Q1 2022 Quebecor Inc Earnings Call

[music].

The conference is now being recorded.

Okay.

Good day, everyone and thank you for standing by and welcome to the Quebec or Inc's financial results for the first quarter 'twenty 'twenty to come.

Cool.

To introduce female Chief financial Officer of cubic core Inc. Please go ahead.

Yes.

Thank you good afternoon, everyone and welcome to this go back to our conference call. My name as you're just trying to read small I'm. The CFO of can they call and joining me to discuss our financial and operating results for this first quarter is you have to help me that little our president and Chief Executive Officer.

And you wanted unable to attend the conference call will be able to listen to recording by telephone or webcast access details are available on our website at triple W. Dot, Quebec, where dot com the recording will be available until August 10th of this year.

As usual I also want to inform you that certain statements made on the call today may be considered forward looking and we would refer you to the risk factors outlined in today's press release and reports filed by the corporation with regulatory authorities.

Now I'll turn the floor to get messy.

And good afternoon, everyone.

And this quarter has been.

We all know they buy the one ukraine that in difficult situations.

All agree.

We have been actively working to support that.

And people living in Quebec first by adding the 24 hour news channel <unk> 24 to our television programming lineup.

And make any.

First of all to all clients for free.

We also suspended international calling charges were all calls made to Ukraine from Canada.

Our mobile residential and business clients and.

In addition, dermatologist launch a new program to help all Canadians are lagging and Canada, providing them with a six month, all inclusive and 20 gigabytes per month mobile plan at no charge. So we can maintain contact with their loved ones. Both here and abroad. Finally go ahead.

1000 user will refurbish smartphone to the region.

Our convenient Canadian Congress and its partners. So they can give them to families in need.

These initiatives are in addition to the dirt hauling connect or continued support for our communities and prices both year and come back and abroad.

On the regulatory front, we welcome the competition Bureau conclusion after a rigorous investigation that the proposed Roger Shaw merger with substantial Ethernet or lessen competition in wireless services in Canada.

SaaS competition has already declined and that the best remedy remains true and effective growing and disruptive competitor will bring down prices for the benefit of the Canadian consumers.

Is completely in line with our position, which we have stated publicly.

Numerous occasions, mainly at the best perhaps the only way to encourage lasting competition and lower prices for Canadian is by entering that freedom and Shaw wireless assets and in the hands on financially viable long term wireless operator that can make all whereas demonstrate.

The ability to compete effectively against the big tree win market share and bring down prices.

What we have achieved in Quebec has simply not happened in the other markets in Canada, we're quoting the competition Bureau.

Competition is already declining.

The fact also acknowledged publicly by our main competitors CEO , who candidly declare.

The competitive intensity between two potentially merging parties.

Not quite there as it used to be and that's probably benefiting the entire industry.

No.

Nearly a much quieter market and the rest of the country quite different from what we are experiencing in Quebec, where as a tale of two solitudes a record team between Quebec in Canada, the competitive landscape and promotional activity level remained much more.

Intense.

<unk> in which we try from the disciplined management of our operational expenses and investments while offering the best products unparalleled customer service and constant innovation.

Another way to foster competition in wireless is obviously to <unk>, which were mandated by the TICC last year.

On that probably look forward to a framework detailing the terms and conditions of the incumbents and D&O access services, we expect a CIBC to make a quick ruling on these terms and conditions.

He can negotiate and tariff rates and Canadian can start benefiting from the new competitive alternative.

In parallel trying to expedite things we have approach all three incumbents carrier to initiate commercial discussion, but perhaps times surprisingly you have either a review with our approaches.

And that engage in various stall tactics designed to delay the start of meaningful negotiation.

So as a preliminary conclusion, it's important to repeat that we have many alternatives.

To extend our business beyond our historical footprint in Quebec, where our growth prospect are obviously more limited as compared to 10 years ago.

On a related matter, we are pleased with the ITC decision on determining conditions.

Seamless Romain issued on April six this is a constructive constructive decisions that will ultimately reduce and prevent the prevailing dropped call when moving from a regional carrier network to a national carrier network, thereby eliminating.

Importantly, competitive disadvantage for regional carriers.

Cause that are also welcome to tabling of 18, Bill by the Minister of Canadian Eric the outcome.

Numerous representation made by <unk> and many other Canadian media organizations and associations. This bill will regulate negotiation between the web Giants and local news outlets to ensure fair and equitable compensation for the use of their or our.

