Aug 7, 2014
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 Alain F.
Dussault - Corporate Secretary
Analysts
Simon Flannery - Morgan Stanley, Research Division Richard Choe Glen Campbell - BofA Merrill Lynch, Research Division Dvaipayan Ghose - Canaccord Genuity, Research Division Maher Yaghi - Desjardins Securities Inc., Research Division Jeffrey Fan - Scotiabank Global Banking and Markets, Research Division Drew McReynolds - RBC Capital Markets, LLC, Research Division Vince Valentini - TD Securities Equity Research David McFadgen - Cormark Securities Inc., Research Division
Operator
Good morning, ladies and gentlemen. Welcome to BCE's Second Quarter 2014 Results Conference Call.
I would now like to turn the meeting over to Mr. Thane Fotopoulos.
Please go ahead.
Thane Fotopoulos
Thank you, Wayne, and good morning to everybody on the call and webcast. As usual, I'm joined here today by -- with George Cope, Bell's President and CEO; as well as Siim Vanaselja, our CFO.
We did release our second quarter results earlier this morning. All the usual information, including the news release and slide presentation for this call are available on BCE's website.
And following the review of the slide presentation by both George and Siim, we'll move on to the Q&A portion. However, as usual, before we begin, I also like to remind all listeners that today's presentation and remarks by both George and Siim will contain certain forward-looking statements that represent our expectation 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 risks.
Results may differ materially. Except as may be required by Canadian securities laws, we do not undertake any obligation to update or revise any forward-looking statements.
For additional information on such risks and assumptions, please consult BCE's 2013 Annual MD&A as updated in our Q1 and Q2 2014 MD&As, as well as our news release of today, announcing our financial results for the second quarter of 2014, all of which are filed with the Canadian Securities Commission and are also available on our website. So with that, over to George to begin the review of the quarter.
George Alexander Cope
Great. Thanks, Thane, and good morning, everyone.
Thank you for joining us today. Let me turn to Slide 4 and just start with a quick overview of the quarter.
The company certainly had a good quarter and we are on plan for the year and met our expectations. The EBITDA growth of 4.9%, obviously supporting our growth model, but importantly from my perspective is holding our consolidated margins consistent year-over-year, it's 39.4%.
The strong 5.7% Wireless service revenue growth drove the 9.5% EBITDA growth that we saw in the quarter and based on all results, now the leading EBITDA growth in the industry in Canada. So really pleased with that.
The Wireline EBITDA decline continues to improve year-over-year as we grow the residential services side and we expect that improvement in Wireline EBITDA to continue through the second half of this year. It was a third consecutive quarter of positive residential service revenue growth.
We also continued to see significant cash flow contribution from our the Bell Media division with an increase of 27% year-over-year driven, of course, by the inclusion of the Astral acquisition. Strategy continues to be to expand our fiber footprint and launch as many new LTE markets as we can, as quickly as we can.
As everyone on the call knows, we announced the privatization plan for Bell Aliant on July 23. This transaction, as we mentioned, will be accretive to BCE earnings and our free cash flow and supports our dividend growth model for 2015 and forward.
Important this morning, I want to announce that we've received Competition Act clearance that was obtained on August 5, and you may recall, because it's a company that we already controlled, there was no industry candidate or CRTC approvals required. The one approval required was the Competition Act and we have now received that clearance.
Turning to the next slide from the Wireless perspective. The net adds of 66,000, representing about 36% of the market share in the quarter against our incumbents, growth of 3% year-over-year in terms of market share and consistent with our objective of obtaining at least 1/3 of the postpaid market.
The metrics were very strong, some of the best we've had in years. Churn on postpaid, the lowest we've seen in over 6 years.
The ARPU growth, the highest we've seen in 7 years and been able to maintain retention spending and cost of acquisition fairly stable on a year-over-year basis. Also a new revenue sources continue to lead the country Mobile TV subscriptions at 1.5 million now and working with now 4 Canadian banks who have moved towards mobile payment systems where using your smartphone and tapping it, et cetera, are part of the technology going forward, which will obviously over time drive some incremental revenue for our Wireless business, as well.
Turning to the next slide. Just a few comments, our LTE build up continues across Canada.
We now cover 82% of the Canadian population. Our focus now is in the rural communities and starting to deploy our 700 spectrum as well.
