, we're maintaining our adjusted EPS guidance at the current range, and that continues to be appropriate. Our free cash flow guidance also remains unchanged for the 2013 year at $2.55 billion to $2.65 billion for year-over-year growth of 5% to 9%.
We expect higher cash severance and other Astral-related acquisition costs to be incurred in the second half of this year. As well, there is some seasonality to Astral's working capital.
And therefore, we don't see any meaningful free cash flow accretion from Astral, again, beginning until 2014, and we expect Astral to be fully accretive in that year. Astral operates at a lower level of capital intensity compared to Bell.
Given the scale difference, however, our capital intensity guidance of 16% to 17% for revenues, again, remains appropriate. And lastly, for your reference, on Slide 18, we've provided an updated summary of all of our key financial assumptions that underpin our 2013 guidance targets.
And with that, let me turn the call back to George.
George Alexander Cope
Great. Thanks, Siim.
I'd just like to make a few comments, before we open up to questions, on the ongoing wireless issue in Canada around the upcoming auctions. We have been very public on this, and I want to make a few comments this morning.
If we turn to Page 20. I want to make sure investors clearly understand BCE's position on this.
First of all, our opening position continues to be we are open to competition, of course, in the market. Any carrier who chooses to come in to Canada, we welcome them from a competitive perspective and look forward to competing with them.
However, we absolutely believe that it should be done on a level playing field. There is no justification whatsoever for a company -- as has been reported, Verizon's interest in Canada, a company of the size of Verizon having any type of advantages over Canadian incumbents.
And in particular, we've asked its 3 loopholes be closed in the regulatory arena that were put in place for the sole purpose of small start-ups and never intended for companies with the scale of Verizon. It's very clear that Verizon does not need government handouts.
It is 4x the size of Bell, TELUS and Rogers combined. And also, Canadian companies have not been granted these same 3 loopholes for access into the United States.
Our solution is quite simple and quite clear, on Page 21. These loopholes should be closed before September 17, the auction deposit deadline.
And we're again simply asking that Canadian companies have the same level playing field and the same opportunities such that Verizon has no advantage in entering the market. So we have suggested, one, that all wireless carriers should be able to bid for the same amount of spectrum.
So if Verizon can bid for 2 prime blocks of spectrum, so should we be able to bid for 2 prime blocks of spectrum. We believe that Verizon, with their ability to enter the market, or other global carriers and their access to capital, they certainly don't need access to our wireless networks.
Their capital budget is 14x the size of BCE's. So accessing our product, being our network, we believe, is unacceptable and should be changed.
And if they plan to enter the market to compete with us, they should build their own networks. And finally, the third loophole.
If Canadian companies are for sale, Canadian companies should be able to participate in that process just as it's being allowed for American companies to participate in that process. So again, in all 3 cases, all we're asking for is a level playing field.
And we will continue to pursue this very aggressively because we believe it is right for our shareholders; right for our customers; profoundly unfair to the Canadian marketplace; and quite frankly, a very reasonable request to ask for a level playing field. So that's my comments.
And with that, we'll open it up for your questions.
Thane Fotopoulos
[Operator Instructions] Audrey, we're ready to start the Q&A.
Operator
[Operator Instructions] The first question is from Greg MacDonald from Macquarie Canada.
Gregory W. MacDonald - Macquarie Research
I wanted to ask a question on ARPU trends. Very nice sub -- postpaid sub numbers in the quarter.
ARPU's a little light. So I'm trying to figure out whether there are changes in the trends going on vis-à-vis the revenue growth profile in the mix.
A little light on ARPU relative to consensus numbers, relative to what I estimated. Much of that in the data segment is -- and we've heard a lot about the competitive dynamic recently.
In the most recent quarter, we heard a lot about that in Québec, just to kind of profile one of the geographic segments. George, can you talk a little bit about subscriber mix on the gross adds?
Is this a function of industry maturity where the subs coming in are just naturally lower-ARPU subs? Is this more a function of the competitive dynamic where competition for the high-end sub is getting higher?
What's going on now? And is it geographic -- segmented, geographic focus, or is it kind of happening right across the country?
George Alexander Cope
Yes. I think, on the ARPU, we're obviously pleased that ARPU continues to improve.
We've not completely but very close to closing the gap with our competitors from where we were 6 years ago. That continues to be the strategy.
ARPU is increasing not because of increases in price in the marketplace but that customers are using the products more, particularly those migrating to LTE. And then for the street, in terms of the increase in ARPU relative to where the street may have been, I absolutely would concur its competitive dynamic.