Our content.

Creation of a payment system.

Necessary in view of the web Giants market dominance.

These platform user content produced by Canadian News organization to generate a significant portion of the anthrax interaction on their network essentially would be required to pay a fair price for it.

I will now review our operational results starting with our telecom segment.

You don't always actively pursuing its fiber deployment in the province of Quebec, providing increased be expand connectivity in.

And minimal latency I think first of all focus on identity urban areas. We're continuing to expand and are ahead of schedule in terms of.

Operational sites deployed.

Operation I speed, which will deliver high speed Internet with 37000 household in several municipalities across the province is proceeding well.

Despite the tight specialized labor market, we are aiming to accelerate the deployment over the summer months and easier weather condition.

On the wireless front, we are pursuing our path of increasing profitable growth with a 24500 net adds during the quarter capturing once again the largest combined share of gross adds in Quebec with more than 31% of our two brand.

And do it at home and FID According to <unk>.

<unk> remained stable and wireless EBITDA increased 16% in the quarter.

Consolidated wireless our group for the quarter improved by 62, SaaS or one 6%.

Over the same quarter last year.

Two higher planned mix, especially for fifth lower discounts and higher roaming and data usage revenues more than offsetting the diminishing dilutive effect.

Yes.

In wireline Internet subscriber growth was 5300 during the quarter and 51200 year over year, continuing its steady growth in the midst of highly promotional environment and it did lobbing trend of compliant internet connections and <unk>.

Usage and larger multiple dwelling units.

<unk> decreased by 94, SaaS or one 7% over the last year essentially due to the dilutive effect of <unk>, which account for 50% more customers in our Internet base and last year.

Our helix Activations reached 88500 for the quarter, bringing our total <unk> subscribers to over $1 3 million as of March 31, 2022, a good performance in a shrinking in an increasingly competitive TV distribution center.

Yeah.

As we mentioned last quarter, we are continuing to optimize the migration process, our medical genetics, which is proving to be more challenging than initially and thats. It.

They painted with the addition of significant cost over the last few quarters, namely new platform system development and integration teams, while realizing rolling but still a limited benefit to date from the commissioning of older platform support contract.

And other cost reductions to come that being said key long term strategic benefits such as self install which reached 70% over the last quarter are kicking in and translating into last thing operation cost reduction.

With more than 520000 subscribers across Quebec Flimsy go ahead go ahead.

Our new subscription platform that is dedicated to exclusive on scripted lifestyle document Gerry and entertainment content continued to invest in the production of local differentiated content from various horizons with the introduction of brand new content offer.

In the first quarter.

Two two phase fan favorite fan favorite of its series made a weighted comeback to new original series debuted at <unk> and the production of a new season for two of our most popular show with announced for activity go along with it.

<unk> is also proud to have launched many international productions, including the movie which.

Which was available on our platform soon after its tier relief.

Thanks to their impressive numbers of new original production available every month, good equal and bank.

Fast, becoming the reference for our original content from Quebec.

As a reminder, and thank all increasing investment in production and acquisition have gone down by more than 40% in 2021 compared to the previous year and the better part of those investment was made towards original content.

In our media segment.

We are continued to dominate this market increasing its consolidated market share by $1 two.

Market share to 46% in the quarter and broadcasting four of the five most watched television show in Quebec, including La <unk> and startup Academy, which attracted more than $1 5 million viewer each.

<unk> was also strong in males film production facilities and audio all services as well as in Chengdu, our production and distribution business, which delivered more than 20 films this quarter.

Turning to our financial results and starting with our Telecom segment.

<unk> generated $345 million in cash flow from operation in the first quarter, an increase of 10% over the same quarter last year.

With EBITDA growing 2% year over year, and EBITDA margin, reaching 59% compared to $49 three last year revenue.

Decreased slightly by one 2% in the quarter as compared to last year, mostly due to lower wireline equipment sales from helix as the migration naturally slows for forefront speak last year.

On the Opex side, we are starting to see material reduction from the various initiatives implemented over the last year translating into are increasing and industry, leading EBITDA margin.

Another clear impact of our cost reduction initiatives is a $23 million decrease in capex this quarter.

As we are reducing overhead simplifying our technological team structure and systematically conducting a much more disciplined rigorous analysis of all development project to ensure our optimized scope and more agile development and thus reduce.

<unk> investment.

To be clear, we are continuing to invest just had significantly and sometimes more in our key strategic initiatives such as LTE advanced fire <unk> rollout.