As noted a few weeks ago, we did announce our real focus in Atlantic Canada and where over 100 communities will see access to LTE by the end of 2015. We now expect our 700 rural buildout of LTE and all of our LTE coverage to be completed by the end of 2015, 1 year ahead of our government commitments on 700 and will reach over 98% of the Canadian population.
Also over the next 2 to 3, 4 weeks, we will announce through spectrum aggregation of AWS spectrum that the speed on our LTE network will increase by approximately 50% for our customer base. Turning to Slide 7.
On the residential side, we continue to see an improvement year-over-year in residential RGU losses, an improvement of 12% year-over-year. The Internet add was up slightly over last year, but quite frankly, as you saw our competitors results in our territories, the quarter is traditionally soft, as we see the student outwards [ph], quite frankly, driving that numbers although up slightly, clearly not at the growth rates we want to see growing forward.
On the 5 perspective 46,000 net adds, pleased with the number, down a little bit, particularly down in the province of Québec, up in the province of Ontario. In the Québec, there were some very aggressive pricing by one of our competitors and we chose not to match it in the quarter and quite frankly, we're pleased with the growth that we're seeing in Ontario and we expect to see an acceleration of Fibe TV as we move forward.
Overall, NAS losses improving on the consumer side. On the business side, up a bit.
Again, as we continue to migrate our corporate and mid-customers to IP and also, believe it or not, some of our small business clients moving from dial-up to different Internet services now, having some impact on that as well. Most importantly, the quarter from my perspective is in our IPTV footprint, where we have that, we continued to be RGU positive and that's most important metric for us.
The strategy is keep growing that IPTV footprint. Just thought I'd make a quick comment pro forma Bell Aliant.
You can see the strong metrics of the combined organization with 59,000 IPTV net adds pro forma and 18,000 Internet net adds. And importantly, the decline on a combined basis of the RGU net losses, as well.
And also worth mentioning that the net adds for Wireless would go up just slightly as we integrate one of the smaller Wireless parts of Bell Aliant pro forma the acquisition when that takes place. From the media perspective, continue to see some softness for sure on the advertising market.
I think our numbers will say that we are competing very well in the Canadian marketplace. In terms of audiences 4 of the top 5 shows, between the ages of 25 and 54 are carried on our media assets, which secured 11 new series for next year and we'll have, again, the leading number of top 20 hits in the country going into the season in September.
On the TSN side, as we've announced earlier, we are expanding from 2 to 5 national feeds to recognize the consumer demand for more and more sports content and we continue to add more sports content to TSN and RDS recognizing that demand by our customer base. In terms of our overall mix, again, our growth services, quite frankly, really driving some top line revenue growth for us, $300 million or 7.8% even pro forma the acquisition.
You can see our mix does changed slightly as I said on a call a few weeks ago from 81% of our revenue from growth service to 79%, because of the increase in our local access lines as a result when we closed the Bell Aliant transaction. Of course, the offset to that is our rate of Wireline decline will improve because of the competitive Fibe footprints that's been put in place with Bell Aliant.
So with that, let me turn it over to Siim.
Siim A. Vanaselja
Thank you, George. Good morning, everyone.
I'll begin with a review of our consolidated second quarter financial results. And I'll first bring to your attention a terminology change in our financial reporting starting this quarter.
So consistent with the recent requirement of Canadian securities administrators, going forward, you will see us replace the term EBITDA with the new term adjusted EBITDA. There's no change, however, to how we calculate or define that term and no change to previously reported numbers, just that we will now refer to it as adjusted EBITDA.
Beginning on Slide 12. In the second quarter, we grew service revenues at Bell by 5.8%, that was driven by our growth services, which collectively increased 7.7% year-over-year.
Revenue performance was led by Astral's contribution to Bell Media, accelerated Wireless revenue growth and as George said, a third consecutive quarter of positive Wireline residential service revenue growth. Bell adjusted EBITDA increased 4.9% this quarter, reflecting the inclusion of Astral, a strong contribution from Bell Wireless as well, which delivered year-over-year growth of 9.5%.
Our Wireline segment had a fifth consecutive quarter of year-over-year improvement in the rate of adjusted EBITDA decline. Bell's consolidated adjusted EBITDA margin remained stable at 39.4% as the contribution from Wireless and Wireline growth services offset the decline in higher-margin wireline voice business and the lower-margin media contribution from Astral.