We saw extremely aggressive pricing in the quarter, particularly on what are referred to, I think, as flanker brands or discount brands from one of our particular competitors, and we saw that in revenue growth, so that always in terms of what other competitors have reported. And so we're comfortable with the growth we had in the quarter, but there absolutely was an impact in the competitive marketplace.
Gregory W. MacDonald - Macquarie Research
And I guess, is that -- is it based on the industry maturity? And what you saw from that one competitor, being the most mature in the market, can we now conclude that the competitive dynamic is here to stay?
Or do you think there's an...
George Alexander Cope
Well, I think our -- I think the competitive dynamic is probably as intense as ever. What I would say, though, I think, is our strategy has been to close the gap with our 2 main competitors.
Where we were $13 lower 6 years ago, I think we've got it down into the range of $3 to $4. And we want to get that gap closed.
From an investor perspective and given the uses we're seeing from customers, we think, over time, that should include a steady -- still steady increase in blended ARPU, and that's what we're targeting to have happen.
Operator
Our next question is from Ric Prentiss from Raymond James.
Richard H. Prentiss - Raymond James & Associates, Inc., Research Division
Maybe a follow-up on that. You mentioned increasing usage.
What are you seeing as far as increased usage on 4G versus 3G? And when would you maybe need to add some capacity to the LTE network, not just coverage?
George Alexander Cope
Well, we're adding capacity now all the time to our LTE network. And I don't have the numbers, it's something that Siim would be happy to report.
We don't have it top of head, but there's no doubt we're seeing in acceleration, frankly, a significant acceleration, in usage from those who moved from HSPA+ to LTE. And we now have 73% of the country covered.
And of course, not to digress again back on the regulatory side, but our goal, of course, is to cover the rest of the country with LTE, which of course won't happen if a new entry comes in leveraging our network. So we'll focus on that.
And we are seeing expansion in usage, but Thane's happy to share that with you afterwards. We'll just go look up the data.
Richard H. Prentiss - Raymond James & Associates, Inc., Research Division
And any interest in voice over LTE as far as when that might become a priority?
George Alexander Cope
No announcement on that this morning. Happy to come back and address that.
Operator
Our next question is from Jeff Fan from Scotiabank.
Jeffrey Fan - Scotiabank Global Banking and Markets, Research Division
I want to go back to the regulatory issue here. Since all the lobbying has started, the campaigns have started, with the new minister have making statement, it seems to suggest that there is going to be no changes to the auction rules.
So I guess my question is to George, whether you're a bit concerned that this is falling on deaf ears and whether there are any other tactics that you can think of that might change their mind. And then the second part to that question is, as you guys have pointed out, Verizon's position in the U.S.
is obviously very different from what they're potentially maybe doing different here in Canada, i.e., they're asking for no set aside in caps in the U.S. while they may be taking advantage of preferential rules here in Canada.
There -- so there seems to be some inconsistency. Wondering if there's anything worthwhile there to -- that you can raise perhaps in the U.S., to the regulator, on that kind of inconsistency that's being brought on by Verizon.
George Alexander Cope
Yes, I mean, what I would say is this: we have -- the labor groups in the country have supported the position we're taking. The business groups in the country have supported the position that we have taken.
The academic groups have supported the position that we are taking. I believe over 90% of Canadian's editorial boards have supported the position that we're taking because it is actually very straightforward.
The position is we want a level playing field. So I have -- being born and raised in Canada, I continue to be optimistic that a fair solution is the right solution, and we'll continue to push for that.
That final decision won't rest with BCE, it'll rest with our government of the day. And I am hopeful they will see the inequity, the unfairness to our shareholders, customers and Canadians in this policy, and we'll continue to pursue that.
We will use every avenue we can in a professional way to pursue it. We think Verizon is a world-class company.
And obviously, if there's inconsistencies in their position we will bring those to the attention of the right regulatory bodies.
Operator
Your next question is from Dvai Ghose from Canaccord Genuities.
Dvaipayan Ghose - Canaccord Genuity, Research Division
George, I just want to follow up on the pricing question. As you correctly pointed out, Rogers is obviously very aggressive in the first half and regained market share but with a slight -- given some ARPU pressure as a result.
And it seems to me that, since June, they have been relatively conservative. Their new pricing seems to be pretty similar to yours and TELUS'.
I'm wondering if that's a fair assessment. And also, on the Wireline side, I'm wondering if you could give us an update as to both Rogers as well as Vidéotron pricing, as your primary competitors.
