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Edited Transcript of CGO.TO earnings conference call or presentation 7-Apr-17 3:00pm GMT

Thomson Reuters StreetEvents

Q2 2017 COGECO Inc and Cogeco Communications Inc Earnings Call

Montreal Apr 7, 2017 (Thomson StreetEvents) -- Edited Transcript of COGECO Inc earnings conference call or presentation Friday, April 7, 2017 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Louis V. Audet

Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc

* Patrice Ouimet

Cogeco Communications Inc. - CFO and SVP

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Conference Call Participants

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* Aravinda Suranimala Galappatthige

Canaccord Genuity Limited, Research Division - MD

* Bentley Cross

TD Securities Equity Research - Associate

* Drew McReynolds

RBC Capital Markets, LLC, Research Division - Analyst

* Gregory W. MacDonald

Macquarie Research - Head of Equity Research of Canada

* Jeffrey Fan

Scotiabank Global Banking and Markets, Research Division - Analyst

* Maher Yaghi

Desjardins Securities Inc., Research Division - Analyst

* Phillip Huang

Barclays PLC, Research Division - Senior Equity Research Analyst

* Robert Goff

Echelon Wealth Partners Inc., Research Division - MD of Research, Head of Research, Telecom Services and New Media Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the COGECO Inc. and Cogeco Communications Inc. Q2 2017 Earnings Conference. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Patrice Ouimet, Senior Vice President and Chief Financial Officer of COGECO Inc. and Cogeco Communications Inc. Please go ahead, Mr. Ouimet.

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Patrice Ouimet, Cogeco Communications Inc. - CFO and SVP [2]

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Good morning, everybody, and welcome to our second quarter conference call. So joining me today are Louis Audet, Rene Guimond, Andrée Pinard, Pierre Maheux, and [ Philippe Bonin ]. So before we begin this call, I would like to remind the listeners that the call is subject to forward-looking statements, which can be found in our press release that was issued yesterday.

And I will now turn the call over to Louis Audet.

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [3]

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Thank you, Patrice, and good morning, ladies and gentlemen, and thanks for joining us today to discuss the results of Cogeco Communications and COGECO Inc. for their second quarter of fiscal 2017.

The performance has been solid in our cable operations, with some weaknesses at Cogeco Peer 1 where our turnaround efforts continue. Let us begin with Cogeco Communications. Revenue was up 1.7% in the quarter to reach $561 million; EBITDA is up 2.2% to reach $254 million. And if you were to take out the effect of the exchange rates, both would have been in the 4% range. The quarterly dividend has been reconfirmed at $0.43 per share this quarter, a 10.3% increase over last year.

Let us now look at the individual components of Cogeco Communications. At Cogeco Connexion, we have generated strong year-over-year growth of 3.1% in revenues and 4% in EBITDA. Our PSU additions have improved over last year, thanks to our best-in-class Internet offering and our industry-leading TiVo video service.

At Atlantic Broadband, we continue to generate revenue growth in U.S. dollars in the range of 6%, as expected. Programming cost increases have had a temporary impact on January and February results, with EBITDA in the U.S. growing at 4.3%, and this should be back in the 5% range in the near future.

The financial results in Canadian dollars are obscured by the recent rise in value of the Canadian dollar against the U.S. dollar. We continue to be very satisfied with the PSU additions, which continue to be satisfactory. We continue to seek opportunistic cable acquisitions in the United States, where we're enjoying superior organic growth in the mid-single digits, and we plan on keeping a strong financial position.

At Cogeco Peer 1, we continue to work on improving Cogeco Peer 1's operations with an emphasis on market positioning, sales generation and capacity utilization. As the turnaround is taking more time than initially planned, we are now forecasting the second half of the year to be slightly lower than in the corresponding period of last year. We believe, nonetheless, that this is a growth industry, and we are committed to improving its results and have no reason to believe that we couldn't improve its results. As promised, Cogeco Peer 1 continues to generate unlevered free cash flow to the level of $6 million in this second quarter. Unlevered free cash flow to be generated in the second half of the year is expected to be more modest due to the timing of certain CapEx initiatives, with generated free cash flow still forecast to be substantial. And we will not make further acquisitions in the business information, communications and technology sector, as we are still focused on turning around Cogeco Peer 1.

