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

Maher Yaghi - Desjardins Securities Inc., Research Division Gregory W. MacDonald - Macquarie Research Simon Flannery - Morgan Stanley, Research Division Jeffrey Fan - Scotiabank Global Banking and Markets, Research Division Richard Yong Choe - JP Morgan Chase & Co, Research Division Matthew Niknam - Goldman Sachs Group Inc., Research Division Dvaipayan Ghose - Canaccord Genuity, Research Division Glen Campbell - BofA Merrill Lynch, Research Division Phillip Huang - Barclays Capital, Research Division Tim Casey - BMO Capital Markets Canada Robert Goff - Euro Pacific Canada, Inc., Research Division

Thank you, Wayne, and good morning to everyone on the call and webcast. As usual, I'm here today with George Cope, Bell's President and CEO; and Siim Vanaselja, our CFO.

We're pleased to have released our third quarter results earlier this morning. As usual, the information has been sent out to everyone on this call and will be available during the day on our corporate website.

Following a review of the slide presentation by George and Siim, we'll move to Q&A. 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 don't 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 and which are also all available on our website.

So with legal formalities out of the way, I'll turn the call over to George.

Great. Thanks, Thane.

Good morning, everyone. Thank you for joining us.

Let me start by saying how very pleased we are with the quarter's results. Certainly, relative to our largest competitor, we know now we had a very strong quarter.

In terms of Wireless, excellent market share growth, we believe, again relative to early reportings and really strong, quite frankly, Wireless financial results. From the Astral side, we closed the acquisition, integrated it into Bell Media, and we're off to a very positive start there.

From the Wireline perspective, the strong growth that we had in TV and Internet still enabled us to maintain a Wireline margin at approximately 37%. And quite frankly, the highlight of the quarter is, for the first time since 2005, we are positive residential net adds for the Internet and Fibe TV growth offset the reduction in NAS.

Overall, also very pleased that our overall margin was stable year-over-year at 38.4%. And I think in summary, the highlight of the quarter for us would be the acceleration of our growth services revenue, up 5.3% year-over-year.

Turning to Wireless. We had a solid postpaid quarter in light of the beginning implementation of the Wireless Code of Conduct, introduction of the 2-year contract pricing and fair to say, reduced availability of some of the newest smartphones near the end of the quarter.

All of our key metrics are moving in the right direction: Postpaid churn, down year-over-year to 1.2%; our retention spending, down to 9.3%, yet we still saw a reduction in churn; cost of acquisition, pretty much stable year-over-year; and importantly, our continued ARPU growth of narrowing the gap with our competitors in the marketplace, a journey we've been on now for 6 or 7 years. Also pleased that we now have 77% of the country covered with LTE, and I think Canada may be the only country in the world that has 3 wireless carriers covering this amount of geography with the world's leading technology, which is LTE today in the wireless industry.

Turning to our TV and Internet subscriber growth. It was clearly our best-ever quarter for net adds for Fibe TV with 73,000 adds in the quarter.

Importantly, if you look at that net adds over our average footprint in the quarter, we had penetration growth of about 1.8% in the quarter alone. Part of that clearly has been driven by our product leadership with IPTV.

The Fibe TV product with the new wireless set-top box has clearly attracted a number of customers and given us some differentiation in the market. Also, I think importantly for us has been the pull-through we continue to see as we rollout Fibe TV from an Internet perspective.

The 37,000 net adds is our highest over the past 6 years. The strategy is working and now really is about expanding the footprint further on IPTV over the next 24 to 36 months.

Turning to the -- our Wireline NAS numbers and our business local access numbers. Again a key milestone, as I mentioned, where we're positive RGU net adds on the consumer side for the first time in 8 years.

Also, what we saw was a reduction in our NAS losses of 30% year-over-year. And what I think is particularly encouraging is where we have IPTV or our Fibe TV product, we're seeing a reduction in NAS at about half the rate of where we don't have the product.

So again, the continued footprint expansion we think will help us not only just pull through Internet over time, but also help mitigate some of the triple households, where we weren't necessarily as competitive in the past. In terms of customer service, one of our key strategic imperatives from the Wireless standpoint really pleased and we can see it in our margins, but we really have been able to improve our service metrics from a year-over-year perspective and in the last 24 months.