George Alexander Cope
Sure. Well, on the Wireless side, I mean, the Code of Conduct, the Wireless Code of Conduct that's been -- was announced by the CRTC, which shortens the life of contracts that customers can choose, of course, means that the subsidy has to be covered over a shorter period of time.
And as a result, we've seen some pricing changes, we believe, in the marketplace, in the recurring revenue side, and we've seen that across the board in the marketplace. So it -- because it won't all flow through to just the handset changing part of it will be through service revenues.
So there has been some changes in the pricing environment at the beginning of the quarter. And of course, quarters change.
The beginning of the quarters, Dvai, are always quite different than the end of quarters, but we'll see how it pursues. It certainly was a positive, right direction.
In terms of on the Wireline side, we continue, as I said, Fibe TV, we had an excellent quarter. It's building from us from a momentum perspective.
We have seen a little bit of pricing strength in the marketplace on the consumer side from our 2 competitors you just named. We view that as positive because, clearly, we are pushing very hard to try to get our Wireline business on a positive revenue trajectory.
And of course, that's the scale issue we have relative to other players, particularly our size on the Wireline traditionally -- traditional NAS business. So we're feeling -- quite honestly, I'm probably feeling more positive on our Wireline position than I felt in a number of years in terms of not just doing the growth through a cost area there, but also we're now starting to see some underlying strength in revenue on the Wireline side.
And then I've said particularly for us, on the business side, it was one of our better quarters in some time.
Operator
Our next question is from Simon Flannery from Morgan Stanley.
Simon Flannery - Morgan Stanley, Research Division
Just following up on that last comment, George. The strength of the business markets, do you think that's something that we've sort of turned a corner here?
Is it macro? Is it sort of that your legacy products are small enough, the growth products are big enough that we've sort of turned the corner here from that perspective?
And on the consumer side, talk about the economics of Fibe TV. We hear a lot of content and cost pressure out of the U.S.
carriers. I don't think you have the same things, but how is the profitability of Fibe TV looking?
George Alexander Cope
Yes, okay. So on the B2B side, you are right.
The last comment, for sure, the percent of our basis on legacy continues to decline. And so that's helping us on the B2B side.
I think we moved some market share in the quarter as well relative to some instability in one of the sales of one of the competitors of ours in that space. I think that's helped us.
We also, over the last 24 months, have had some significant leadership changes in that particular unit in our company, and we think we're really beginning to see the benefits of that leadership team as well. And then on Fibe TV, the economics for us: there's no doubt there are content and cost pressures because, even for Bell Media, their content that they are acquiring in the U.S.
continues to go up in cost, particularly also in the area of sports. And their ability to pass those costs through to us as a customer and other BDUs continues to obviously put pressures on all BDUs, including our TV business as well.
But I would say, so the benefit we've had is consolidating it with our satellite TV business. And with the scale we have, obviously, we make sure that our BDU agreements recognize the scale that our Bell TV business is relative to some of the other providers in the marketplace.
And more importantly than anything, 85% of the time, when people purchase IPTV, they're taking a triple from us. And of course, 100% of the time, we're getting Internet and TV.
And that's where we're really seeing the strong ARPU growth. And as Siim talked about, 6%-plus growth in our data side on consumers, a very strong quarter for a company our size.
Operator
Our next question is from Glen Campbell from Bank of America.
Glen Campbell - BofA Merrill Lynch, Research Division
A quick one on your TV ARPU. It's very strong.
It remains to do -- to be a real driver. Do you expect to see, going forward, the potential for ARPU growth in TV and, I think, particularly, your TV out of region?
And then I had a follow-up on Astral. If you could you give us a sense of how much depreciation might step up once it's integrated and what your current view is on synergies.
George Alexander Cope
Yes, yes. So on Fibe TV, we continue to have an ARPU that's north of $60.
But Glen, one of the things -- it is our base that's on promotion is still pretty significant because of the growth you're seeing quarter over quarter. So percent of base on promotion is pretty high in that product portfolio, and over time, that should come down, just as the math, denominator-versus-numerator math, starts to take over.
And that will flow itself out and, I think, help us as we go into 2014. So if we see ARPU increases on Fibe TV, it won't be because of price increases, it will be more because of people moving off of things whether 6-month promotions or 90-day promotions where they get discounts.
On the depreciation side, let me turn it over to Siim.
