Pierre Gagné - Chief Financial Officer and Senior Vice President Louis V. Audet - Chief Executive Officer, President, Non-Independent Director, Member of Strategic Opportunities Committee, Chief Executive Officer of Cogeco Inc and President of Cogeco Inc

Gregory W. MacDonald - Macquarie Research Phillip Huang - Barclays Capital, Research Division Jeffrey Fan - Scotiabank Global Banking and Markets, Research Division Drew McReynolds - RBC Capital Markets, LLC, Research Division Tim Casey - BMO Capital Markets Canada Vince Valentini - TD Securities Equity Research Maher Yaghi - Desjardins Securities Inc., Research Division Dvaipayan Ghose - Canaccord Genuity, Research Division Robert Goff - Euro Pacific Canada, Inc., Research Division

Good day, and welcome to the COGECO Inc. and Cogeco Cable Inc. Q1 2014 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Pierre Gagné, Senior Vice President and Chief Financial Officer of COGECO Inc. and Cogeco Cable Inc. Please go ahead, sir. Pierre Gagné: Thank you very much. Good morning, everybody. And with me are Louis Audet, our President and CEO. I have René Guimond as well, Vice President, Public Affairs and Communications; Andrée Pinard, Vice President and Treasurer; and Alex Tessier, Vice President, Corporate Development. Before we begin, listeners are reminded that this call is subject to the forward-looking statements which can be found in the press release issued yesterday by COGECO Inc. and Cogeco Cable Inc. I will turn the call to Louis for further comments before the Q&A session... Louis V. Audet: Thank you, Pierre, and good morning, ladies and gentlemen. Welcome to this first quarter fiscal 2014 review of Cogeco Cable and COGECO Inc. Our first quarter has been one of continued growth and solid performance on all fronts, with which we are quite pleased. Let us begin with Cogeco Cable. In Canadian cable, we continue to experience good mid single-digit EBITDA growth, thanks to our bundling strategy and expenditure controls. Our new, evolved video distribution platform is now in tests for a small number of friendlies, and we have not yet announced the launch date. The end of a very attractive Telephony acquisition campaign launched in 2011, 2012 is the reason for recent Telephony PSU losses. The effect of this is almost over now. We continue to successfully deploy meaningful efforts toward save and retention strategies. I am delighted to report that, for the fifth year out of the last 7, Service Quality Measurement Group has awarded Cogeco Cable Canada 2 voice of customer excellence awards for highest customer satisfaction for the TV and telecom consumer industry in Canada and best interactive voice response customer experience in North America. Turning to U.S. cable now. Here too we continue to experience good mid single-digit EBITDA growth. We're currently devoting significant efforts to increase High Speed Internet and phone penetration. We continue to deploy the TiVo platform across our systems and expect to be done by May 2014. At this time, the service is currently available to 44% of the Atlantic Broadband footprint. Here too we continue to successfully deploy meaningful efforts toward save and retention strategies. In the Enterprise services sector, both Cogeco Data Services and PEER 1 Hosting are enjoying solid double-digit growth based on the excellent reputation of our service offering. Our strategy continues to be to focus on delivering increasingly better results with our existing operating companies, as well as reducing our pro forma debt-to-EBITDA ratio to 3.0x by the end of fiscal 2015. And of course, that being the case, it is out of the question to consider larger acquisitions for yet some time, as we have said repeatedly. Turning now to COGECO Inc. We witnessed increased radio spending in the Québec market in the first quarter and have been able to capitalize on it, thanks to our solid audience rating positions. In conclusion, our guidance for 2014 remains unchanged as the apparent CapEx lag is the result only of timing variances and we continue to focus on delivering results. That concludes my opening remarks, and we would be happy now to answer your questions. Pierre Gagné: So we'll ask Michelle, the operator, to set the process to -- for the Q&A session.