The higher adjusted EBITDA drove 6.5% growth in adjusted EPS from $0.82 -- from -- to $0.82 from -- sorry, to $0.82 from $0.77 in the second quarter of 2013, and that was the key contributor to free cash flow generation of $815 million this quarter. Consistent with our plan for the year, capital spending stepped up in the second quarter as we continue to expand our IPTV footprint, increased Internet and Wireless network capacity to support customer and usage growth and we began deploying advanced 4G LTE mobile services to rural communities and small towns across Canada.
So overall, it was a very good financial quarter with healthy results across all our segments. And I'll now turn to the highlights of each of our operating segments.
On Slide 13, Wireless service revenues were up 5.7% this quarter, that was driven by 4.6% higher ARPU. This is the 18th consecutive quarter of year-over-year Wireless ARPU growth.
The increase reflects a greater mix of postpaid subscribers in our customer base, higher rate plans and strong data revenue growth of 21%. Wireless adjusted EBITDA grew 9.5%, yielding a revenue flow-through to adjusted EBITDA of 76%, and a 1.6 percentage point increase in service margin to 47.5%.
So that was our best Wireless margin performance in at least 10 years. Bell Wireless continued to make a strong contribution to Bell's overall free cash flow with growth in adjusted EBITDA less CapEx of 5.9%.
Another overall excellent quarter of Wireless performance on financial results and with solid postpaid operating metrics. Moving now to the Wireline segment on Slide 14.
The rate of Wireline revenue decline continued to move closer to achieving breakeven with a year-over-year decrease of 0.8% in the quarter. Residential Wireline revenue grew 1.3%.
As George referenced this reflected improvement in net subscriber losses and higher ARPU across all our consumer wireline services. TV and Internet combined, delivered 6.1% higher revenues year-over-year.
Voice erosion continued to slow with fewer NAS line losses over last year and higher sales of international long distance minutes. In business Wireline, the rate of adjusted EBITDA decline improved, which was supported by cost control actions and business IP connectivity saw good growth in the quarter of 3.4% on revenues.
However, overall business market results continue to be impacted by repricing and slow economic growth. Total Wireline adjusted EBITDA in the second quarter decreased 2.7% year-over-year, which represents improved performance over both the first quarter of this year and the second quarter of last year.
Bell's Wireline adjusted EBITDA margin was on plan at 38.4%. As we look forward to the second half of the year, we do expect the Wireline segment to deliver positive revenue and adjusted EBITDA growth, benefiting from continued acceleration in Fibe, pricing discipline and cost control.
On Slide 15 for Bell Media. The second quarter marked the last quarter of incremental year-over-year contribution from Astral.
So beginning with the third quarter, Astral will be fully reflected in our results year-over-year. On a pro forma basis, for the second quarter, when including Astral in last year's results, Bell Media revenues were down approximately 2% year-over-year, that's excluding a one-time $10 million retroactive video-on-demand revenue that we recognized in the second quarter of 2013, which was from broadcast agreement renewals with certain BDUs.
Total reported advertising revenues were up 29% over the second quarter of last year. Again, pro forma Astral advertising revenues for conventional and specialty TV in aggregate were down approximately 5% and that reflected the generally soft advertising market, as well as fewer NHL hockey playoff games, which were broadcast on TSN and RDS.
The quarter was also impacted by movements in advertising spend to the 2014 World Cup coverage. Subscriber revenues in media were up 5% year-over-year on a pro forma basis, that was on specialty TV rate increases, growth in Bell Media's expanding array of TV Everywhere products and growth in mobile TV subscriptions.
Reported second quarter Bell Media adjusted EBITDA growth of 34.6%, pro forma Astral and before the $10 million nonrecurring items that I mentioned, Bell Media adjusted EBITDA was stable year-over-year, reflecting higher content costs for TV programming and sports broadcasting. On Slide 16, adjusted EPS of $0.82 per share this quarter was a solid 6.5% increase year-over-year.
The growth was driven primarily by higher adjusted EBITDA, which reflected a strong contribution from Bell's growth services. We recognized a mark-to-market gain of $0.02 per share this quarter on equity derivative contracts resulting from the appreciation in BCE share price and that compares to a $0.06 loss on equity derivatives that we recorded last year.
Depreciation expense for the quarter increased $0.03 over last year, consistent with our higher capital asset base and the asset base from the Astral acquisition. Higher year-over-year interest expense that you see is due to the Astral acquisition and with the Canadian dollar's depreciation in the second quarter, we recognized the $0.02 per share foreign exchange loss on currency hedges entered into manage the financial exposure on our U.S.
dollar capital purchases. Those hedges on capital expenditures do not qualify for hedge accounting.