Yet at the same time, with the launch of our self-serve smartphone app, have seen calls reduced 25% year-over-year over the last 24 months even as our subscriber base has grown. And secondly, the Fibe TV install time continues to come down, a 25% drop over the last 24 months.

The wireless receiver installation taking another 8% out of that install time. And also our provisioning time, in other words, our ability to fill calendars has improved such that from date order now to install can be on average 2 days, which, of course, helps us from a sales perspective as well.

Bell Media, as I mentioned, we had a strong quarter in terms of the -- our financial results. Also, the Astral acquisition is meeting our expectations.

And I thought that one interesting metric is that our -- prior to the acquisition, conventional TV represented about 35% to 37% of our revenue in the Media business and now, with the acquisition, it's around 27%. And that's a result of the specialty assets and the outdoor radio assets that we acquired with the acquisition of Astral.

The Amazing Race Canada, quite a highlight for our company in the quarter, a record viewing for a Canadian production, but also was the highest-rated debuted show ever in Canada for either Canadian or U.S.-produced show in a world where content management continues to have value. Our ability to create content and distribute it through our media assets was really very successful with this product.

In the sports side, we continue to see viewership growth at -- in the CFL, up 14% a year with TSN. And we're off to a strong start in the quarter with our programming schedules for the fall.

The results of Astral, combined with the growth on our portfolio, continues to see our mix improve with now 82% of our revenue coming from our growth services. I mentioned the strong results in terms of revenue from our growth services, consumer Wireline voice now representing just 8% of our revenue.

So the mix for the organization continues to improve, and I would say we're now very well positioned to continue our dividend growth strategy in 2014. When we start to look forward, we're quite comfortable we'll be in a position to continue our dividend strategy in 2014 and well within the midpoint of our free cash flow ranges that we've shared in the past.

The other comment I'd like to make is the interest rate environment and the return environment have been such that our pension funding has improved dramatically and Siim, maybe make a few comments on that. With that, let me turn it over to Siim.

Thank you.

Great. Thanks, George, and good morning to everyone on the call.

Our consolidated financial results for the third quarter were strong across the board as we continue to execute and deliver on our 2013 guidance targets. And we remain very confident in the direction of our business given the favorable operating metrics we're seeing in residential wireline and also in wireless, which would provide a strong foundation for sustained financial performance in the fourth quarter and going forward.

So starting with consolidated financial results for Bell. We grew service revenue at Bell 3.3%, driven by our growth services, which collectively increased 5.3% year-over-year, as George referenced.

That revenue contributed -- that revenue contribution reflects Astral, which is now part of the Bell Media segment. In addition to media, Bell Wireless contributed solid top line growth, and Bell Wireline continued to trend closer to achieving positive EBITDA growth -- positive revenue growth.

Consolidated Bell EBITDA increased 3% this quarter, again reflecting the inclusion of Astral as well as the contribution of Bell Wireless, which delivered another quarter of strong double-digit EBITDA growth. Bell's consolidated EBITDA margin remained stable year-over-year at 38.4%.

Revenue growth and operating efficiencies throughout the business helped to offset higher upfront acquisition costs from the significantly stronger Fibe TV and Fibe Internet customer growth, as well as the lower-margin media contribution from Astral, which is in our results starting this quarter. BCE's statutory EPS for the third quarter was $0.44 per share.

That's down $0.24 over last year, and that year-over-year decrease was due to the $230 million charge on CRTC benefits obligation, which we incurred on the Astral acquisition. Adjusted EPS increased a healthy $0.05 or 7.1% over last year to $0.75 per share.

That's mainly as a result of the higher EBITDA. We had a good, strong quarter of cash generation.

Free cash flow was $747 million, up 8.9% year-over-year. Growth in free cash flow can be attributed to EBITDA improvement and improvement in our working capital position, which you may recall in the third quarter of 2012 was impacted by a higher accounts receivable balance at Bell Media as a result of Olympics-related advertising revenues.

Consistent with our plan for the back half of the year, the pace of CapEx spending stepped up in the third quarter as we continue to expand our IPTV service footprint and roll out fiber to more homes and businesses. Let's now move into a review of the individual operating segments.

Our Wireless segment increased service revenues 5% on postpaid revenue growth of 6.3%. Postpaid revenue in the quarter was driven by wireless data revenue growth of 18.4%, reflecting continued strong adoption and usage of smartphones.

Wireless ARPU continued to increase as well with 1.7% growth in the quarter. That marks our 15th consecutive quarter of year-over-year ARPU growth.

