Good morning, ladies and gentlemen. Welcome to BCE's First Quarter 2013 Results Conference Call. I would now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead, Mr. Fotopoulos.

Thank you, Jason. Good morning to everyone on the call and webcast. Joining me here today, as usual, are George Cope, Bell's President and CEO; and Siim Vanaselja, our CFO. We released our first quarter results earlier today. All the usual information, including the news release, the slide presentation for this call, are all available on to BCE's corporate website. Following a review of the slide presentation by George and Siim, we'll move to Q&A. However, because of our Annual General Meeting that's taking place this morning, we'll be ending the call slightly before 9:00 a.m. today. So we'll take as many calls as time permits. However, as usual, before we begin, I want to remind you that today's presentation and remarks by both George and Siim will contain forward-looking statements that represent our expectations as of today and accordingly are subject to change. We do not undertake any obligation to update any forward-looking statement except as may be required by Canadian Securities Laws. A number of assumptions were made by us in preparing these forward-looking statements, which are subject to risk. Results may differ materially. Details on these risks and assumptions are in our filings with the Canadian Securities Commission and with the SEC, which are also all available on our corporate website. So with that done, I'll turn it over to George.

Great. Thank you, Thane. Good morning, everyone. Thank you for joining us. I'm on Slide 4 for those that are going through the deck. So let me just begin by saying it clearly was a very solid first quarter for us. Our focus on the 6 strategic imperatives continues to drive steady EBITDA and EPS growth for our shareholders. I think importantly in the quarter is the strong Wireless and Media EBITDA growth and the moderating Wireline declines resulted in a margin improvement in the quarter to 37.7% this first quarter, an improvement over last year. We turn to the next slide. Our wireless momentum continues in the marketplace. We had a very strong first quarter in terms of net adds at 59,000, the seasonally weakest quarter of the year. Our retention span at 10.3%, we believe, puts us best-in-class in the industry. And importantly, even holding that expense at 10.3%, we were able to reduce our postpaid churn from 1.35% to 1.25%. We also saw a relatively stable COA, which reflects the benefits of beginning to sell the new BlackBerry devices, which has a lower subsidy than some of the other smartphones and will improve our sales mix, we believe, over time. From a technology perspective, we continue to lead the market. We now have a broad LTE footprint of 70% versus our largest wireless competitor today who stands at 60%. Sometime over the next week or so, we will surpass 800,000 Mobile TV subscribers. And this morning, we have just announced, with Royal Bank of Canada, RBC, coming a launch of mobile payment services in Canada for all the RBC cardholders, we think the next evolution of the mobile industry driving the capability for consumers across Canada to seamlessly use their wireless device in the end as their…

Thank you, George, and good morning, everyone. I'll begin with some brief highlights of our first quarter financials on Slide 12. We had a good start to the year with continued strong Wireless performance. We had an improving Wireline profile, as George said, and a strong contribution from Media to consolidated EBITDA and cash flow. And I think all of that is very consistent with the guidance that we provided at our February investor conference. We grew service revenues at Bell 1.3% this quarter, with higher year-over-year revenues across all of our growth businesses. Bell's EBITDA grew 2.1% this quarter. That was led by Bell Wireless, which delivered another excellent financial quarter, and Bell Media, which benefited from higher specialty TV rates and programming cost savings. We also saw improvement in Bell Wireline's EBITDA trending this quarter as we continue to evolve the mix of Wireline services away from voice. Bell's EBITDA margin increased to 37.7% this quarter on a flow-through of higher Wireless ARPU, stable rates of spending on Wireless subscriber, acquisition and retention, and operating cost savings realized in both Wireline and Media. Adjusted EPS grew $0.08 over last year to $0.77. And finally, EBITDA less CapEx provided a strong contribution to free cash flow, growing almost 13% in the quarter. I'll say that our capital spending was lower year-over-year, but we expect the pace of our capital programs to step up through subsequent quarters. And with that overview, let me provide some commentary on the results for each of our operating segments. On Slide 13, in our Wireless segment, service revenues were up 7.2% on postpaid revenue growth of 8.9%. In the quarter, we expanded our smartphone customer base and increased our penetration of customers in higher ARPU markets. Data revenue growth of 24% in the quarter…