System migration network performance optimization network extensions and operation Isps in remote areas.

The net capex reduction as the resolve of our rigorous and agile approach with respect to the numerous other lockman growth and maintenance related projects.

In our media segment.

Revenues were up 4% in the quarter as compared to last year, driven by TV advertising revenues production and distribution revenues as well as now increased film production and audio visual services activity.

In the quarter, we continued to invest in.

<unk> wealth of new shows original production and exclusive content to maintain our leadership in the face.

Increased competition from that problems are proliferating offerings on multiple platforms.

Additional investment of <unk>.

$15 million and differentiated content translating into growing audience market share is all is allowing us to continue to increase our share of the advertising spend and position us well for the strategic fall season, but obviously comes with a direct impact on our.

Our EBITDA.

Now, let you review or a consolidation consolidated financial results.

<unk>.

For the first quarter, Quebec gross revenues reached $1 1 billion.

0.3% from last year revenues from our telecom segment was down 1% to $903 million.

Mainly due to the decrease in the volume of equipment sales related to our wireline Telecom services.

And most specifically helix as Cal.

Tom mentioned revenues in the media and sports and entertainment segments increased 4% and 9% respectively for the quarter.

<unk> EBITDA was down 2% to $442 million in the quarter, mainly due to the $13 million decrease in EBITDA and our media segment explained as we've just said by the increase in our investments in content production and acquisition for the TBA group in order to maintain our leading position and TV market share in Quebec.

Until they communications segment posted EBITDA up $9 million or 2% to $460 million.

<unk> reported net income attributable to shareholders of $121 million in the quarter or <unk> 51, a share compared to a net income of $121 million as well or <unk> 49 per share reported in the same quarter last year adjust.

Adjusted income from continuing operations, excluding unusual items and gains or losses on valuation of financial instruments came in at $129 million or <unk> 54 cents per share compared to an adjusted income of $130 million last year or <unk> 52 per share.

Telecom Capex spending was down $23 million as Stefan mentioned for the quarter as compared to the last year, mainly due to the timing investment and all of the main issues. The tech element pointed out.

Our adjusted cash flows from operations increased $9 million in the quarter of 3% to $316 million once again, demonstrating the resilience and strength of our business model as well as our continued operational and financial discipline adjusted.

Adjusted cash flows from operations for our telecom segment grew $32 million or 10% to $345 million in the quarter.

As of the end of the quarter, our net debt to EBITDA ratio was three eight times up from $2 six seven times reported at the end of the first quarter last year, mainly explained by the $830 million investment for spectrum acquisition across the country.

In 2021 avail.

Available liquidity of $1 7 billion at the end of the first quarter and our growing free cash flows are obviously more than sufficient to fulfill our commitments and to continue to fuel our growth.

In the quarter, we purchased and canceled almost 1 million class B shares for a total investment of $26 million.

Please note that we received on April 27% approval from the <unk> to increase increase the maximum number of class B shares.

Can be repurchased under this year's program to 10 million shares since we initiated our normal course issuer bid program 11 years ago, approximately $50 5 million class B shares have been purchased and canceled.

We thank you for your attention and we'll now open the lines for your questions.

Okay perfect. So just to remind everyone to ask a question. Please press star one to get Mchugh.

And the first question comes from Vince Valentini from TD Securities. Please go ahead.

Yes, thanks very much.

Couple things from me first.

Our food decline in Internet.

Sure Carl you mentioned Mark down one 7%.

If you took the fix mix fifth phase.

Today's mix changes out of it what would <unk> be up on just the videotron brand and even if a job I assume it's down less than the strong results you posted in the first quarter last year is there any comment you can give on incremental.

Promotional intensity versus bowel, maybe maybe some of that is things getting back to normal after the pandemic with retail stores and people moving houses a bit more.

Commentary on that would be great.

Good I'll ask.

To give you a little bit more detail Vince but in the meantime, as I mentioned you know we should say that competition is still intense.

In Quebec, and again, we look forward to have disciplined management by making sure that all of our expenses are well positioned to continue to grow.

Our our business and this is what we're looking for it so.

Is this.

Situation will remain I guess that we're positioning ourselves.

To make sure of that.

And we will be able to face headwind at whatever is the kind of circumstances that are taking place.

Yes.

On the specifically on the <unk> decline Vince even excluding four excluding <unk> from the equation.