And as expected, we did see some ARPU growth moderate this quarter due to the impact of upfront discounts on the strong postpaid activations that we had through the first half of 2013. Rate plans now include bigger data usage thresholds and more value-added services.

And as you know, we recently lowered roaming rates. From a profitability perspective, wireless EBITDA growth of 11.6% reflects a revenue flow-through to EBITDA of 98%.

And that results in a significant 2.7-point EBITDA margin improvement to 45%, driven by higher ARPU and lower year-over-year acquisition and retention spending. Given Bell's strong year-to-date Wireless financials, we're very comfortable in reaffirming the outlook that we provided at the beginning of the year for Bell Wireless to deliver full year 2013 EBITDA growth north of 10%.

So let's move to our Wireline segment. The pace of Wireline revenue decline was essentially stable compared to the second quarter of this year as growth in TV and Internet, business IT connectivity and professional services solutions helped to offset ongoing decline in legacy Wireline voice revenues.

However, we've now seen 4 consecutive quarters of sequential improvement in the rate of residential decline in voice revenue. And this reflects fewer year-over-year NAS line losses, as George explained, and a lower rate of LD revenue decline from increased sales of global long distance minutes.

Wireline EBITDA in the third quarter declined 5.6% year-over-year. That's on a reported basis.

So it's important to note here that almost 3% of that decline or $29 million was due to the recognition in the third quarter of 2012 of a nonrecurring pension curtailment gain and a onetime reduction in our liability under the CRTC's Local Programming Improvement Fund. Recurring Wireline EBITDA, therefore, decreased 2.7% this quarter, which in large part reflects approximately $14 million in higher year-over-year acquisition costs from the very strong Fibe TV and Internet subscriber acquisitions that we reported this quarter.

As we look forward, we expect the Wireline segment to deliver an increasingly meaningfully improved revenue and EBITDA profile, benefiting from continued acceleration in Fibe TV and Fibe Internet growth, a lessening burden from residential upfront acquisition discounts and fewer losses in the mass and midsized business markets as we execute on what I'd say is quite an extensive transformation of our SMB service delivery model. I'll now turn to the Media results.

Starting in July of this quarter, Bell Media's operating results include Astral, which performed very consistently with our expectations. Astral drove significant revenue and EBITDA growth for Bell Media and increased our Media EBITDA margin to 30% on the stronger mix of specialty TV properties that Astral brings.

Advertising revenues were up 12% over the third quarter last year. Excluding Astral and excluding the advertising revenues generated last year from Bell Media's broadcast of the London Olympics, our core advertising or recurring advertising revenues increased a healthy 5% year-over-year in what is seasonally a low quarter for ad spending in the media sector.

This market-leading performance reflects the strength of CTV's programming schedule and ratings, as well as growth in Bell Media's non-sports specialty TV services. On subscriber fee revenues, we saw a growth of 37% year-over-year.

Again, excluding Astral, subscriber revenue was down $3 million. However, normalizing for about $13 million in retroactive specialty TV rate increases in the third quarter of 2012, which followed a settlement between Bell Media and certain broadcast distributors, recurring subscriber revenues grew 7.9% this quarter.

Bell Media's EBITDA was 26.8% higher year-over-year. Before Astral and the year-over-year nonrecurring items that I've referenced, core Bell Media EBITDA increased 9% this quarter, a strong result.

Our adjusted EPS this quarter was $0.75 per share, a good 7% acceleration year-over-year. Higher EBITDA from the Astral acquisition and strong growth at Bell Wireless, as I referenced, drove the EPS growth.

The higher year-over-year interest expense that you see reflects the increased long-term debt relating to the acquisition of Astral. Depreciation and amortization for the quarter is slightly favorable.

So when you break that down, depreciation on fixed assets is, in fact, up year-over-year, consistent with our increased CapEx spend over the past few years. But in the quarter, amortization was down due to some intangibles becoming fully amortized, and also we revised some useful life estimates on various software assets as of the beginning of the year.

Tax adjustments contributed $0.02 of EPS this quarter, and there's no further tax adjustments that we would anticipate for the balance of this year. Our effective tax rate was in line with our statutory rate this quarter at 26.7%.

That rate reflects certain non-tax-deductible acquisition costs related to Astral, as well as equity earnings included in our P&L, which are already tax effective. Year-to-date, adjusted EPS of $2.29 per share is in line with our plan and on track to meet our full year 2013 EPS guidance of $2.97 to $3.03 per share.