Thanks, Siim. So before we start the Q&A period, I do want to remind everybody on the call today that because of our time constraints this morning, to keep your questions short, to the point, and limited to one, so we can get to as many of your questions as possible. To the extent we have time, we'll circle back. But I doubt we will. But on that, Jason, we're ready to start the Q&A session.

[Operator Instructions] The first question is from Greg MacDonald of Macquarie Capital Markets.

So I'm going to say really good IPTV numbers at 47,500. But we're seeing a trend here, right. The IPTV numbers are getting better. The satellite numbers seem to be getting worse. And I want to try and ask the question, to put the context of the Internet subscribers in context here, 2,000 was lower than I would have expected given that strong IPTV number. I knew you said 13,000 in the footprint. So maybe you can just give us some color on how much of that satellite loss is going to Fibe customers versus the competition, to try and help us understand what's happening on the Internet side. And in particular, on that Internet side, is there a mix issue here? Is it more a business loss versus consumer or in-market on the Fibe side versus out-market? What's happening there to hold that number back?

Good question, thank you. First of all, we are absolutely thrilled with the momentum that we've got on Fibe TV. In terms of satellite conversion, it's, interestingly enough, consistent with what we said over last year, about 15% of our net adds on Fibe TV came from our satellite base. So the remaining 85%, obviously, came from either market growth or our competitors in terms of Fibe TV. In terms of Internet, I -- absolutely, we're pleased actually with the 13,000 in IPTV footprint. We are RGU-positive in our IPTV footprint now; NAS versus Fibe and Internet, we're positive there. So it's about expanding the footprint. I would say, though, it is a good question. One area we definitely have seen an impact, on the wholesale side, we believe a significant market share had moved to the cable operators over the last 12 months because of some regulatory pricing that put cable regulatory wholesale rates well below Bell's wholesale rates. And so the wholesale market moved to that side. The recent regulatory decision, we'll have to see how it migrates. It lowers our price, puts it more in -- a more competitive position, I guess, is what I would say. So that may have some impact. But there is no doubt that we have had negative net adds on the wholesale side over the last 15 months. And my only assumption would be that those wholesale probably went to the cable side. They're much lower ARPU, obviously, but they account in nets. And that's probably why our revenue growth was so strong in Internet and Fibe TV versus our sub growth. It's because of the wholesale deterioration we're seeing. So that is actually a contributing factor. I'm glad you asked the question.

The next question is from Maher Yaghi of Desjardins.

George, I wanted to ask you about the EBITDA improvement in terms of year-on-year trends. You talked about it in the guidance when you gave the guidance earlier this year. We did see a turnaround in terms of year-on-year decline. Do you still continue to expect that improvement to be sustainable throughout the year? And in terms of the Business Markets on the Wireline, a nice positive surprise there. Do you believe this improvement will continue or this was due to one-time events in the quarter that helped it be strong like that?

Just for the second part of your question, can you repeat that?

The Business Markets...

Oh, yes. Sure, sure. I'd be happy to -- sorry. So first of all, on the Wireline side, yes, what we said at the Investor Day is still our view. We expect over the year that our Wireline decline will be less than the year before, as we've said. And the margins you saw, I mean, frankly, without the one-time CRTC catch-up of last year, we were really, really pleased with the EBITDA margin on Wireline. And so that strategy continues to be mapping where we want to see it. And on the business side, you're right. It was -- we're not out of the woods there in terms of growth because we still need to see employment growth. And everyone on the line, of course, knows that -- that's a big challenge, nationally. And we're, obviously, impacted by that given if companies are growing employment, we're growing revenue. But the underlying trends in BBM were certainly better in the first quarter than we had seen recently. And it's early in the year. But certainly, probably if there is one little surprise even internally, it's probably on that side of the shop.