Videotron is our view is fairly a fairly flat on the on the wireline is fairly flat in the in the quarter a number of issues.

At play here as Cal mentioned of course.

It is in and Internet and TV distribution increasingly a.

Competitive.

So our ability to increase prices as much lower than it used to be.

And also.

We set some discounts on equipment.

Our continuing in that.

In the in the midst of the transition that we've talked about.

Between equal in helix.

<unk> is also is also weighing in on this so.

Yeah.

Even without the diluted effect of says we have to be you know I.

I think we have to be fair that arguably fairly.

It's fairly stable this quarter.

Anything in terms of the timing of rate increases.

<unk> this year versus last year, even if at all.

No same timing.

Just taking us a little bit longer to.

To pick it up and and sometimes some of these some of these increases are.

Countermanded by by as I said more more discounts.

Either on equipment on our on our service our people moving onto lower lower.

Packages lower priced packages.

More us having to relying to competition.

On promotion on heightened promotional activity as I mentioned, a little bit later.

A little bit earlier.

Okay, and you mentioned the equipment discounts.

The equipment revenue was down.

Down quite a bit is that is that just simply the factor. You mentioned is there any impact on costs is that part of the reason why youre. Your cost reduction was so strong because you didn't have to pay for some equipment or is it is that not right.

No no no thats not right that need the equipment, yes.

The reason for the equipment.

The migrations were.

Slow down a little bit as we said.

So obviously our equipment revenue don't don't forget that for helix, we're on a different model, where we sell the boxes and we finance them over 24 months.

We're compared to the traditional rental model right. So obviously this.

It helps on the Capex side of course, so and that's.

Significant chunk you know I'm sure you might have or some of your colleagues will have questions on capex reduction don't forget that a good chunk of the Capex reduction has to do with that that change in model where are we.

If we sell the box that we still have to from a cash flow perspective. It comes back to the same thing we still have to buy the boxes, but.

We don't we don't Capex them anymore. So that's that's a that's a chunk of the of the lower capex, but on the other side.

It.

It really impacts the margin.

On wireline.

Just two more.

Hopefully quick ones, one I assume the.

Significant increase in homes passed.

About 520000 up.

Just because you have multiple dwelling units you know Kevin each unit as an individual.

Yes.

That's exactly it was its just that difference.

Way to calculate the end.

To get to the what.

What we believe is or is the rail.

A true number of.

On this path.

And last one for me.

I'll leave the wireless stuff to others I'm sure you won't get off the hook on that but the last one for me would just be GVA and content cost is that.

A one quarter thing and something to do with timing issues.

Pandemic or is this more of a structural change because of streaming investments.

And content inflation that Jay Youre going to be seeing this type of escalation and content costs every quarter.

You know.

I was mentioning.

Competition is intense I would say that it's not only in the telecom side.

We should also add that it became stronger and.

What we will call our general General live broadcasting so our TV again.

The two other main bond get broadcasters being at Duke and it obviously had been there for always in a second.

<unk>.

Bell media investing much more significantly.

They are all programming. So we consider that remaining number one is of great importance.

Because we want to continue to have the main shares of advertising revenues.

This is why we need to make sure that we will lineup.

As much as good programming as possible.

The I would say the benefit that we have of investing more is also that Oh darn cold, we're populating our other platforms, namely.

Our active vehicle NBA, which is also full of goddamn and other capacity due to enhance.

And promote our telecom services, because it's included in that or its piggybacking on.

And so again, it's it's showing our that all of the convergence.

Game plays and Quebec, all but certainly you know we were.

For us to make a.

Effort and investment effort for the last quarter.

And we look forward to continue to maintain our position in the future.

Thank you.

Okay.

Okay.

Yeah.

I think the second the next question is Joel delay.

Yes, we have as your home library on the phone. Please go ahead.

Yes. Thank you.

Thanks for taking my question I will take the wireless question for sure. So.

I understand you're still interested in acquiring freedom.

Obviously, a lot of moving parts here and an evolving situation too, but I wonder if you can provide color.

On where you currently are in terms of a dialogue on that front. If there is one and then as a follow up on this.

If you can comment broadly on the profitability targets that you would need to see.

The potential investments in order to make a firm bid at that size.

A lot of questions here at all.

And a lot of aggressive I guess horowitz for answers yet you would probably considered too.

Not enough.

And I'm sure that you will understand pretty easily that the.

Comment making comment on this specific situations.

Certainly not in our best interest.