Turning now to COGECO Inc. We continue to register excellent audience ratings in our radio stations, and sales and financial results in general are excellent. Our outdoor advertising subsidiary, Cogeco Métromédia, having been sold on January 5, 2016, this second quarter is beginning to be more directly comparable to the same quarter of last year. Revenue is up 1.4% at Cogeco to reach $586.4 million, and EBITDA is up 2.3% to reach $258 million for the second quarter. The quarterly dividend has been reconfirmed at $0.34 per share this quarter, a 15.3% increase over last year.

And in the second quarter, Cogeco has repurchased 92,600 shares for a cost outlay of $5.5 million under its normal course issuer bid announced last August. Cogeco expects to continue such repurchases at a slightly higher pace in the next quarters.

In conclusion, we are focused on generating good results in all of our operating subsidiaries, including improving the performance of Cogeco Peer 1.

I would like to take this opportunity to clarify some of the questions that we have received from the investment community during the quarter, and they are as follows: We continue to invest adequate capital to improve upon our Canadian and U.S. cable territories and bringing state-of-the-art services to our customers at the appropriate moment. In particular, we are pleased with our TiVo video platform. It has delivered tangible benefits for Cogeco Communications during the course of the last 3 years, including the recent launch in Canada of the 4K DVR. The TiVo platform addresses current market needs, and we are confident that the platform will evolve to satisfy future market needs that can be provided for by our company in a profitable manner to serve our shareholders.

Following the 1 gigabit per service -- per second service launch in Burlington/Oakville last fall, we will announce further launches in Canada as they occur. In the U.S., we have launched a 1 gigabit-per-second service in Connecticut last August and plan to have such a service widely available in Miami by August of this year.

So that concludes our answers to the key questions we have received and this presentation, and we are now ready to answer your questions.

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Patrice Ouimet, Cogeco Communications Inc. - CFO and SVP [4]

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So operator, you can proceed with the questions-and-answers period.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we will go to our first question, Mr. Phillip Huang with Barclays.

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Phillip Huang, Barclays PLC, Research Division - Senior Equity Research Analyst [2]

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Yes, just a quick question and then maybe a longer-term question for you guys. Certainly, BCE appears to be quite focused on constructing fiber to the premise in the 416 area code of Toronto. Just given the proximity of Burlington and Oakville, I was wondering if you guys have seen any evidence of fiber build in those territories yet, any sort of truck rolls et cetera?

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [3]

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Well, the Burlington and Oakville geographies are characterized by high proportions of underground and buried plant, so it's not the easiest place to install fiber-to-the-home for anyone. What is your second question, please?

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Phillip Huang, Barclays PLC, Research Division - Senior Equity Research Analyst [4]

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Yes. So the second question was a bit of a longer-term question. I know 5G is still certainly years away, but the preparation for that is certainly much closer. And you can see -- we can see from the development in the U.S. I was wondering, really, how do you see Cogeco's positioning evolve in a 5G world? And what investment needs to be made in the coming years? And I think this question, I guess, I would ask for both the Canadian and the U.S. part of the business as well.

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [5]

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So 5G technologies are technologies that will be extremely expensive to deploy. And there -- we have no plans to use it widely in our cable systems because there is no need to do that. However, we will use it occasionally, where it makes economic sense to serve certain pockets of our network. But otherwise, since we do not operate a cellular phone service, there is no requirement for us to engage in widespread use of it.

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Phillip Huang, Barclays PLC, Research Division - Senior Equity Research Analyst [6]

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Do you think that once a -- one of your competitors do launch 5G, that it could potentially increase [ on your ] wireless substitution of fixed broadband that could potentially eat in to your market share? Like do you -- how do you kind of see -- because it's so nascent, we're not really sure exactly what...

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [7]

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It's a question of economics, Phillip. You're talking about 5G, a very potent tool, a very expensive tool and not conducive to winning market share when cable has such an inherent economic advantage, both from a capital standpoint and from an operating standpoint. So I think you should -- that's just not in the cards. But we are currently able to offer 1 gigabit-per-second service on our -- in our cable systems. And with the advent of Full Duplex DOCSIS 3.1, this will go all the way to 10 gigabit-per-second symmetrical service with -- essentially with the same plant.