Lastly, tax adjustments contributed $0.02 to EPS in the quarter compared to $0.05 a year ago, resulting in an effective tax rate of 25% in the quarter versus the statutory rate of 26.6% for the current year. We see minimal tax adjustments of approximately $0.01 per share for the balance of the year.
Year-over-year adjusted EPS of $1.63 per share represents growth of 5.8%, that's on a year-to-date basis, and that's in line with our plan and remains on track to meet our guidance for full year EPS growth in the range of 4% to 7%. Turning to free cash flow on Slide 17.
We generated $815 million of free cash flow in the second quarter, driven by growth in EBITDA and a year-over-year improvement in our working capital position. This quarter's results also reflected higher planned capital spending, as I discussed, and a step-up in cash taxes in line with our full year 2014 guidance assumption and higher cash interest payments.
All of that is on track with our guidance for the year and our plan, which calls for accelerated cash flow generation in the second half of the year. So to wrap up, I'd say we see no changes in our outlook for the second half.
The operating performance of all our segments is tracking well to deliver our guidance target. Wireless, financials and postpaid operating metrics remain strong.
We expect to see good improvements in Wireline financial performance through the third quarter and the fourth quarter. In Bell Media, Astral's contribution, as I've said, will be reflected in both 2013 and 2014 results.
So year-over-year performance in media will normalize in the second half, but with the impact of increased programming costs. Given that outlook I'm affirming all of our 2014 financial guidance targets.
And lastly, for your reference on Slide 19, I've provided an updated summary of our key financial assumptions. As you will see, the [indiscernible] spectrum that we acquired earlier this year, which we've begun to deploy and which was at a favorable cost relative to our expectation.
Notwithstanding that impact, we are maintaining our adjusted EPS guidance range. So with those comments, I'll turn it back to Thane and the operator to begin the question-and-answer period.
Alain F. Dussault
Thanks, Siim. Wayne, if you can now provide instructions to the participants.
We're ready to open up the queue to questions.
Operator
[Operator Instructions] Our first question is from Simon Flannery from Morgan Stanley.
Simon Flannery - Morgan Stanley, Research Division
Very nice results, particularly on the Wireless side. Impressive churn reduction, Wireless margins.
Can you just talk through the sustainability of that? Because we've seen it at other carriers, both north and south of the border.
Is this really reflecting the fact, as you said, that there's no new devices, we've got a big iPhone upgrade coming here? Or do you think we've got a maturing of this industry where some of these churn gains are going to be more sustainable?
And anything you can add on tablets or other broadband devices and what they're contributing here as well, it would be great.
George Alexander Cope
Yes. So on the second point, the tablets are very, very small shares still of our net adds.
Our's are literally almost all smartphone net add penetration. So that's also what's driving the improvement in our ARPU.
And on the churn side, I mean, part of it from our perspective is an enormous investment in the last 6 years in our service agenda to the customer base. We see it in our customer service satisfaction metrics and they're just improved dramatically on our Wireless business and the tools we put in our customers' hands has also, in terms of service applications, has really helped us on the service side.
And then the other point, I think part of the structure, I mean the LTE networks that we're offering in the Canadian market place are second to none in the world. I think customer satisfaction is probably at a high level, and structurally in the industry, I think that's also what we're seeing.
Hard to forecast where the industry will go on churn, but our expectations is that churn will be -- continue to be quite positive on the postpaid side.
Operator
The following question is from Richard Choe from JPMorgan.
Richard Choe
On the Wireline side, just wanted to confirm you think that revenue and EBITDA is going to be up in the second half and given a little bit of the slowdown, both in high-speed Internet and video, what makes you confident in the reacceleration of that growth?
George Alexander Cope
Yes. And I think it's important to note, in the second half of the year we do expect as I've seen both Wireline revenue and EBITDA to breakthrough positive and in my own instincts, you'll see it build in the third quarter, into the fourth quarter.
So the second half will be positive. And frankly, it's just the continual growth of our TV and Internet business, that growing against that NAS base being a smaller proportion.
Some improvement, as Siim talked about on our business side, where we're seeing the rate of improvement on the EBITDA, even still, there's work to do there, there's been improvements there. So we believe in the second half of the year.