I think that in over the last quarters and we are.

We're not adding anything here.

We mentioned that.

We would be interested.

To.

Move forward out of our historical the historical power meter.

Where we've been able to provide the telecom services.

The interesting thing an opportunity may be the only thing that I would be able to say and I would like to emphasize on that because its upgrade important and it shows also coupled with the fact that that you know one should be working on the fact that we will continue to be highly disciplined and we're going to manage our capital.

According to what we consider D and what the market is looking for so the interesting thing is there is many alternative.

So when you got alternatives, you've got choices and then you have the capacity to be the best way to proceed and achieve your objectives. Unfortunately. This is the kind of situation that we're in front.

For the last water and everyday.

Everyday goes by I would say that.

These conditions are even improving.

Mentioned earlier that the recent decision by the CRC and seamless handover.

It looks like you know anecdotal or technical but it shows all.

The regulatory authorities. This is the way that we're reading it is looking to make sure the competition will be stronger in Canada than it used to be before maybe as strong as what the competitive market had been and go back for the last 10 years, obviously I cannot read.

T leaves, but my belief is this is what public policy is all about and obviously, we're looking to piggyback on it.

Thanks, Marci and then.

In terms of the operations on the cable margins front.

<unk> improvement there.

You mentioned the self install the couple of other reasons.

Do you think we can expect this.

This is a new trend that that could be sustainable.

Yeah, well I mean, it's.

As we said this is an ongoing it's not from yesterday that we are.

That we are working on are on many many initiatives too.

To lower operating costs and improve our cash flows and that is certainly something that we're starting to see the benefit of.

Both from a.

From a cost standpoint.

From then we talked about self install I mean, the one thing that maybe we should mention as well as call centers and all of our customer contact centers.

Our our increasingly.

Less costly to us.

Because of our new way too.

To operate technology is improving.

Which makes for a fewer number of calls per year per customer or per subscriber.

We are better organized so with fewer people too.

To give them the service.

We have teams that are more integrated.

So other than the what we've mentioned that we and we've owned up to it we have a bit of a migration issue.

On the wireline and we're working on this and for as I said before for a couple of quarters, it's going to it's going to remain a bit of a challenge, but other than that our main initiatives are really starting to kick in so I would definitely say that this is something thats on for <unk>.

For good and for the longer term.

Great. Thank you.

No.

Thank you.

And our next question comes from David Friedman from Kumar.

Remarks. Please go ahead.

Okay. Yeah. Thank you a couple of questions.

When I look at the wireless network revenue.

10%.

Oh, Yeah, I'm, just wondering what the wireless EBITDA did what it would it be up tomorrow 10 person or I'm, just kind of wondering how the wireless EBITDA did in wireline EBITDA in the quarter.

David We actually gave it to you. This time it was an idea that yeah. We said, 16% I know, it's a surprise to all of you since we never said it before but we actually set of discounts at a 16% increase in our in the wireless EBITDA.

Thank you okay.

I guess I missed that one.

So that would that would probably I really I haven't done the math, but that would probably imply wireline EBITDA is down modestly.

Yes, well thats the yes, that's the counter.

I mean, it's not debated.

There are other free gaslog do after that.

It will be very <unk>.

Okay, sorry, I missed online and I'm not fast enough on my calculator to calculate.

Yes, David we I think we've talked about our issues and are the reasons for the.

More challenging.

EBITDA performance and in wireline and I think we've covered most of the issues there, but that's the account just pointed out you know if you look at cash flow generation.

10% is insignificant.

Insignificant in the quarter and don't forget that these all of these various initiatives that we keep talking about there and.

For the most part I mean, some are wireless or wireline, but for the most part D.

They're all there on both sides.

<unk>.

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

Yeah.

Let me maybe.

Maybe just back on wireless.

In the quarter.

Yes.

When you look at the prior quarters is down.

Many quarters is.

Is this a trend that you can continue at Lindbergh start to see a growing are up modestly.

<unk>.

Well a couple of things.

Not as much as our competitors as you know, but some roaming revenues are back.

It's not the most of it but it's a chunk of it to be sure and also as we said you know we've talked for many many months or many quarters in the past.

The dilutive effect of <unk>.

Uh huh.

As you know a bolus of wild both both our views we're growing <unk> being at a much lower price point.

But this quarter you know.

Finally, I think we're starting to get over there. So yes to answer your question I believe that.

But some of these.