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Operator [8]

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And we will go to our next question from Greg MacDonald from Macquarie.

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Gregory W. MacDonald, Macquarie Research - Head of Equity Research of Canada [9]

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Louis, I have a strategic question for you. So given the valuation on your stock, I would argue your stock's fairly cheap. So given the valuation on your stock, if Rogers were to sell its Cogeco shares, would the company consider purchasing them? I know it's a big ticket, but by my math, I think you could do this with cash and not risk your investment-grade credit rating.

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [10]

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Well, that's an interesting question. Well, I guess, we'll have to think about it. Thank you for bringing it up. I suppose you're bringing it up as a suggestion.

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Gregory W. MacDonald, Macquarie Research - Head of Equity Research of Canada [11]

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Well, I want to bring it up in terms of another suggestion and ask you what your thoughts are on this. So if I make an observation here, if you were to sell your data center business at current market values in the stock market and you were to acquire your own shares back from Rogers at current valuations in the stock market, I calculate that you can create significant value; in fact, much higher ROIC than if you were to buy more U.S. cable assets. So just based on where the valuation math is right now, I wonder if you just might comment on that overall.

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [12]

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Well, I think you're ahead of us in terms of having performed your calculations. I think we are going to look at this idea very closely. Selling a business at the performance of which you are not satisfied with is certainly not a good idea. And in any event, we have not come to the conclusion that we should sell it. But I understand the question, and we will consider your -- consider this idea. But buying back stock hasn't been something that we have considered, other than in a normal course issuer bid, in the -- for the last 10 to 20 years. So thanks for the idea, Greg.

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Operator [13]

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And we will go to our next question from Rob Goff from Echelon.

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Robert Goff, Echelon Wealth Partners Inc., Research Division - MD of Research, Head of Research, Telecom Services and New Media Analyst [14]

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Very simple ones. You commented, Louis, that you were looking for the U.S. cable EBITDA growth to uptick a bit. Given that there were increased programming expenses, I take it that the uptick in the EBITDA would reflect on price increases to recoup those programming costs.

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [15]

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Oh, I think it would come through tighter operation. We have 3 -- we have 2 quarters left in this year to sort of steer it back up, right?

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Robert Goff, Echelon Wealth Partners Inc., Research Division - MD of Research, Head of Research, Telecom Services and New Media Analyst [16]

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Okay. And if I could, can you talk to the traction that you're seeing on the 1 gig in terms of -- is it a competitive weapon to attract nonsubscribers? Is it an upsell product? And just how that mix might be.

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [17]

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Well, the take-up is very low because it's a premium service. But it clearly establishes that we are capable of fulfilling whatever needs the customer has and comfort the customer in that respect. So I think that's the key ingredient about 1 gigabit per second today. I suspect we will have more demand in the business market in the United States, but that remains to be seen.

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Operator [18]

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And we will go to our next question from Maher Yaghi with Desjardins Capital Markets.

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Maher Yaghi, Desjardins Securities Inc., Research Division - Analyst [19]

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We're seeing a -- the CapEx in the first half in terms of your -- compared to your guidance to be on the low side. Can you talk a little bit about what is expected to ramp up in terms of CapEx in the second half to fulfill your guidance? And as a follow-up to that, can you discuss your DOCSIS 3.1 deployment plans in Canada? Without getting too much details, I know you don't like to comment about where you're doing it, when is the time -- basically, when you'll be finished. But I guess the question comes to what you discussed earlier on the call is -- just to get an appreciation of the preparations you guys are doing ahead of the telcos increasing the footprint on fiber-to-the-home in your territory. So can you -- I'll start with that, and I have a follow-up question.

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Patrice Ouimet, Cogeco Communications Inc. - CFO and SVP [20]

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Okay. So I'll take this one. So on the CapEx front, it primarily comes from lower capital investments in the quarter at the -- in the Canadian business. And as you saw, we did not change our guidance, so we're expecting this to pick up in -- later on. It comes primarily from CPE, so customer premise equipment purchases that can sometimes be lumpy. We have construction as well that can be lumpy, depending on the weather and different plans we have, so infrastructure investments. And there are some IT investments as well. And on the Cogeco Peer 1 side as well, we generated significant free cash flow in the quarter. We expect this to be lower in the second half of the year, and primarily has to do with investments in server farms that we have, so again these can be a little lumpy; and some IT investments as well. So that's for your first question. For the second one...