Siim A. Vanaselja
So Astral, we anticipate, will add about $50 million of depreciation in the second half of the year, but that is going to be offset by lower depreciation and amortization expense at val [ph] that just comes from closing a number of capital projects later in the year than was originally contemplated in our plan. So overall, our guidance for depreciation and amortization will be unchanged.
And then in terms of synergies for Astral, as I said, I think we really don't expect Astral to be fully integrated into Bell Media until the end of the year when we have an opportunity to have all of their systems onto our platforms and we get through the restructuring plans that we have in place. So the significant accretion on both EPS and free cash flow will come in 2014.
It is material, and I prefer to wait until we provide full year 2014 guidance, which we will do early in 2014.
Glen Campbell - BofA Merrill Lynch, Research Division
Just to clarify on the TV, George. Is your comment about price increases on the TV platform, I think that was with reference to Fibe, if we think about Bell TV outside footprint on the satellite platform, would that comment also hold relatively flat pricing going forward?
George Alexander Cope
Yes, I mean, that's a competitive dynamic that will drive that, Glen, as opposed to where we will see that the most significant ARPU increases will be on Fibe TV because, obviously, when we're pulling a triple into service, we put our discount on the TV side, just as our competitor puts it on the phone side. But on the other business, I think it would be relatively stable, subject to what's happening from a competitor perspective.
Operator
Our next question is from Maher Yaghi from Desjardins.
Maher Yaghi - Desjardins Securities Inc., Research Division
George, I wanted to ask you about IPTV. I mean, it seems it's starting to really take hold and improving your Wireline results.
I'm looking at revenue grow -- revenue declining by a 0.9% in 2Q. That was down 3.7% and exiting 2002 -- 2012.
When you look forward, when can we think about that trajectory becoming positive? Do you have a time frame that you can share with us about that -- when that might occur?
And also when you're looking at it from a long-term perspective, are you thinking about maybe expanding your IPTV coverage higher than what you had initially expected to have and since it's taking hold and customers are appreciating the product?
George Alexander Cope
Yes, so let me start with the back half. I think we are really pleased with the growth we're seeing in Fibe TV.
We're also seeing the pull-through. And we're even seeing the benefit on the NAS side.
So in 2014, we will talk about our future capital program for IPTV, but if there was a direction where we're heading, it's the one you're talking to, which is accelerating that footprint faster and into more footprint because the results are really quite compelling. All that said, always within our CapEx envelope of the 16% to 17%.
So no one on the call should be concerned we're going to announce a knee in the curve of CapEx to do that. And we'll keep it within the range that we're talking about.
Certainly, the dollars will be allocated to there. And what was the first part of the question?
Sorry.
Maher Yaghi - Desjardins Securities Inc., Research Division
Yes, just in terms of revenue trajectory. Do you -- when can we see or might anticipate some positive growth on the Wireline revenue?
Is that a 2014 time frame?
Siim A. Vanaselja
Yes, yes, where -- when you look at the Wireline unit through the first half of 2013, Maher, it's actually just modestly positive. And we continue to see that trend continuing through the second part of the year.
Quarter-by-quarter, EBITDA has continued to improve. And our objective is to get that Wireline unit to ultimately positive EBITDA growth as well.
That's the residential piece.
George Alexander Cope
That's the residential, then, yes. We'll just make sure we're clear, that's the residential that was positive.
You're -- and you're just on the overall number. We don't want to provide guidance on that because it's so close to us now being positive revenue.
And the difference for us between one up and one down, people will know, given our size and scale, how tricky that is to call. But we are definitely on the cusp of that important piece for us.
And what's really, I think, most significant for us is that we've been able to do this while maintaining EBITDA margins on Wireline that we know are best in class in North America. And that's -- the trick here is to pull both off, and that's what we're trying to do.
Maher Yaghi - Desjardins Securities Inc., Research Division
Yes, that's just my second question, on the margin on the Wireline. As your IPTV now is starting to really ramp up, are you -- how confident are you that you can keep that margin?
Because we saw it in your competitors in Western Canada, that margin started to decline as they grew their IPTV footprint and customer base. Do you -- are you confident you can maintain that margin in the next year?
George Alexander Cope
Well, there's different mixes to the business. Our competitor has such as different mix out west and they certainly don't need any of -- their executions, they -- unquestionable.
So there's no comment around their structure. Our -- as you look at the structure of our asset base, the scale of our TV business, now well over 2.2 million, 2.3 million subscribers, is -- we are well into a positive EBITDA situation on our TV business today.
And I've always said that's different than even our U.S. counterparts as well.
We started with no TV. I think that's one of the reasons our margins are probably a little better.