Let's turn now to cash flow. Free cash flow generation of $747 million in the quarter was 8.9% higher year-over-year, reflecting EBITDA growth and the improvement in our working capital position, as I said, given the prior year's increased Olympics advertising receivables.

Following the Astral acquisition, our leverage ratio is now at around 2.5x EBITDA. Our balance sheet and liquidity sources remain very strong, and we expect our leverage ratio to decline back to our policy at about 2x EBITDA over the next 24 months as we generate growth in EBITDA and apply cash flow generation, including the proceeds of Astral remedy asset divestitures towards debt reduction.

The higher cash taxes and severance payments this quarter reflect the inclusion of Astral. And lastly, an update on our defined benefit pension plan obligation.

I'd say that with the recent pickup in government bond yields, discount rates have increased around 70 basis points year-to-date, resulting in a good improvement in Bell Canada's pension valuation. At the end of the quarter, our solvency ratio was well over 90% compared to approximately 80% at the beginning of the year.

And in fact, Bell's solvency deficit could be eliminated with about a further 50 basis point increase in the discount rate. So should at some future time we get into a positive valuation position, there may in fact be an opportunity to significantly reduce Bell's ongoing pension funding requirements.

So in closing, I'll say that we have a -- we've seen good performance in the key strategic growth areas of our operations this quarter and this year. With 3 quarters of growth in consolidated financial performance, we see no fundamental changes in our outlook for the balance of the year.

We remain competitively well-positioned across our Wireless, Residential Wireline and Bell Media segments as we enter the fourth quarter. Astral is certainly meeting our expectations in terms of overall performance and contribution to consolidated results and will be accretive to earnings and free cash flow in 2014.

Our focus continues to be on executing to capture incremental growth across our businesses. We expect financial performance for the full 2013 year to track to our guidance targets.

So consistent with that outlook, we expect Bell's EBITDA margin for the full 2013 year to be stable year-over-year, supported in the fourth quarter by continued healthy Wireless profitability, improvement in our Wireline financial trend and cost efficiency. So given this outlook, I'm reaffirming all of our 2013 financial guidance targets and this positions us to continue delivering on our capital markets objective of creating significant growth in shareholder value.

Now with those comments, I'll then turn the call back to Thane to begin the Q&A period.

Thanks, Siim. [Operator Instructions] On that, Wayne, we are ready to take our first question.

I wanted to maybe delve a little bit into your Wireline subscriber additions, which improved significantly quarter-over-quarter. How much of that is due to the increased geographical presence of IPTV on your footprint?

And how much of it is improvement in market share sequentially?

Yes. So what I would say is a few things.

First of all, the launch of the wireless set-top box added significant differentiation to the product. Secondly, as we, generally across the base, if you take the size of the base, broken through the 10% penetration level and most products you see that's when word of mouth of a product takes to a different level.

Thirdly, we launched the Ottawa market midpoint in the quarter, and the Ottawa market is a major geographic footprint, obviously, in the country that we had not had Fibe TV. So it was really all those items, and our execution of the product continues to improve.

And so, in the marketplace, we're meeting the expectations we have for that. And I think most importantly, from my perspective, is it's getting us the pull-through of the triple and particularly on the broadband Internet side.

So is it fair to say this is not a onetime event? I mean, given the market structure and the continued increase on your footprint on IPTV, unless the pricing on the -- from competition changes, this should continue, these additions numbers should continue?

And also, the question in my mind is at what -- what's the cost for BCE to generate this kind of growth in subscriber numbers? Are we giving up a lot of pricing power here to generate those subscriber additions?

Or you're confident that margins should not be too much pressured by these customer addition numbers?

Well, yes. So first of all, I'm not going to -- as it won't surprise people on the call -- give a forecast on expectations going forward.

I would bring to the attention of everyone that the third quarter, traditionally in our space, is very strong in total because of the back-to-school marketplace for broadband and for TV. So there is some seasonality in every quarter, and the third quarter is typically strong for those products.

Outside of the seasonality issue, we are confident that as we've rolled out the footprint, we're starting to see the right subscriber growth we would expect, not dissimilar to what other companies in both Canada and the U.S. have seen as they've rolled out and got to their critical mass of footprint.