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [21]

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For your second question, we do not really discuss what we're going to do and how we're going to do it. But what you should know is that most of the preparatory work is done, and it's now a matter of selecting the geographies where we think it makes sense to do it. And I will not go any further in answering your question since this is a sensitive competitive issue.

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Maher Yaghi, Desjardins Securities Inc., Research Division - Analyst [22]

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Okay. And as it relates to the upgrade, it must -- I mean, is it fair to assume that it will be financed throughout your current CapEx intensity ratio? And the follow-up question I have is, as it relates to ICT, we're starting to see improvement in year-on-year revenues. It's -- the EBITDA, I understand, is lagging. But is the -- how much lag is EBITDA going to take before we start to see it be in line with the revenue line growth or a slight decline, in this case?

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [23]

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We would normally -- to answer your first question, we would normally expect to have the investment in DOCSIS 3.1 be part of our normal CapEx envelope, as, I'll remind you, these improvements can be done for between $60 and $70 per home passed. So this is extremely economical as compared to what our competitors have to do. Hence, it warrants much better rates of return as time goes by. So that answers your first question. The second question, I'm a bit -- a little bit hard-pressed to answer your question. I'm not sure, is it realistic to answer this, Patrice, or -- because I'm not sure I want to commit to that.

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Patrice Ouimet, Cogeco Communications Inc. - CFO and SVP [24]

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Yes. So basically, just generally, we can provide you -- as Louis mentioned, we're expecting the second half of the year to be slightly lower than last year. So that gives you basically, for the full year, low single-digit decline in revenue and higher single digit in EBITDA. That being said, longer term, as we're working the plan to improve the business, we'll come back to you. But we would not want to comment on the following year at this point.

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Operator [25]

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And we'll go -- we'll take our next question from Jeff Fan from Scotiabank.

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Jeffrey Fan, Scotiabank Global Banking and Markets, Research Division - Analyst [26]

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More of a strategic question related to wireless. One of your peers in the U.S., Comcast, recently announced they're heading into wireless using an MVNO. Their whole objective, I guess, at the beginning is to try to reduce the churn of their customer base, your -- their core cable customer base even though they're not probably going to make a lot of money on the MVNO business itself. They already have very good customer metrics, so they're looking to enhance it even further. Turning the question over to you, you -- Cogeco seems to be in a position to perhaps consider something like this. Your customer metrics are already strong, but perhaps a wireless could further enhance that. Wondering if you have any thoughts about that and whether you think that's an opportunity.

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [27]

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Well, as I think we've said on a number of occasions, we would love to enter into a mutually profitable MVNO relationship. But the truth of the matter is that, for the time being, this is not really possible. But when it becomes possible, we will be delighted to entertain meaningful discussions to work and progress in that direction.

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Jeffrey Fan, Scotiabank Global Banking and Markets, Research Division - Analyst [28]

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If I can just go into that a little bit further, is it primarily because of the rates that you are being offered is not attractive enough, such that you might be losing money on the MVNO service? Or do you need to make money or do you -- can you break even and still see a net benefit overall?

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [29]

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Well, I think the market is closed to MVNO. It's closed. It's very simple. I am sorry, I am being a little brutal in the use of my terms, but this is not an opportunity at this point. It will become. The CRTC has mandated resale to third parties over cable facilities. Still a mystery why it's not amended -- mandating resell over wireless facilities. It's a mystery. I suppose, eventually in time, that mystery will be resolved and redressed.

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Jeffrey Fan, Scotiabank Global Banking and Markets, Research Division - Analyst [30]

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No, I appreciate that. Another question related to the video service. Can you just give as an update on your offering to your video customers on TiVo related to over-the-top, i.e., if customers want to get offer -- get their video service on an iPad or tablet or outside the home, can you just update us on what you're offering there, if you're offering anything? And what your video rights are if you're able to actually (inaudible)?