Secondly, our position in the business market side is, I think, quite unique in North America. And as much that business isn't growing, it's for us a very sticky business because of the relationships we've worked on for many, many years to establish.
And so I think that helps us as well. And finally, maybe where we are different than some of our carriers in North America is our focus on cost reduction, as one of our imperatives has continued.
Once again, our cost dropped in the quarter year-over-year, and that's -- that, we think, is helping us hold these margins. But I'm not going to forecast margins going out, but clearly, we are really trying to do both.
And so far, so good.
Operator
Your next question is from Tim Casey from BMO.
Tim Casey - BMO Capital Markets Canada
George, going back to the regulatory issues. Of the 3, I guess, initiatives that you're asking for, for the -- from the government, could you provide a little color there?
Which -- are any of those nonstarters for you guys? Or I guess, how would you prioritize those?
And you have had an opportunity to meet with the new minister. I recognize it was a private meeting, but are you more or less optimistic after a face-to-face that you can get some progress on what you're asking for?
George Alexander Cope
Well, I'm not going to comment, out of respect for the minister on meeting specifically with him, he's new to the portfolio. We've known Minister Moore, and we're optimistic and continue to be as he digests this file.
We are hopeful that he will look at it if only because, other than in that specific area, there's no other group in the country that has studied this that says that a level playing field isn't the way to go. On terms of the 3 particular, I think it's all 3 of the loopholes that are creating this unusual situation.
And so by definition, it's only logical that all 3 should be dealt with. I will tell you that the second loophole, having access to our network, sits with us as a very uncomfortable thing because, quite frankly, our product is our network.
I don't think someone's going to ask our competitors in the retail world, like Canadian Tire, to give a Walmart access to their stores when they entered Canada. I don't think anybody asked Tim Hortons to give Starbucks access to their coffee when they entered into Canada.
So why we would ever have to give access to our network to Verizon when they entered Canada is -- to me, makes no sense. And so if you ask me to rank them, that would be, for sure, the most important one.
And then the other ones are very important. And hard not to say "equally," so to me it's all 3, but number two, to me, is just so wrong in so many ways.
Tim Casey - BMO Capital Markets Canada
And then can you -- what options do you have if the government doesn't move in your favor? What recourse do you have?
George Alexander Cope
Well, I think we'll just -- I won't comment, other than to say we continue between now and September to try to make it very clear that we're open to Verizon being in the marketplace, or other competitors. And I apologize for repeating the same position, but it is the position and we're going to continue to work optimistically that there'll be a right decision here for the country; the interest of Canadian consumers, investors and shareholders.
And then we're just going to continue to work with Minister Moore to try to make that happen. There are no guarantees.
And in the end, people will know on the call that's not a decision that BCE will be left to make on its own.
Operator
Our last question is from Drew McReynolds from RBC Capital Markets.
Drew McReynolds - RBC Capital Markets, LLC, Research Division
Just back to the Wireline data growth, and my apologies if I missed this earlier. But obviously, up 4%, really, really good performance.
Just wondering, George, if there's any kind of particularly one driver in the quarter that did that. And just maybe talk to the sustainability of that level of growth.
And maybe just a quick one, on Wireless TV, obviously, with a good Fibe performance in the quarter, to what extent is that helping that performance there?
George Alexander Cope
Yes. So it is clearly -- it's all 3 on data, Fibe TV being number one.
Secondly, a little better Internet result, not where we need to be but better on the pull-through. And thirdly, I think, most -- my own view, most importantly, in the quarter was a strong result from our B2B side.
And the real question is, can we sustain that particular one? And that's the hard work and that'll only be shown in our results.
So it's led us to see we can execute on that.
Thane Fotopoulos
Wireless TV.
George Alexander Cope
And then finally, on the Wireless TV side, yes, we're really excited about the launch of that product. It's creating a lot of interest for consumers.
I think -- quite frankly, [indiscernible], I think, is one of our better branding positions we've taken in quite a period of time. And what's really significant is the technical results were actually better than our product that's not wireless and our install times are dropping dramatically because it's a wireless install.
Other than one TV, which has to be a main -- the main one, everything else is through wireless. So we're -- it's beating our expectations on every metric.
Thane Fotopoulos
Great. So thank you, again, for your participation this morning.
I will be available throughout the day for any follow-up questions or clarifications from this call. So on that, thanks, and have a great day.
Operator
Thank you. The conference call has now ended.
Please disconnect your lines at this time, and we thank you for your participation.