In terms of the ARPU on the product, our Fibe TV ARPU continues to be better than $60. So I'm quite pleased with that, and that includes, as Siim said, a lot of, obviously, acquisition promotions in the first 90 days of customers.

So we're comfortable with that. And then in terms of financial guidance, we'll give it for next year.

But as Siim has said, we expect our Wireline EBITDA numbers to continue to improve in the fourth quarter and as we get into next year.

It's a similar question trying to get the pricing power here. Look, I'm going to say, these numbers on IPTV and data are very strong, and I think you got to get credit for that because clearly, this is what's important to bring the Wireline business back to positive.

But here's the thing I'm going to point out. The Wireline revenue number only met expectations despite the fact that you got this big beat on the subscriber counts.

And you hear a lot of antidote -- anecdotes out there, people are getting repriced down. And this is not a Bell thing, it's an industry thing.

But they're getting particularly priced down on the voice product. If we assume a 0 value for voice in the future, and this may happen relatively quickly, is the Wireline business a positive growth business in the next couple of years?

I think that's one of the questions that investors are asking.

Well, first of all, net adds in a quarter are going to have no impact on that quarter's revenue, clearly. So that's the first thing.

Secondly, our average ARPU per household went up in the quarter. So both those issues I'm comfortable with the pricing environment that we're pursuing.

We absolutely are aggressively pursuing our net adds on TV because it's a triple for us. But then, in terms of the trajectory capability of the Wireline business, it's 2 things.

It's growth of broadband and TV and, as Siim and I have both said, proportion of our business that was local access. Both those -- all 3 of those elements are going in the right direction.

Broadband and TV looks more positive than in the past because of the new footprint, the product and our improvement in our broadband services. And local access is less of a proportion of our business.

And the next overlay of that is I think we've proven to be one of the most efficient wireline operators in North America in terms of margin management. So look, it remains to be seen as we execute going forward.

But as I've said, we anticipate our fourth quarter Wireline EBITDA results will be better than this quarter, and we expect next year's Wireline EBITDA results will be better than this year's Wireline results.

George, not asking for guidance, but can you tell me sort of medium term what you think the normalized growth rate for the industry will be on Wireline?

No, I can't. What I would say though is, in general, we are driving 3 portfolios of assets to generate free cash flow that allows us to drive a consolidated EBITDA number and drive the dividend growth model.

And based on where we stand today and what we believe 2014 represents for the company, we're quite comfortable that we'll be able to continue to execute that capital market strategy going into 2014.

Okay. Just following up on Fibe, if I could.

Do you have any data from some of your early markets? Verizon has talked about getting over 50% penetration in some of their first FiOS markets, obviously, a few more years in the marketplace.

But give us some sense of where you think you can take this overall? And you're over 4 million households now.

Given the results that you're seeing so far, what are your latest thoughts on how much of the footprint you'll ultimately go to?

Yes. So in terms of penetration by market, I think our best penetrated market for Fibe TV is Québec City, and that's been -- part of that lends itself because of the complete rollout of fiber in that market.

That's our strongest penetrated. I don't want to give specific geography penetrations other than I think people can take base over footprint.

In terms of footprint, we'll comeback in '14, but we're at 4 million. I think ultimately, we'll get to about 80% of our NAS footprint with IPTV, and we'll give that calendar to everyone next year, all within our capital intensity of 16% to 17%.

But over a period of time, that we'll talk about in -- and we're just finalizing business plan. I don't want to give guidance, but over a period of time, as we see the return of the lower access -- improvement on lower access lines, broadband and TV, we think taking that footprint to as much as 80% of ours is going to be something that'll be attractive for investors.

And we'll talk about that in the February time frame.

Want to switch gears a little bit and ask a question on Wireless. Over the past couple of years, you've grown faster than some of your peers because of the smartphone penetration growth catching up to your peers.

Looks like the gap has pretty much closed, but your margin and ARPU is still slightly below. So I just want to maybe revisit what your thoughts are now going forward in the ability to catch up on both margins and ARPU on the Wireless side.

Yes. Well, that's what our shareholders should expect us to do, and that's what we intend to do.

Perhaps maybe digging in a little bit more on the roaming side of the business, you guys introduced some more attractive plans, and just wondering if you see that elasticity of demand and usage is going to help drive that going forward and whether you're seeing some of that coming through yet?

Yes, that's it -- that's a good question. Two comments.