The next question is from Jeff Fan of Scotiabank.

My question is on the wireless substitution trend. Just wondering if you're starting to get a little bit more concerned about the acceleration in wireless substitution. And wondering if whether any price increases in the residential voice is causing that acceleration. What are your thoughts there? And what kind of profile -- what are the profiles of the customers that are actually cutting the cord?

Yes, well, as I said, first of all, consumer voice is now 9% of our total revenue. So not -- that it's not important but, obviously, declining in overall importance. Without a doubt, wireless substitutions increased in the country over the last 15 months. I'll leave it to the analyst community to do the net adds of the cable operators against our declines. And you can pretty much assume the gap is wireless substitution. We know from reports that we're getting our disproportionate share of those on our Wireless business because we track those reports pretty carefully. But all that aside, we don't think pricing in the Home Phone market really is impacting at all the wireless substitution. We think it's a technology and convenience choice that customers are either making or not making. I would say, though, in fairness, on the Fibe TV side, where we have been pulling market share, we certainly, particularly in Ontario, saw extremely-aggressive triple for the third-product pricing from one of our competitors at a price well below ours. We think that moved a little bit of the share, for sure in the quarter. We're not going to play in that space because we think this is a technology evolution to wireless. It's just going to happen. And that's all accounted for in our numbers in the year. And we had those, obviously, in our outlook for this year's guidance, and so it hasn't changed.

The next question is from Dvai Ghose of Canaccord Genuity.

If I look at the 2 obvious risks to your Wireless business, one is regulatory and one is pricing, they're not necessarily from the new entrants, as we've seen in the past. But one of your incumbent competitors seems to be particularly aggressive this year. I'm wondering how serious these risks are in your mind?

Yes. I think -- first of all, thanks for the comment on Wireless. I do think we continue to monitor closely the pricing environment in the marketplace. You are -- I agree with your comment that it's one particular incumbent, specifically in some markets. We're going to compete in the marketplace and make sure our customers have the competitive pricing they need in the market. We have a healthy growth industry. So I would expect that to be continued to be reflected in the industry as we go forward. But clearly, we are seeing some pockets where it's more aggressive than, certainly, we would prefer. But that's the marketplace we're in. Clearly, we're able to compete with that head-to-head. And what I am most pleased about in the quarter, with all that going on, our churn was reduced and we kept our costs of retention at the level that we saw. All moving the right direction -- and for us, it's geographic as well. The geography strategy is really starting to work. We saw some of that benefit as we talked about in Manitoba. That's a new market for us. It's not huge, but we'll add about 40% more distribution this year in Manitoba to continue to strengthen that opportunity. And as everyone knows, we opened 100 stores in the Alberta, B.C. markets last year with The Source in Bell. All that helps us a little bit with mix. Because clearly the toughest ARPU market always in the country has been Québec. And that's not the pricing. That's just the usage of the customer base there. And so the more we get in other geographies, the better our blended ARPU.

The next question is from Adam Shine of National Bank Financial.

George, one of the Investor Day slides back in February pointed to improving traction in net RGU trends, and obviously, what looked like something approaching close to breakeven. The marketplace or consensus is probably close to the negative 150k still. So acknowledging that the sub counts were a little bit light in Wireline at least per street numbers, what can you say in terms of where some of the upside surprise might be as we track through the rest of the year?

Well, I think, what I would probably say is, the guidance we provided, we're comfortable with. There is always puts and takes. I mean, I think we would probably say that Wireless, internally, probably exceeded our expectations a little bit in the quarter. And on the Wireline side, we want to do better on Internet than we did. And Fibe TV is where we needed it to be. So in terms of upside, to me, it's about footprint expansion on IPTV to continue to pull through the Internet. That's the strategy. And then it's a function of the pricing, or not, we see in the marketplace. So I think, overall, steady quarter, we're on track and on track for our guidance.

