BCE Inc BCE
Q2 2012 Earnings Call Transcript

Operator: Maher Yaghi, Desjardins Bank.

Maher Yaghi - Desjardins Bank: Good job on the quarter guys. I just wanted to go back to a comment that Siim made earlier regarding your debt refinancing over the past few years. Now, we have seen interest costs continue to be low, and over the last few years you have significantly reduced your debt burden in terms of interest cost. On a more strategic basis, can you discuss what the impact of this reduced cost of capital has had on your profitability and your decision to deploy CapEx in your business? More specifically, can you comment on what you're seeing in recent trends in terms of return on invested capital and the difference between ROIC and your weighted average cost of capital? Has it been improving or decreasing over the last few years.

Siim A. Vanaselja - EVP and CFO: Sure. Well, certainly, with the declining interest rate environment that we've been in, in a number of years now and the lower volatility in BCE share price, there has certainly been a reduction in our cost of debt and overall cost of capital, which has helped us. We have a lot of balance sheet financial flexibility and a strong stability in the ratings categories that both our debt and commercial paper is rated at. So that's really in no way a constraint in executing on our capital investment plans. The way we're thinking about our capital expenditures is – strategically it's a priority for us to continue to execute and complete over fibre build-out and to penetrate IPTV into as many homes in our targeted territories as quickly as possible. With the results that we have this quarter, we're comfortable moving forward on an accelerated basis in order that we can begin generating attractive returns on those investments. For all of these significant projects, there is very extensive plans that we have in place and sensitivity analysis, I'm not going to get into the details of that but I can assure you that the rates of return are very rewarding to us and significantly exceed the cost of capital that we would use as a gauge to measure them.

Maher Yaghi - Desjardins Bank: Just a follow-up on your TV net adds. There is about 12,000 difference between net activations on Fibe and your net TV numbers. Can you may be split difference in terms of how much is cannibalization of your satellite business and how much is just pure losses?

George Cope - President and CEO: Well what I'd say there is – on the satellite side there is I think Bell line also, I think, kind of have about 13,000 or 14,000 net adds on the Fibe side. So (consolidated) BCE did somewhere roughly 50,000. There is definitely some cannibalizations I talked about last time. In our shop, it can be 15% of the number and then, of course, we even have in the West where some of it would obviously be TELUS doing some with their IPTV. So if you kind of assume from our end in the 15% range, than that's probably a safe number still to use. We'll just continue to take everyone through that every quarter. There is – you can see the net impact. We'll work through that because ultimately (indiscernible) we see early on as I've said is remember people have Bell TV services, have already all Bell products, are the first ones inclined to take the latest and greatest product that Bell would have. So we think we'll actually continue to see the mix improve over time as well. But having said that we will see cannibalization satellite from IPTV.