One, we want to continue obviously to close the gap with where we were a number of years ago, and we're seeing that, as you mentioned, in the first comment. The second comment, in terms of roaming, it's too early to see the stimulation of demand on what we're doing.

We've reduced the prices into the U.S. by 50%.

We took in the -- some other markets, a 70% reduction we talked about. We're going to go global to every geography in the country, renegotiate as best we can roaming rates and try to manage the customers as best we possibly can to make them able to use these products.

So you're going to see more of that as we go forward. And the business side of it, I would also say, customers may not migrate as quickly to using a Wi-Fi off-net product if they're not as concerned about the roaming rates on the data because of the -- obviously, the quality of LTE is really something even in other countries.

So we're going to manage that. We definitely -- if there's one message that was very loud and clear during the summer as we went through the process, our services are second to none in Canada, our prices are globally competitive.

This roaming issue is a global issue not just for Canadians, but I think you're going to see certainly from Bell as one carrier lead this issue to get everyone comfortable in the marketplace. And at the same time, from the investor standpoint very carefully manage that reprice through our financials is what we're trying to do.

In terms of the -- on the Wireless side, in the third quarter, you saw a lot less activity. At the start of the fourth quarter, have you seen activity coming back?

Are there still any supply constraints with smartphones? Just to get a better sense of what we're expecting for the fourth quarter.

And kind of with that, do you think we'll need some kind of higher promotions to get customers back into the stores?

It's a good question. It's early -- [indiscernible] guidance on a quarter.

It's also early in the quarter because of the real fourth quarter December becomes the key for that. I would say, though, our supply of smartphones has improved significantly.

So we think that's going to be helpful in the quarter. Also, we are living through the adoption from 3 years to 2-year contracts, and what that means for the speed of customers moving from carrier to carrier in those items.

So it's a hard call in the fourth quarter other than, as Siim said, we're quite comfortable with our financial guidance. And to be completely as transparent as I can, you really don't know until we get into December what the buying season is going to be like.

But we will be supplied to compete with that head to head.

Great. And then a quick follow up to the ARPU question.

In terms of the new roaming plans, what should we expect in the quarter in terms of the roaming plan ARPU pressure?

I won't give guidance, but I would say it's not material to our ARPU. What is relevant is to the -- from the customer perspective, those that travel on the consumer side not feeling they're comfortable using their product because of these bills.

But in terms of dollars and cents from an investor perspective, it won't be a material number you'll see in ours. And part of that is just our history of our position as only in the last 4 to 5 years really becoming competitive with our customer base with global roaming.

So not as big a base as others may have, but that, of course, is growing.

And I would just add to that, that the consumer-friendly actions that we've taken on outbound roaming are for the retail sector, which constitutes about 35% to 40% of our total roaming revenues. Business roaming is not impacted.

So I think certainly through the fourth quarter, the impacts of the actions that we've taken are not going to be material at all to achieving our guidance numbers.

One more on Wireline, if I could. With the success you've seen from Fibe, I'm wondering if you can talk about any competitive responses you've seen from peers in the fiber footprint, whether it was in 3Q or early 4Q?

And then also, have you seen in cable maybe stepping up activity in some of your DSL or non-fiber areas to make up for share losses they're seeing in the Fibe footprint?

Interesting. Yes to both.

Yes, in terms of outside our footprint, we definitely see a clever strategy by our competitors, because they're smart competitors. And so, our strategic answer to that is grow our footprint, and that doesn't happen overnight but we are continuing to do that.

So yes, we are seeing that. In fact I mentioned, local access declines are almost double outside the IPTV footprint versus in the footprint.

So it's yes, there is something that's going on in the market. Our mitigation of that, as I said, will be really 2 things, expand the footprint and make sure the satellite bundle is as priced as it can be to compete.

And then in terms of [indiscernible], we've seen some activity because of the results, particularly in our -- in the Ontario market. We saw some things that were more aggressive than we'd seen before.

And I think our subsidiary BCE -- Bell Aliant, Karen Sheriff has mentioned to in her footprint she's seen it from one of our competitors. But by and large, every quarter's competitive, and I wouldn't actually say this fourth quarter's any more competitive than previous quarters.

I'm trying to assess the flow through into profitability next year. I guess there's 3 obvious variables to sustain -- sustainability of subscriber growth, which I assume is doable as you increase your IPTV footprint and penetration.