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [31]

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We're offering -- virtually, the full lineup is available for viewing through streaming outside of the home through the tablet or the smartphone.

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Patrice Ouimet, Cogeco Communications Inc. - CFO and SVP [32]

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There's also an opportunity to download and go. So basically, downloading on an iPad and seeing the shows without the connection. We have TV Everywhere as well. But I would say, in terms of product offering, it's fairly wide to provide a lot of flexibility to consumers. And as you know, the TiVo platform also offers Netflix and access to YouTube as well, so it's a combined OTT as well as the full lineup of video-on-demand and linear channels as well.

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [33]

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Yes. And this the most evolved video platform currently widely available in the Canadian market.

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Jeffrey Fan, Scotiabank Global Banking and Markets, Research Division - Analyst [34]

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Yes, I appreciate that. And then just one very quick follow-up on that. Given your proximity to the Toronto market, could your customers take that TiVo service outside their home but outside your cable footprint in Toronto, for instance? And use -- you can get the same access to the video?

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [35]

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Just -- Yes. Well, they have to be a customer resident in our service area. But if they're streaming outside of our service area because they are on the GO train or because they're visiting a neighbor, sure, they can do that.

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Jeffrey Fan, Scotiabank Global Banking and Markets, Research Division - Analyst [36]

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Okay. But you can offer that...

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [37]

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But it's not sold -- oh, no. No, no, no. This is only sold to people who are connected to our network, where our network exists. Then, through wireless means, they can access it. Is that clear?

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Jeffrey Fan, Scotiabank Global Banking and Markets, Research Division - Analyst [38]

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Yes, very clear.

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Operator [39]

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And we will go to our next question with -- from Bentley Cross from TD Securities.

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Bentley Cross, TD Securities Equity Research - Associate [40]

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I just wanted to follow up a little bit on the Business ICT segment. It sounds like that turnaround's been pushed out yet again. Just -- well, hoping you guys might be able to provide some color as to when that turnaround might happen, and what it will take to finally get this footing back under it.

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [41]

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Well, you know how it is. Turnarounds are not always an easy thing to do. Sometimes, they take more time than you would like or more time than you would expect, and I don't think we are in a position to comment right now as to when that might be. But it won't take an indefinite amount of time. I think it'll take yet a not-too-long period of time. This is a growing market. There is no reason that this company, once we've got it straightened out, cannot perform well in that marketplace, and we are making all the moves for that to occur. In the interim, some people have suggested that this was a drag on our management time, and I'm happy to confirm that it isn't. All of the strategic decisions have been made, they are now behind us. It is now largely a question of execution. So the head office is much less involved in the -- in this issue. So this is not a drag on management time. So I guess this is the best I can tell you at this point in time.

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Bentley Cross, TD Securities Equity Research - Associate [42]

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Maybe just to expand on that. Would you be willing to offer what the current business mix is? I mean, what is hosting versus cloud, however you want to break it down?

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Patrice Ouimet, Cogeco Communications Inc. - CFO and SVP [43]

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Sure. So we don't break it down specifically, but generally, the hosting business is the larger piece of it, slightly more than half the business, and that comes from the Peer 1 acquisition; and the balance is made up of colocation and transport.

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Bentley Cross, TD Securities Equity Research - Associate [44]

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Is it fair to assume that the hosting business is serving as a drag, whereas the rest is just continuing to grow?

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Patrice Ouimet, Cogeco Communications Inc. - CFO and SVP [45]

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Well, the hosting business is the area where there's a much bigger transformation. I would say colocation is very similar to -- the service offering right now is very similar to what you've seen in the past few years. Transports are the same. The hosting is where you have new players acting, especially in the cloud space. So there's a transformation of the service offering that's occurring for us and several other players as well. So we are still offering the same kind of services and hosting on our servers, and we're also resellers of cloud services. So that keeps evolving, and that's part of the transformation.

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Operator [46]

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Our next question comes from Aravinda Galappatthige from Cannacord Genuity.