[Operator Instructions] The first question comes from Greg MacDonald of Macquarie. Gregory W. MacDonald - Macquarie Research: Good. So question is on the Canadian cable side of things, and as most analysts, we tend to focus on the negative, so don't take that personally. The Canadian revenue was the one area of weakness that I saw relative to the consensus numbers and that what's happening here is we're seeing that manifest through the subscriber count. And I guess this is much a question for the industry as it is for Cogeco because price increases continue to flow through for the industry overall. And my question is, is it a risk to encourage price-sensitive customers to churn when we have issues like over-the-top risk that people are considering and wireless substitution which, for Cogeco, is a little more important because, unlike Rogers or some companies that have wireless, you don't get the benefit of that customer moving off of the wire line product onto wireless? Louis V. Audet: Well, this is a large question that encompasses a lot of sub-questions, but first off, I -- what I'd like to say is this is really a balancing act, right? Rates continue to increase, and that is testimony to some rationality, some pricing rationality, in the market, but nonetheless, the phone companies are giving out -- giving away equipment and at times offering very aggressive acquisition promotions to lure customers. And we as operators in the middle of this effort are trying to balance and come out with a reasonable financial performance and reasonable return for shareholders, so we're having to make calls to try to balance and come out with good returns for shareholders. So what you see is the results of those calls. Now can that be modified slightly? Of course. It's always modified. It's always modulated to try to come out with the best possible results. Now with regards to wireless substitution, we consider that to be minimal right now because we are in serving mostly older demographics in a bungalow city where people are more likely to want to keep their landline. However, as I explained, the higher losses that you had seen are much more related to one event in time, which was that promotion which we offered in -- for a period of a few months in 2011, '12. And clearly, it was so advantageous that some people are coming off it. And that's why you see those decreases. Otherwise, we would not expect you to see such decreases. Have I covered your question properly? Gregory W. MacDonald - Macquarie Research: You have, yes. And let me ask just a quick follow-on, then. Would you say the same answer that the competition -- or the competitive environment is what's driving subscriber erosion on the cable side, as well as the phone side? In other words, your focus is on Bell Canada and its IPTV product, much more so than concerns over customers just cord cutting or cord shaving? Louis V. Audet: Yes, that is entirely correct. We're much more concerned about competitive activity. And as I said, the -- were if not for that promotion, we would normally be showing positive telephone gains.

The next question comes from Phillip Huang of Barclays. Phillip Huang - Barclays Capital, Research Division: First question is on your -- it's encouraging to see that you guys are reiterating your commitment to paying down the leverage to 3x by end of fiscal 2015. Could you maybe talk a little bit about, aside from paying down debt, what might be some of your capital uses that you might foresee over the next -- from now until the end of fiscal 2015? Louis V. Audet: Well, we issued guidance for fiscal 2014. We have not issued guidance for fiscal 2015. As you have seen in the last couple of years, we are growing free cash flow, that's what we're trying to do. So we want to keep it growing. We want to continue making wise investments in plant and equipment such that we maintain the dominance of the cable product and the attractiveness of our data centers. We want to continue doing that. And although we don't have, per se, a dividend policy, you have noticed that, in the past, if you look at the past 8 years, our dividends have been growing between 20% and 30% per year on average for the last 8 years, depending on whether you're looking at COGECO Inc. or Cogeco Cable Inc. So I think if -- that gives you an idea of what we're doing and where we're going without making it a commitment. Phillip Huang - Barclays Capital, Research Division: Right. No, that's very helpful. And if I could also follow on with on the enterprise aside, it's great to see that. I think it's the first time in 7 quarters we're seeing a positive contribution from the enterprise side. I was wondering -- I know you guided to fiscal 2014 being a cash flow neutral year for the enterprise. I was wondering if we should read into this as maybe potentially seeing a bit of free cash flow contribution even from the enterprise side this year. Louis V. Audet: That is not intent. We're not intending to reflect that. Really, what you're seeing is their temporary timing variances in capital. Our guidance remains unchanged.

The next question comes from Jeff Fan of Scotiabank. Jeffrey Fan - Scotiabank Global Banking and Markets, Research Division: A couple of quick ones here. On your television subscriber loss, wondering if you can break out or, at least, talk a little bit about whether this is all going to competitors or whether you're seeing any signs of customers cutting the cord. And then the second part to the question is also related to the television side and it's more specific to content costs. As we've seen, sports cost is really driving up programming expenses. And it looks like that's not going to stop, especially with Sportsnet and Rogers now getting the NHL. So it looks like there's more to come down the line. I'm just wondering, Louis, whether there's anything that, as a cable distributor, you can do to try to protect the television business, protect the gross margin and the gross profit that's coming there, and also try to protect against subscribers leaving the system. Louis V. Audet: Yes, I would start off with the first part of your question and say that, for the time being, we measure very little cost cutting -- pardon me, cord cutting. What we're mostly registering is people going to the competition, for the most part, so I would start by saying that. With regards to content costs, that's something we keep a very close eye on. As you know, we've taken a very pro-consumer stance throughout the years. And we have our customers' best interests at heart and make sure that we put these at the forefront when we have negotiations. Now I think the Canadian public and in that they are increasingly coming to realize, as the American public has, that content costs, in particular for sports, are rising. So I think there is an increasing recognition that this is a worldwide phenomenon and that it's not cable related or phone company related or satellite related, it's just the reality of life. And I think this is sinking in, in the population. Having said that, all these costs eventually do get passed on to consumers because that's how businesses are run. So we will do everything to protect the consumer and protect our margin. Jeffrey Fan - Scotiabank Global Banking and Markets, Research Division: What about those households that actually don't want to pay for sports? I mean, is there a point in time where you have to somehow segment that between the sports household versus the non-sports so that the non-sports aren't subsidizing the sports household? Louis V. Audet: Well, for the time being, we haven't yet had negotiations with the rights owners further to these, for example, the large NHL transactions. So it -- I think it's a bit premature at this stage to comment, although I understand directionally where you're going. We haven't come to final decisions as to what we would do because we don't have enough information, but I understand the pertinence of the question.