But there's then revenue per subscriber and COA. So on the ARPU side, I'm wondering what sort of competitive responses you're seeing generally from Rogers, Vidéotron and Cogeco in those IPTV areas?

And whether you think price increases are sustainable given the regulatory environment? And on the cost side, in particular with COA, both capitalized as well as expensed, you talked about a lot of the efficiencies including wireless, more efficient truck rolls and so on.

Could you give us an idea as to how much COA is coming down and whether you think, therefore, you can generate Wireline EBITDA growth from 2014?

Yes, there's a lot in that. The cost of acquisition comes down for sure as our efficiency of install improves.

So we are seeing some of that. In total, it really means our intensity though [ph] stays in the 16% to 17% range because the reality is, we'll take incremental capital that comes to us in COA and just keep expanding the footprint device.

So that's what happened on that front. In terms of pricing, we did see one of our competitors in the core Ontario market put a significant price increase through in July in the marketplace -- into the market on their base.

But I think there has been -- and part of that, of course, is speeds are improving in the home, et cetera. So the price to improving those speeds have changed as people migrate up to these faster packages, so that piece.

And then the real question you're asking is, when does Wireline turn EBITDA positive? And really, we're going to have to come back to that, to some extent, with our guidance in '14, because it does get driven now by what's the pace of this growth going to be?

And I know every shareholder on the line would want us to invest in the growth provided that the -- that it's accretive from an overall EBITDA cash flow perspective, and it is. So we've got to mitigate the pace against that, and we'll come back to that in '14, other than quite confident that in our quarter, our fourth quarter for this year, will prove some better Wireline EBITDA numbers than we've seen in the past.

Great. Can you just remind me how many IPTV homes passed [ph] you have now and what your targets are?

Yes, well, we're around 4.1 million now. I think we were trying to end the year around 4.3 million, 4.4 million.

And we'll talk, and someone had asked about what we're going to do going forward. But our thinking is, we'd like to get to 80% of our footprint.

We'll share that, keep the capital intensity in that 16% to 17% doing that. So it'll take a bit of a window but ultimately put you north of about 6 million households over time.

A couple of quick ones here. First, has there been any change in the rate of satellite cannibalization from Fibe TV?

I think you were saying it was 15% to 20% before. Second, could you give us a sense of what the postpaid upgrade rate -- handset upgrade rate was in the quarter and whether it was sort of temporarily depressed, in your view, or likely to snap back?

And then just a third one. From everything you said, George, it sounds like the focus on Wireline CapEx will simply be to grow the footprint, but are you seeing any need in the medium term to, let's say, upgrade capability within the Fibe footprint you have?

Okay, I'm trying to keep track of each one of them. The first one was the oh, the 15% to 20%.

That continue to be around the same number.

Yes.

That's generally what we're seeing still, 15% to 20% of our adds are migrations. And interesting enough, because we see it internally [ph], we see not a dissimilar rate in terms of satellite we would lose to what Bell Aliant's team is doing as well.

So it seems to be consistent there on the satellite number. Second question was yes, it's a good question, Glen.

Did we see a slowdown in the pace of migrations as the change from the contracts and what have you with the Wireless Code of Conduct? I think it's fair to say we did.

I think that's part of the reason we saw a little reduction in our cost of retention. You may notice the percent.

It may have caught some people off-guard in terms of how low it was and that's because we did see some of that. I think it will return to more normal levels.

I just think there was this -- well, this is a different market than it was before for the consumers as a result of the wireless code. So we definitely saw that.

And then the third question, I think you're really asking about investment in the footprint in terms of broadband speeds. We've rolled out in May the bonding technology, and we're seeing some results there.

Customers who wanted to expand their IPTV footprint in our current footprint by adding speeds, and it gives us an ability to double speed for clients that want it. So we're actually feeling really quite positive about our ability to compete on a broadband basis with the footprint we have, and that's why the work's going to be on extending the footprint.

A question on your excess cash position going forward. Given your improved pension status, and presumably no more need to do pension special funding anymore, just wondering how you would prioritize the use of cash and especially in light of the excess cash that you would get as a result of the pension status.

And then quickly on the CapEx side, you guys have accelerated some investments using cash flows contribution from your Media business in the past couple of years. I was wondering how soon we could see CapEx intensity return to like as an overall number maybe returned to a more normalized level.

Yes, thanks, Phillip. It's Siim.

I'll address your first question on excess cash flow. As you know, we generate about $800 million of free cash flow after payment of all common and preferred share dividends.