Maybe as a quick follow-up, you talked in prior quarters about upping the game in Ontario. Can you speak to the Québec versus Ontario dynamic?

Yes, we were stronger in Ontario. Last year, we talked a lot about in Québec being disproportionately strong. I would say it -- some of that trend reversed in Q1.

The next question is from Drew McReynolds of RBC Capital Markets.

George, just can you kind of drill into the Business Market a little bit more for us, just kind of talking about enterprise versus SMB. And then can you just also talk to kind of where you are on leveraging the relationship with Q9?

Sure. Well, on the -- I don't want to overplay the quarter from the B2B side. But anything that's a reversal in the trend is positive from our perspective. There, we've undergone, as people know over the last -- maybe they don't, but 12 to 18 months, a pretty dramatic change in management leadership there under Tom Little. And we're starting to see some of those results. At the end of the day, business, as any other part of the company, execution is through leadership. We're seeing the type of leadership there we want to see in the marketplace. Our product portfolio, we're investing more than we have in the past. Some of that is helping underlying trends. In terms of Q9, no doubt, the hosting site is contributing to our -- it's not in our numbers, but it's contributing to our business growth because of our ability to do managed service offerings, et cetera. That is an area of growth for us. And Q9's meeting our expectations at this point. And combining that with our Bell data centers, we're now at 20 data centers that we can market to our enterprise clients, which we think will be important going forward.

And just on the SMB market, are you seeing a little bit more continued competition from the cable cos?

We always do the -- our NAS improved slightly year-over-year. So there really wouldn't be much that we would say had changed there. We've certainly seen no improvement. We call it enterprise mid and small. In the mid-market, we're probably most pleased with the quarter.

And just maybe a quick follow-up for Siim, just in terms of your cost savings target for the year and maybe in your results, how much have you realized of that -- think it was $170 million for the year.

I think we realized about $25 million for the year. And that would be higher if we take into consideration that $14 million impact from the wholesale decision. And that's kind of consistent with our business plan. We're right on track to achieve our full year target. A lot of that is coming from efficiencies and productivity improvements in our call centers, in our field operations. And we'll see that ramp up through the course of the year.

In Wireline alone, as Siim said earlier, excluding the CRTC regulatory impact, just in Wireline alone, it was $37 million in the quarter. So we're on track for what we said in the year.

The next question is from Glen Campbell of Bank of America.

A question on Wireline and on, I guess, the Internet and satellite, in particular. George, could you comment a little bit on where you're seeing more churn on satellite, whether it's out of footprint, in footprint? And do these tend to exercise single-play subs or bundled with Internet? Where I'm going with this is whether some of the softness in Internet is due to bundled losses around satellite.

Yes. So as I said, on the satellite side, 15% of our net adds on Fibe are coming from our own satellite base. So that -- and that trend has been pretty stable, folks, over the last 12 months, so we're feeling that's where it probably is. Secondly, no doubt, cable guys are fighting for market share in TV. So there have been pretty aggressive campaigns against the satellite products. So that's part of the competitive dynamic. And we have a pretty significant footprint of telco IPTV now in Canada right from the East Cost to the West Coast. And some of that, obviously, is part of migration that we see. So I think if 15% of our customers migrate to IPTV, I'll let the analysts try do some assumption of what percent that are -- other telcos are getting their IPTV subs from, you got to assume roughly a certain percent is coming from us. And that would be a safe thing to assume. That's how we model it.

The next question is from Tim Casey of Bank of Montréal.

George, talk a bit about how you see the handset subsidy metric evolving. I mean, it seems that the next generation of handsets, the improvements there will be incremental rather than revolutionary. Are you expecting a step-down in the subsidy dynamic? And could you also comment on maybe relative shares there? Do you -- how do you see that evolving among the various handsets?