Some of these levers are in for the long term well, let me hold on you're right I mean things can change, but many way should be in for for the next little while.

Okay. Okay, great. Okay. That's it for me thank you.

Thank you David.

Okay.

And our next question comes from Stephanie price from CIBC. Please go ahead.

Hi, good afternoon.

I just wanted to circle back on the National wireless relate as well just curious about how important the bundled offering including wireline would be as you look at a national wireless rollout.

I am sorry, Stephanie I didn't I didn't quite get your at the end of your question do you mind Restating I'm, sorry, I wasn't quite sure my problem.

Was that curious around the importance of a bundled offering in a national wireless rollouts that would include wireline.

Yeah, I mean, we said.

As we said.

Our expand our potential expansion outside of Quebec is it's certainly I mean, we talked about wireless and <unk>.

But.

There are other opportunities and certainly being able to offer a multi service or a multi product approach or a bundled approach as you as you call. It rightly so.

It would be an advantage and would certainly.

No.

We believe make the offering stronger I mean that being said I think.

There are many ways to skin this cat than certainly many ways to develop our business outside of Quebec and.

Bundling is certainly an approach has been very successful for us in Quebec and that.

That I believe we need to consider on the.

If we if we do expand outside.

Stephanie if I may add.

Do not forget that.

Internet access regulated in Canada.

The capacity to offer internet through a PPA model is existing so then therefore.

All of those possibilities.

<unk> and I know that some people would say that.

Selling just one one of the product.

It has an offering we're not going to be successful.

I guess that we can say that that took place elsewhere in the world.

<unk>, Canada would be somewhat different.

Certainly we're not done yet.

Publicly talk about our marketing strategy, but we will just would like to mention that again.

As you say in many many ways to skin a cat, but there is certainly many other alternatives of our proposal our marketing strategy that we can use to make sure that we will be as efficient as possible and this wireline or wireless.

Market outside of Quebec.

Great color. Thank you and then I'll ask about the Capex reduction.

How do you think of Capex going forward it looks like the reduction was mainly driven from the telecom group.

Yes, so the Capex reduction.

<unk>.

I'll state it is really.

It is the the you know I mean, it's the result of a number of things, but mostly.

You know our various initiatives to be more disciplined.

In terms of.

Really analyzing in a lot of detail the number of projects that we've got ongoing the scope of each project.

And the involvement.

And the need.

For all of these projects.

So and.

When you really get down to it and it's I mean, it's.

It's a lot of work, but once you get down to it I mean, a lot of times you.

You find out that you can be more disciplined a little bit more.

A little bit more tight on cost and we ended up doing.

Many project fewer a lower number of projects, but are still.

Focusing on the important ones and as we said clearly I am not talking about the big the big strategic projects on which we are continuing to invest in as we've said in some of them even more.

But I'm talking about.

And in Telecom is in many businesses I'm sure. There are a lot of growth related to our maintenance related or I mean.

There are many many projects that.

That are put in front of us and now we are a little bit more systematic in terms of making sure that we optimize these things.

And do these projects.

Yes.

Yeah.

Great. Thanks, so much.

Thank you Stephanie next question please.

Perfect. Thank you and we have four more in the queue. Our next question is from Ben <unk> from <unk>.

832 asset management. Please go ahead.

Yes. Good afternoon. Thank you for taking my call.

I have questions related to just the acquisition I was just at a very high level.

Firstly.

So as to given the size of that acquisition do you feel that you need to partner with anybody and.

Secondly.

In the event you to proceed with the transaction like how will you structure would you be.

Using videotron balance sheet or would you be doing this through a separate entity linked fence and.

Not really linked to read your tone and thirdly, just wanted to get a sense on your discipline with respect to the balance sheet.

Quite often we just call, but just wanted to see just sketch to scale for you as you know like how important.

Thank you.

I'll answer your question, but I, just because I didn't get the benefits.

From what are you and analysts.

Yes.

Okay with whom.

$8 32.

Oh, Okay, <unk>, Okay, alright, well if at all.

On your couple of question I mean, certainly we.

Got it.

As determining whether a ring fence or any other I mean, that's I mean, we're we're not there yet I mean, it's I think it's a bit early in the process to be able to answer that question at this point.

And your other question was was with respective of our balance sheet.

Disciplined but what was your question.

Alright.

So I guess I don't mean.

Just expecting the balance sheet MTBE.

You mentioned a lot of.

Discipline like I, just wanted to get a sense of.