It's important for the analysts between quarter-to-quarter, second half of the year that Wireline EBITDA will breakthrough and be positive. And part of that is, as I've said, just the growth we're seeing.
And the seasonality in the second half of the year, you see on ins on what you see in the second quarter on Internet, you see the benefits of our Internet and Fibe TV in the second half of the year when the -- on the student return market.
Glen Campbell - BofA Merrill Lynch, Research Division
I guess the build, the Fibe TV slowed a little bit, are we still on pace to hit that 5 million number by year end?
George Alexander Cope
The household coverage we're on, the Fibe TV, definitely a little slower in Québec than we had wanted and part of that, quite frankly, was tactical given what we saw some pricing responses and once people saw our previous quarter results, we had positive growth in Ontario and the ARPU, of course, between the provinces are a little bit different and we will continue to see the footprint expansion.
Operator
The following question is from Dvai Ghose from Cannacord Genuity.
Dvaipayan Ghose - Canaccord Genuity, Research Division
As you know, you've had 10, I think, dividend increases since you became CEO, which has been really positive. The concern going forward is that you're overly reliant on acquisitions incrementally for free cash flow and dividend growth and overly reliant on Wireless.
It's encouraging to hear your Wireline comments, I assume you believe in 2015 you should produce some pretty decent Wireline EBITDA growth. My questions really are on Wireless and media.
On the Wireless side, as you know, the significant concern amongst my peers is that you may not be able to increase Wireless EBITDA or if there is a 4 or 3 capitalized player. Do you believe that?
And last but not least, you considered media is still to be a growth asset? Do you think there is room for pro forma EBITDA growth next year with Astral and CTV combined?
George Alexander Cope
Okay. Thanks, Dvai.
I didn't know -- as you know, I'm not going into 2015 guidance, but I'll give -- let me give some context to of your question. I think, if you look at the mix of our portfolio and the growth on the free cash flow, we've talked about the integration of Bell Aliant and investing in telecom assets to grow that and that's the privatization of Bell Aliant, which will be free cash flow accretive next year.
I mean, I think our track record on free cash flow generation keeping our payout ratio at around 70% speaks for itself. And so I think the Street's expectation for our ability to manage that is our responsibility and we expect to continue to do that.
In terms of the Wireless marketplace, I think the one comment I will drive for investors, it's important to note that 18 of Canada's top 20 markets today have 4 carriers. And so there is some confusion here, at least I pick up, people keep writing that we're suddenly going to have a new fourth carrier.
We've had a fourth carrier in those 18 markets for 6 years and the results that we're reporting reflect that. How they're capitalized, how they're not capitalized, how they're successful in execution will just remain to be seen in the marketplace, but I did want to mention that.
I think it's important that there are 4 players in those markets in what we've seen. So that's really the one comment on that.
And then overall, the media business, as we go forward, we talked about for sure, there's some challenges there in terms of the rate of rapid growth we've seen historically and we don't think we'll see that pace on the Wireline side. You'll see improvement in the second half, we'd like to see that to continue to drive the cash flow on the Wireless, I think the results speak for themselves.
Operator
The following question is from Maher Yaghi from Desjardins.
Maher Yaghi - Desjardins Securities Inc., Research Division
A follow-up question on the Wireless. More on the long-term perspective here.
Overall, I mean we're seeing declines and continued declines on growth activation in this sector, especially on postpaid and this is not just seen by Bell, but also by Telefon Rogers. So you have been benefiting from the lower churn rate and improving ARPU, which continues to build into probably next year and that's going to help you next year.
But when you look longer-term, what can you do as an industry to increase penetration of wireless in Canada and if you can't, I mean, if you suspect wireless growth is coming down, how will you be able to replace that growth in the healthier consolidated results?
George Alexander Cope
Yes. Well a part of it of course is the portfolio we have of assets.
But you know specifically, on the wireless industry side, my own opinion and we're seeing it is, the Canadian consumers adoption of smartphones and uses of these devices, and as I mentioned, the improvement in our speed of our LTE by 50% over the next 4 or 5 weeks, that is only going to drive a more and more demand for usage of the product. The ARPU price -- the ARPU that we're seeing in the marketplace is not from price increases, it's generally from pricing discipline, but also just the increased usage of the products.
So I think that provides further growth. In terms of penetration, I think we're the -- one of the interesting things for Canada, of course, is, because we still have penetration in front of us, probably haven't been as aggressive in things like the tablet market or what have you, I think you'll see that evolve and start over time, start to look probably a little more like the U.S.