Yes. What I would say is, we're a handset agnostic, obviously, as a carrier, letting the customer decide what handset they prefer. But you're right. I don't think it's going to be a sudden step-down. But I think it will evolve to a steady improvement. And that's driven by mix, now we have 3 really strong competitors back in the smartphone space, not 2. And that's obviously as a buyer, advantageous, and for the consumer from a choice perspective. So there is no doubt, in the first quarter, mix of having the BlackBerry in our portfolio helped us in our overall cost of acquisition. And we're excited about their new handset lineup, as we are with Samsung's new handset lineup and other suppliers. The more consumer choice, we think that puts the right COA pressure we want to have on the supply side. And over time, I think that helps us a little bit going forward. In terms of market share, I won't comment. That would be not -- one, not fair; and two, frankly, I think outside any of our agreements with our suppliers.

Have you factored in any material change in your -- in the subsidy into your 2013 numbers? Or are we talking years out?

There is no material change, but we've been going in one trajectory for the last 2 years. And this is the first time we saw it go a little bit the other way, is what I would say. And so I think -- I know nothing material there. And one of the issues, of course, we have -- we still have -- which is a great opportunity, we still have 30% roughly of our base who don’t have smartphones. And I am of the belief that 100% of Canadians will migrate to smartphones. But of course, that drives subsidies as the entire base migrates to that.

The next question is from Vince Valentini from TD Securities.

Just a quick question probably for Siim. I guess the EPS was boosted by these pension and derivative items in the first quarter, but you didn't change your guidance for the year. Is this just simply that you're waiting for the Astral deal first before you revise? Or should we assume that there will be some offset to that sort of $0.06, $0.07 impact for your full year EPS?

No. I -- where we stand right now, we are comfortable with our full year EPS guidance. As we said, with respect to Astral, we will update all of our guidance targets on the closing of that transaction. You're quite correct that the pension surplus gain and the gain on the equity derivative hedges that we realized this quarter are one-time items. But when we put our guidance together, we were well-advanced with the pension regulator in obtaining that surplus entitlement, so the $0.03 was built into our guidance. And then with respect to the equity derivative hedges, there's always an element of that, that we build into our EPS guidance as well. You never know how the share price is going to perform over the course of the year. We saw a strong performance in the first half, and we'll hope that keeps up for the second half. And if it does, we'll adjust guidance accordingly.

Yes, so just to help you out, too, as Siim has said earlier, the pension we had expected in the year, we had not expected it in this quarter.

[Operator Instructions] The next question is from David McFadgen of Cormark Securities.

Yes. So I was wondering if you could talk about the wireless voice ARPU, what the decline was and how it compares with Q4 and Q3 2012. And then just one other data point, if you could give us the smartphone penetration of postpaid gross additions?

Well, wireless ARPU was actually up year-over-year, 3.9%. So is there something different you're asking?

Yes, the voice component.

Oh, the voice component of ARPU.

Yes.

Then -- sorry. Then unpack the question for me a little bit. What are you...

I was just wondering what the voice component of ARPU was, what the decline was in the quarter and how it would compare with Q4 and Q3 of 2012.

Voice decline was -- I just had it handed to me, was 4.3% in the quarter. It was up 20%. And we continue to see that migration. I also would say with the unlimited voice plans that were launched on the voice side in the market, placed in the fourth quarter, the voice side, obviously, pulls in as a result of that. And we just continue to see a real positive on the ARPU side. As customers migrate particularly to LTE products, we see an expansion in usage of the product. And obviously, that drives ARPU growth to help offset the voice decline.

Okay. And can I get that one other data point, smartphone penetration of postpaid gross additions in the quarter?

I'll have to follow up with you later, David. I don't have it handy with me.

This concludes today's conference call. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.

Thanks, everyone.

Thank you.

The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.