The next question comes from Drew McReynolds of RBC. Drew McReynolds - RBC Capital Markets, LLC, Research Division: Just on the EBITDA margins pretty much in each of the segments, certainly a little bit better than what I was expecting. Just wondering if there's any one-timers in there. And specifically in the U.S., we saw a nice kind of sequential increase. And I know Q4 had a little bit of noise in the numbers, but is there any reason to believe the mid-40s margins are not sustainable going forward? Pierre Gagné: You're talking on a consolidated basis? Drew McReynolds - RBC Capital Markets, LLC, Research Division: Just the one-timers applies to just each of the segments, is there any kind of noise [indiscernible]? Pierre Gagné: We have some one-timers, but they're not statistically meaningful, so it wouldn't move the needle. Drew McReynolds - RBC Capital Markets, LLC, Research Division: Okay, okay. And the 46% margins in the U.S., obviously a nice sequential uptick, is that a level that you expect going forward? Pierre Gagné: Well, I think what we have to be mindful of is it depends on how the marketing campaigns are going from quarter to quarter, as an example. So you have to be mindful of that. As you know, in the -- during that season, in the fall season, some customers are coming back, and the snowbirds. And you'll see that happening up to our Q2. So we have that, for example. We've launched the TiVo as well, and Tivo is going to be launched for the remainder, just essentially all completed by late spring of 2014. So all these to tell you that you may see some fluctuations. But we'll try to keep it in the mid 40s, that's the objective. Drew McReynolds - RBC Capital Markets, LLC, Research Division: And just another question on just back to the Canadian business. In your MD&A, you allude to some subscriber growth certainly in the business side of the market. Just wondering, when we look at your Internet and Telephony net additions, can you give us some sense of what the contribution from the business market is in those numbers? Pierre Gagné: We haven't disclosed that since the beginning. I could tell you it's progressing as it was progressing in the past. So we have a normal progression, but we never made a specific disclosure as to what percentage of our growth comes from commercial. Maybe it's something we should think about, but up to now, we haven't done that. Just to complete this, just as for -- as you will understand, it's for competitive reason. Drew McReynolds - RBC Capital Markets, LLC, Research Division: Yes, understood, understood. And just lastly, just I think, at the end of last quarter, you alluded to the IPTV overlap in your Canadian footprint at about 25%. Has that materially changed at all from where you guys sit? Pierre Gagné: Not to our knowledge. It's about the same. Maybe that's inched up a little bit but not significantly, so we would -- say it's still that, in the 25% range.

Your next question comes from Tim Casey of BMO. Tim Casey - BMO Capital Markets Canada: Got a couple of things here. Could you just really just talk a little bit more about the Telephony promo that you said impacted the results? Was it just a straight price promo? And is that something that you'll consider doing in the future, or will you have to modify that? And on the new IPTV platform that you now have in test mode, just strategically, are you looking at this as a cost-saving initiative, or a revenue-generating initiative, or a retention initiative? I'm just wondering how you approach that one. Louis V. Audet: Sure, sure. Well, first off, the phone promotion was an offer of the phone service on very advantageous terms for someone taking a triple play. It didn't last very long. It lasted maybe 2, 3 months. And I think the lesson from that is that we don't want to do it again. So that, I think that answers the first part of your question. The second part of the question, the answer is all of the above. We anticipate that, in the fullness of time, the equipment to support this new advanced video platform will in fact be more advantageous than some of the proprietary technologies that we've been locked to in the cable industries historically. So that's the first consideration. And having an all-digital network and operating it as an all-digital network will lead to -- and with fiber deeper into the network, does lead to operating cost savings in the fullness of time. And yes, we would seek it to be a retention tool insofar as its superior nature would induce people to stay with us. And being a superior product, we would expect it to attract new customers, hence my statement that it's all of the above.