So there's incremental revenue there. And I probably, this is optimistic today in our Wireless growth as they have been over the last 10 years.
I still think it's early days for this industry.
Operator
The following question is from Jeff Fan from Scotiabank.
Jeffrey Fan - Scotiabank Global Banking and Markets, Research Division
Perhaps 2 quick ones on both Wireless. The installment plan we're seeing in the U.S.
seems to be very popular. Wondering if you have any renewed thoughts on whether you see that as an opportunity for Canada?
And then secondly, the BYOD, the bring your own device. Wondering if that's becoming a bigger portion of your activations, of customers bringing their own device and going on to month-to-month plan?
George Alexander Cope
Sure. And then just to add, one thing I didn't mention on Wireless is we're seeing in our results and I'll come back to that is, the tools we're using with our customer services is driving costs out of running the operations as well, because customers quite frankly want to use smartphone for service and not necessarily call into call centers and that is driving some of the margin flow-through that we're seeing.
In terms of bring your own device, yes, there is no doubt, we've seen some of that in Canada, for sure. People moving from carrier to carrier and bringing the device with them.
So that is helping obviously the things, such as cost of acquisition, what have you. For sure, we've seen that.
And on the installment plans, we're watching the developments in the U.S. and we'll see.
I have no comment on a competitive or a market launch, other than making sure we clearly understand the true cash flow costs of those programs as opposed to what they might do from an accounting perspective. They really want to know what the cost are from a cash perspective.
If it was going to accelerate net present value for our shareholders, we'd obviously take a serious look at it.
Operator
The following question is from Glen Campbell from Bank of America Merrill Lynch.
Glen Campbell - BofA Merrill Lynch, Research Division
So a metric that you probably take a look at and we don't get to see is, how the ARPU for your incoming customers compares to your base across your services, and leaving aside, say, the temporary promotional discounts. My sense is that in Wireless it may have flip-flopped, so that your new customers maybe now be generating better ARPU than your existing.
My sense is on TV that you're probably lower, because your basic package is actually quite a generous TV package. And on Internet, I'm not sure.
Could you give us a bit of color directionally on what that might look like?
George Alexander Cope
Sure. Yes, we use the term, Glen, vintage of our customer base to look at that.
So your insights are frankly on the Wireless, pretty accurate. I mean, what we are starting to see now, part of that, as you know, we moved to 3 to 2-year contracts and handset prices didn't really change in Canada.
But postpaid base and entry-level prices did change and so we're clearly seeing customers coming on using LTE, by the way, which drives a higher usage and drives higher ARPU and seeing, as a result of that, the new customers coming on generating some better ARPU. On the Internet side, it's really about people migrating to higher speeds.
So what we see there is revenue growth, not as much as you do the base in the net adds for us, for the industry aren't significant, but we are seeing as customers wanting higher speeds and that is ultimately they migrate up little higher speeds that drives ARPU. And on the Fibe TV side, the real answer there is, we continue to see a little over $60 ARPU on our Fibe TV product.
But really in most of that service offering, we do it on a triple or a double and the discount is on the total package. But we're continuing to see IPTV north of $60 on the ARPU side.
Glen Campbell - BofA Merrill Lynch, Research Division
And just to confirm that $60 would be clean of any discounts? Or is the discount built in there?
George Alexander Cope
That would actually -- that would be actually be our monthly ARPU with the discounts in them. So -- and, of course, it's a bit of a numerator-denominator issue because the more net new adds you have, so we, over time that number will grow as those promos as a percent of our base come off.
Glen Campbell - BofA Merrill Lynch, Research Division
Okay. And just a quick follow-up, just roughly speaking what, proportion of your Internet subs would be on the 25 and up plans?
George Alexander Cope
You know what, Glen, for competitive reasons, I'm not going to give that, but we are seeing a migration to people wanting to use higher speed products.
Operator
The following question is from Drew McReynolds from RBC Capital Markets.
Drew McReynolds - RBC Capital Markets, LLC, Research Division
George, just 2 questions from me. First one, you've done a great job with mobile TV with the 1.5 million subscribers, just wondering if you can shed some light on usage underneath the hood, just the types of programming that folks are watching?
Do you see any negative effects on usage due to Wi-Fi? The second question, just want to circle back on the comment you made on the Bell Aliant call, just in terms of the benefits of Wireline and Wireless integration.