As I referenced on the call, our leverage ratio following the acquisition of Astral is close to 2.5x. Our policy range is 2x debt to EBITDA.

So we will be using excess cash flow over the next 18 months or so to bring that leverage ratio back down. In addition, in January of next year, we will see the 700 megahertz spectrum auctions, and we'll be looking to allocate surplus cash towards the acquisition of that spectrum as well.

The second question was on...

Capital intensity.

In complete transparency, I think it's fair for the shareholders and for the analyst community to anticipate us staying in the 16% to 17% capital intensity number. And no doubt, part of the benefit of the media asset requiring less intensity has allowed us to reinvest some of that free cash flow in dividends and some of that free cash flow in capital programs for the Wireline and Wireless business.

So yes, I probably -- I personally wouldn't model that number coming down. And having been in the industry for -- as people know on the line -- a long time, I've never particularly seen it come down because of the data growth.

So I think that's a good assumption to use for us. And then, the other thing you mentioned, I do think it's important.

We don't see at this point that requirement for a year-end pension contribution that we've had to do the last 3 years, and I got to tell you as $750 million a year the last couple of years, we're quite pleased to not be in the position to have to do that again, and it gives us the headroom going into the spectrum auctions.

Yes, that's very helpful. Just on the CapEx side, do you -- is it fair to assume that the Wireline side will continue to remain a little bit more -- if you had to sort of moderate CapEx over time, would you see it more so in Wireless or on the Wireline side?

Over time, my instincts are would be a little bit of Wireline over time. Wireless has run almost in the 10 to 11.

I personally think it will be over time closer to 12. I mean, the data growth we see on the customers that take LTE is, quite frankly, significant, fantastic from an investor perspective and obviously, customers using it.

So we think that will over time take a little more intensity from what I can see.

Could you talk a little bit about, on the regulatory side, on the unbundling question? Your peers on the industry have sort of painted you as the bad guy in some respects because of your scale on media and on the distribution platform.

How do you expect that issue to unfold given the Throne Speech? And second, can you just remind us of the timing when you'll review dividend increases?

Sure. So on the first, we've obviously listened to the speech from the Throne and the direction of the market.

Interesting for Bell, in the Province of Québec we have competed with these and have packages ourselves in that market that direct some of this unpackaging of products for customers. And we've seen some demand for that in Québec, both from us and from our competitor, Vidéotron, for quite a significant period of time.

It's pretty clear if the market's looking for different products in their portfolio, we're going to have to address that issue in the marketplace. Also, if it's something that the CRTC wants to see more, we're obviously going to also be mindful of that.

And then in terms of our packaging in the market, from our perspective, our media assets are the best media assets in the country. And we want to distribute them through every one of the BDUs.

Bell Media's business is only successful or successful distributing our product through all BDUs, but not through just the Bell BDU business that we operate. So everything we do is to make that media asset be distributed as massively [ph] as we possibly can, and that's what we'll continue to do.

In terms of your comment about our scale and our competitors, that's just results-driven and nothing else, and we're just going to continue to drive results for our shareholders.

And then the dividend.

Yes, on the dividend timing, I think we'll just -- as I've talked about 2014, we'll have our guidance call early in the new year, and that's when I think you'll see us, in all likelihood, addressing our uses of cash.

And that's consistent with what we did last year.

My question would be on Wireless, and this is more of a forward-looking question. And that would be, George, where do you see third-party payment for data usage potentially entering into the ARPU equation?

I apologize you'll have to unpack the question a little bit more for me. I'm not sure I've understand it.

Sure. The question would be, when do you see like an application paying you for a subscriber going to that application, wherein the, like an ESPN or a TSN for you, would make the money off the advertising revenues, and would, thereby, be willing to pay the airtime that the subscriber incurred?

I don't really have a view on that this morning. The only thing close to leveraging some of the products, the best example we were really pleased with here in the country has been our Mobile TV app, where customers are paying us the $5 or in a package for the 10 hours of viewership.

And then we are paying content providers, both Bell Media, also Rogers and other content providers for that call -- that content. So on the other piece, I don't have any color to give you on that.

We'll try to understand and get back to me with a little more direct answer on that. But thank you for the question.

Very good. So thank you so much for your participation this morning.

And as usual, I will be available for follow ups and clarifications throughout the day. So on that, thanks, and have a great day.