What your approach would be to you know just with respect to the balance sheet.

What our what would be with respect to the balance sheet.

Youre welcome.

So like would you lead with.

The company or like gesture.

Okay.

Right, Yes, yes.

Okay, well one thing I can I think that we've said.

A number of times Ben is that.

Yeah.

If you look at our track record for the past many many years.

We've been very disciplined at at bringing down our leverage despite continuing to invest very heavily in our networks, both wireless and wireline.

And taking out the case, you'll remember that over.

For transactions between 2012 and 2018.

And so and despite.

Stock buybacks and dividend increase and all of that so I believe that our track record speaks for itself.

We certainly wouldn't want to put ourselves again and they're in a position.

Yeah.

<unk>.

Risks from.

With respect to the balance sheet, so we will be.

<unk>.

I think you can bet on our on our track record as I, just said to ensure that.

We're going to be disciplined about that.

Okay. That's fantastic My my last question was just regarding partner.

Look at partnering with someone in this transaction just given the size of injection.

I think it's a I mean there.

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

Understand that.

Wonderful.

Perhaps but I think it's a bit early.

Okay. Thank you very much thank you.

Thank you.

Thank you and our next question comes from our own vendor Gallup the size.

Canaccord Genuity. Please go ahead.

Hi, good afternoon, and thanks for taking my questions. The first question is on instead of on the wireline side of the Internet revenues I know that competitive conditions are tough, particularly in Quebec, but based on some of the disclosure in terms of the subs and the revenues it looks like you had internet.

<unk> dropped by one, 5%, which I haven't seen in a while how should we look at this trend.

Should we think of Q1 instead of the.

Perhaps the bottom as far as the year over year trends are concerned.

Oh.

Just on sort of the timing of price increases and so forth can we expect to kind of see.

If you're a little bit more constructive trend from hereon.

No I mean, I mean, a couple of answers to this I don't think I think some of the some of the dynamics that we are living through in wireline as we said we've talked about competition we've talked about.

Our our migration Thats ongoing between you know between our legacy systems and our legacy.

Offers and products two to our new products and the costs associated with them and the.

Youre trying to transition in the midst of the.

Not much more competitive environment, where some of our competitors are.

I have stepped up their promotional activity and intensity.

I think it would be I think it would be imprudent for us to say that this is just sort of a one time I think.

That being said.

Yeah.

This is something that some of our past issues is something that we will that.

We will get over and is the competitive intensity and the.

Uh huh.

To stay I mean, who knows what it would be a little I wouldn't be a little prudent.

<unk>.

We see internet thats, becoming more and more of a commodity so it's sort of normal.

That that people get more price sensitive in Quebec as you know has historically been a very price conscious market.

It's one where we know how to thrive, though and how to succeed so we're confident that.

You know that we're going to get on top of this.

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

When you think of all those moving pieces sort of the redundant costs youre moving through that transition back off.

And then you talked about the different debt instead of.

Accounting or the way that youre kind of financing the boxes.

How should we think that the margin trajectory is it set of maybe flattish in Q2 as well and then as some of those costs come in cost come out.

We're able to maybe drive some expansion in the second half is that still on the cards.

Yes, I think and I think that's a that's a fair characterization I would.

I would certainly think it is fair to say that flattish and eventually as we are.

As we get as we gain more momentum on the cost side.

Certainly our growth potential towards the end of the year.

Thank you I'll pass the line.

Thanks Aaron.

Thank you expressing grief.

Thank you. Our next question comes from Jeff Fan from Scotiabank. Please go ahead.

Hi, good afternoon, thanks for taking the question.

I just have one related to wireless.

You both mentioned many alternatives in front of you and I think <unk>.

You were talking about <unk> versus our facility base.

Based on your history in Quebec, when we look at.

Over the last 15 years going from <unk>, and then go into facility base and showing the success you've had.

He isn't facility base really the preferred route for you over the long term.

Yeah.

Yeah.

Thank you Jeff.

As you May know.

Conditions.

The licenses.

Was relief and for which we participate in the auction from ice and carry some obligations and those obligation is to build a network of your network.

Out of period.

Seven years.

Is this <unk>.

<unk>.

Built in and we will never change.

Guess that this is the assumption that we will work.

Is arrangement could be done in that long period of time certainly this is something that we will and we should look at.

Is the cost of technology.

Facility base.

Is moving downward.

Our experience as of today is that this is the trend.

We're facing.