Is this about strengthening the Wireless back haul to improve your LTE performance? Or are there other financial strategic benefits that come into play from integrating the networks?
George Alexander Cope
Okay. So on mobile TV, let's deal with that first.
I don't have a streaming number to give you, but I can tell you the volume was up significantly. As always, it's -- a lot of it's starting even in this quarter, when you see things like the World Cup, it is very, very event driven.
Mobile TV. So people add it to their base plan, it can be $5 for the 10 hours and you'll have a period of time where people aren't using it much and there will be some type of event, a world event and it can be a positive sport event, it can be some of the other political events and then we see an explosion in usage for those type of events.
So it's an event driven service, which makes sense given the way we product, the product size, et cetera in the marketplace. And we continue to see that accelerate that growth and it adds to the LTE experience for our customer base.
And we think it's great differentiation in the market and we now hear some of our competitors want to enter that space. So we're happy to have that leadership position.
In terms of Bell Aliant and Bell, I mean, the comments, really, what we've said, if you look out and you think about the bundling market on the consumer side in Eastern Canada, although we've been able to do it, it's always been a little tricky with 2 public companies than the ability to bundle in now IPTV with Wireless when it's all one organization. So those are really -- there's an example, one of the strategic benefits that we'll get of that, you make the point on the backbone and access, but the reality is we've had that, we've always been buying that access from Bell Aliant.
So I guess from an integrator perspective, we'll be there. And there are a lot of articles -- lot of -- some people wrote this was all done as a result of something to do with the fourth wireless carrier and I frankly, that was not any of the strategic intent on doing this.
The strategic intent we talked about was the things we took the group through, free cash flow accretive for our shareholders. We don't need 2 public stubs.
If we look at the Fibe footprints and now IPTV growth off that platform that will help putting it together, those are really the driving reasons. Just one number, our streaming, for instance, is up 61% year-over-year on our mobile TV.
So...
Siim A. Vanaselja
6%.
George Alexander Cope
They just handed me note. Up 6% year-over-year on the streaming and I know in the month of World Cup, the guys were really pleased with the results.
Operator
The following question is from Vince Valentini from TD Securities.
Vince Valentini - TD Securities Equity Research
Questions on Wireline CapEx. So the intensity of 23.9% this quarter, a bit elevated.
Can you give me a more detail on some of the buckets of where you're spending and maybe some directional comments for the future, it seems like that number is a bit above where you'd want to be longer-term?
George Alexander Cope
Well, the real issue is it's an annual number with us and we're trying to accelerate IPTV as quick as we can. But the best way to guide is the CapEx guidance that we've given for the year will be right in that range and I think we are in a 16 to -- what's the range thing that we're kind of on that guidance?
Thane Fotopoulos
Yes, 16 to 17.
George Alexander Cope
So we'll be raising the 16 to 17 or [indiscernible]. And the Wireline side is obviously, where the capital is being accelerated as quickly as we can.
But the lumpiness in the free cash flow, just quarter-to-quarter, we are really trying to get IPTV done as fast as we can, because it's so present value accretive for us. But there's no change in the outlook of our CapEx.
Operator
So the last question is from David MacFadgen from Cormark Securities.
David McFadgen - Cormark Securities Inc., Research Division
When I look at your Wireless business, you are lowering your operating costs, increasing your margins, which is pretty good. In your opinion, is there a kind of a theoretical threshold where you could take the Wireless service margin to?
George Alexander Cope
No. There isn't-- there will be some number obviously, so I don't mean to say it that way.
But there's not really a -- our goal is, as we've said, just strategically for us on Wireless is to make sure we exceed the 33% of the postpaid market share that ultimately we close the gap and I think, we now have with our competitors and capture a leading position of EBITDA growth in the industry. We're doing that and we think we're executing.
The margins, of course, can change pretty quickly in this business up and down depending on new handsets. And you know, I think, one of the things, we'll -- we're not so much on margins, but there are some new smartphone devices coming in the latter half of the year, and maybe that helps to see some acceleration on the subscriber side for the whole industry.
We'll just have to wait and see.
Thane Fotopoulos
Very good. So on that, thank you so much for participating in the call today.
I'm available throughout the day for any clarifications and follow-ups. So thanks again.
Have a good day.
Operator
Thank you. That concludes today's conference call.
Please disconnect your lines at this time, and we thank you for your participation.