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Aravinda Suranimala Galappatthige, Canaccord Genuity Limited, Research Division - MD [47]

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Just a couple from me. With respect to -- I know that, in the past, the ongoing promotional battles between Rogers and Bell had an impact on you, given your proximity. Has there been any change in those dynamics? Obviously, you try to monitor it, but sometimes it's not easy to kind of track those changes. Are you seeing any kind of easing in those promotional activities affecting you? And then, secondly, just a modeling question on enterprise CapEx. Obviously, we have an idea what it would track this year. Should we use the CapEx this year as kind of a baseline for 2018 as well? Or do you expect a kind of a rebound, given the sharp downturn in '17 in terms of capital spend in that space?

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [48]

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So I'll answer the first question. I think Patrice will answer the second. In terms of promotional intensity, I would characterize the market as being extremely dynamic and competitive, as it always has been. There might be variations, but I wouldn't think that these variations would influence the general thrust of your question. I would say this is a competitive market, and we deal with it accordingly using the best skills and tools that we have available. I think that's the best answer I can give you.

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Patrice Ouimet, Cogeco Communications Inc. - CFO and SVP [49]

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On the capital expenditures for Cogeco Peer 1, so what we've mentioned before is numbers in the low 20% capital intensity. So generally, we feel that's a good number to use for the business. The only exception is that we've built 2 pods in our Kirkland facility. So as we build these additional pods, there will be additional CapEx to put there. But that would be the exception. I would say, otherwise, we're not planning to open data centers. And the -- running the business would be in the low 20%.

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Operator [50]

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And our next question comes from Drew McReynolds from RBC Capital Markets.

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Drew McReynolds, RBC Capital Markets, LLC, Research Division - Analyst [51]

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Yes, Louis, just on the SMB market, you had put a number of investments into that market over the past few years and, obviously, you are gaining some traction there. I'm wondering if you can just kind of flesh out for us how it's going, both in Canada and in the U.S. And second question, just on the price increases, kind of a typical question here, I just wanted to get your customer reaction to those price increases. Obviously, you're upping your game with Internet speeds and your video offering and we're seeing some good RGU improvement. Just in terms of pushback or reaction to or acceptance from your customers to those price increases, is anything changing, I'd say, relative to the last 6 months, a year, 2 years or whatever time frame?

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Patrice Ouimet, Cogeco Communications Inc. - CFO and SVP [52]

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Okay. So I'll start with the SMB. So the SMB we're serving generally is, obviously, within our territory, and it's -- a good portion of it is through our current network, so the coaxial network. We are also installing fiber optic lines as well for the bigger customers. So there's different price points for those, and that's true in Canada and in the U.S. But I would say, generally, the investment has been limited so far because we're using our current infrastructure. And in both countries, this is something that's growing double digits. So we're very happy with the progress. And as years pass by, we're adding new services as well, like Software-as-a-Service. So we're resellers of certain services in Canada, Hosted PBX phones, which is a popular service as well. And as time goes on as well, sometimes we do extend the network a little bit, and we might eventually also purchase small companies that are more geared towards the commercial sector. Not something we've done so far, but it's always something that's on our mind, is -- if it's an extension of where we are.

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [53]

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And with regards to price increases, that's always a sensitive issue. We try to raise our prices as little as reasonably possible. We try to be as efficient service providers as possible to minimize price increases as much as we can. But there are some costs that cause us to increase them. So it's something we never do lightly. Now have we received tremendous pushback? No, I can't say we've received tremendous pushback, but we are careful about what we do, how we do it, and the value proposition that lies behind that price increase. So as you can see, it's not an easy answer, but I think it's the best I can give you for now.

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Operator [54]

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That concludes today's question-and-answer session. Mr. Ouimet, at this time, I will turn the conference back to you for any additional remarks.

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Patrice Ouimet, Cogeco Communications Inc. - CFO and SVP [55]

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All right. I would like to thank you -- to thank everyone for participating in today's call. So we'll be looking forward to disclosing our third quarter results in July. And as usual, if you have questions in the meantime, feel free to call us. Thank you.

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Louis V. Audet, Cogeco Communications Inc. - CEO, President, Director, CEO of Cogeco Inc and President of Cogeco Inc [56]

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Thank you.

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Operator [57]

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Ladies and gentlemen, this does conclude today's call. Thank you for your participation, and you may now disconnect.