We were in Barcelona recently.

International Summit Mobiles mobile World Congress.

What we're seeing as the open ran technology.

Give us.

Good perspective on making sure that you'll be able to build your network.

Probably more decent prices than what you have been forced to historically.

That creates a competitive environment from manufacturers.

To our new business model.

We understand.

This is not clearly actually.

Completely full frame and fully efficient, but like any technology.

Technology New technology.

It's improving.

The time goes by so yes, we've been building our business on the bottle facility base.

Give you flexibility that give you obviously.

The profitability.

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

Okay. Thank you.

Thanks, Jeff.

Yes.

We have a last question.

We do have a last question come from <unk>.

<unk> <unk> from RBC. Please go ahead.

Thanks, very much good afternoon, hopefully pretty quick ones here for me just on the NGL framework I'm sure. Karl can you just update US do you have any sense of when you expect to kind of get these.

When conditions from from the <unk>.

Can we maybe for you on the capital returns that obviously, Quebec law has been quite active on over the last three or four or five years with dividend growth and buybacks.

Got it.

Get a little more conservative on that in the near term pending.

The outcome here on wireless and then lastly, I know very small.

Part of the business, but the sports and entertainment just with everything normalizing here kind of through the rest of the year, hopefully and sustainably going forward.

What are you expecting in terms of that segment and how to how to model that going forward.

Good.

And thinking.

Okay.

I'll do the first.

Good effect in the third okay.

We Fortunately don't control it is the CIBC agenda.

Obviously that we're actively actively pursuing the different requests.

I don't want to be too technical but this is a matter that sometimes when you go into detail I'm not saying the devils there but.

Sometimes this is the kind of environment that youll see as you can easily expecting.

Yeah.

The incumbents are not running to offer their services.

Every type of profitability to refrain the slowdown will.

It will be used to make sure that you know.

Competition will arrive at placement as late as possible.

Our understanding is that.

The crts <unk> nodes this kind of game very well.

Are they accepting it.

Not all but.

I think that looking forward to accomplish what the public policy is looking for which is encouraging competition will bring us.

Yes.

Some result, I would say probably you know.

Sure.

So.

It will make shortly a year that the decision was a proposal. So that therefore, we look forward regarding our regulatory colleagues that are entertaining discussion with CRT see that.

The time, though.

World Trade should should.

Should come shortly.

On the on the stock buybacks drew.

As you know this is something that historically we've been.

How would I qualified may be opportunistic about.

And we believe that our stock is.

Tenuous to be undervalued.

We this is certainly something that we will we intend to continue whether it will flex it up or down will depend on I think.

On many factors, but it certainly is something that we can flex down should should our need for for capital.

<unk> be needed elsewhere.

But at this point I think it's a bit early to.

Two two or two to tell you have a specific strategy on that front in terms of capital returns I guess, the other point would be dividends I think we're probably in the right spot for dividends. So that's another thing as well that will we will see as it goes along with our strategy will be but.

We're we're in a pretty good spot right now.

Pretty much within the range that we had set for ourselves in terms of.

Payout so I guess, we'll see over the next few months, whether some some opportunities do materialize or not and whether there is opportunity for us to continue to improve capital returns.

And I would add quickly before going to the third question is that.

With the level of dividends debt.

We are paying and as you know we mentioned.

That we were looking to have a global not a global but an overall.

All of us see as the board of directors establishing.

Phew quarters ago.

Yeah.

Buying back shares allow us to do.

Reframed paying dividends on the shares being bought so mathematically.

As profitable. So this is a question of balance between you know.

We're making improvements in terms of earnings per share and cash wise also.

But obviously you don't want to go up to the end of it.

And.

Uh huh.

Leverage your balance sheet.

Too much.

Third question about our sports and Entertainment section I would say that business is starting to come back.

Have a few concert that are taking place right now.

We'll continue to do so our key EMEA, a minor league ARX <unk>, Quebec in fact, our team they are all the cubic.

Just had a great season and participate in the.

The series and that's playing out in the playoffs intern taking place right now.

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

That's great. Thank you.

Andrew.

I think that.

We do not have any more questions. So to all of you we would like to thank you can participate in this conference call and we'll talk to you at our next quarter Conference call.

Thank you so much.

Thank you.

Ladies and gentlemen, this concludes the cubic Com, Inc. Financial results for the.

So first quarter conference call. Thank you for your participation and have a nice day.

Yeah.

Okay.