The next question comes from Vince Valentini of TD Securities. Vince Valentini - TD Securities Equity Research: A couple of questions. First is on the Canadian -- the weakness of the Canadian dollar versus the U.S. Pierre, can you just confirm? I assume you don't hedge any of your exposure to U.S. dollar revenues because it's basically just translation exposure you have. Pierre Gagné: That's right. So what we're hedging is the -- if you want, the assets against the liabilities. So you see some U.S. debt, among other things, against the U.S.-denominated assets, so debt against asset. And what you see is a conversion factor. You may have -- compared to our -- if you want, our budget, you may have some pluses and minuses depending how the budgets have been forecasted in terms of FX. Vince Valentini - TD Securities Equity Research: Okay. And is there any offset to that sort of weak Canadian dollar benefit in terms of your Canadian cable expenses? Do you have any material expenses for the Canadian unit that are denominated in U.S. dollars? Pierre Gagné: Well, we have certain programming costs, for example, in Canada that we pay for U.S. programmers. And we have CapEx. But the -- compared to a year ago, the average is 1.04 in terms of U.S.-Canadian, so it's not very, very meaningful in terms of, if you want, delta year-over-year. Vince Valentini - TD Securities Equity Research: That's for the fiscal first quarter you're talking about. Pierre Gagné: Yes, the first quarter, yes. Vince Valentini - TD Securities Equity Research: Obviously, it's changed a little bit further in -- here in the second quarter, so... Pierre Gagné: Right, that's right, that's right. Vince Valentini - TD Securities Equity Research: Okay, second question, on the U.S. again, the economy and the stats, they seem to be perking up the last few months. Have you seen any noticeable evidence in either housing starts or basically disposable income and spending power in your territories, any signs of life of sort of tailwinds from a better economy? Louis V. Audet: That's a very good question. I would say, I think it's a bit too early for us to report on that, although we do read about what you're describing. But I think it's too early for us to categorically confirm that we're seeing that. Vince Valentini - TD Securities Equity Research: Okay. And last one, your enterprise segment results. I mean, they're strong, but that business tends, to be, a bit of a lag factor where you have these sales and they take a long time to install stuff. So can you give us any sense of what this sort of order book looks like and sales progress during the quarter and what your sort of order pipeline looks like? Louis V. Audet: Yes. I think I would make a distinction. Most orders are fulfilled on a fairly short time frame, although the selling process for a meaningful data hosting deal might take many months. But once you got the order, it gets -- put in service fairly quickly. I would describe the backlog as being normal and increasing.

The next question comes from Maher Yaghi of Desjardins Capital Markets. Maher Yaghi - Desjardins Securities Inc., Research Division: I have 2 questions. The first one is regarding the increased discussion about M&A and the U.S. cable market. Louis, when you read about these things, do you get excited, or do you think get disappointed? In fact, first, basically, it's good for you guys when you hit -- when you see that kind of concentration on the cable operators that could get your -- potentially your cost of content down eventually, but on the other side, it could impact any kind of future acquisitions you might contemplate in the regional markets next to your areas in the U.S. Can you talk a little bit about the situation and what you make of it at this point in time? Louis V. Audet: Sure. To be truthful, I'm fairly neutral when I think about all these issues because these are happening at a much larger scale than what we could ever consider in our lifetime. So we're sort of impervious to them. And these companies, as large as they are a Charter or a combination of Charter and Time Warner, are such that these guys will never be interested in the kind of opportunities we may consider in due course, if appropriate, once we have reached or -- a debt reduction level. So I think we're following it with interest, but I'm neither excited nor not excited. Maher Yaghi - Desjardins Securities Inc., Research Division: Duly noted. On the many carriers, you mentioned about your future acquisitions. As it relates to the -- your Canadian cable markets, can you maybe talk if you see any differences in terms of behavior, consumer behavior, in the 2 different regions that you -- Québec versus Ontario, Telus market versus BCE market? Can you maybe talk a little bit about the consumer behavior and the competitive profile on these 2 different regions? Louis V. Audet: I -- yes, your question is catching me a bit off guard, but I think consumers are behaving more or less the same way. Now we all know that ARPUs are lower in Québec because less programming is sold, but that being said, the basic consumer reactions with regards to, well, "How can I get the best possible deal," and the desire to pay less, the desire for more choice, greater freedom of choice, I would describe as being the same trends, whether in English Canada or French Canada. Maher Yaghi - Desjardins Securities Inc., Research Division: Let me maybe rephrase my question to be more specific: Are you finding any more difficulty in keeping video subscribers, let's say, in [indiscernible] versus Oakville? Louis V. Audet: No. Maher Yaghi - Desjardins Securities Inc., Research Division: Okay. So basically, the language, the product, the differentiation is the -- not affecting the competitive profile of your product. Louis V. Audet: Indeed not.

The next question comes from Dvai Ghose of Canaccord Genuity. Dvaipayan Ghose - Canaccord Genuity, Research Division: Louis, I understand that wireless substitution is not a major issue for you today, but yours has always been an opportunistic company when it comes to M&A. And when we last spoke -- since we last spoke 3 months ago, you have Mobilicity languishing in bankruptcy without any obvious legitimate bidder if Telus is not allowed to buy public mobiles being swallowed up by Telus. And now we've learned that Wind is not being financed with a 700 megahertz auction. Do you see a growing opportunity here for you to buy wireless on the cheap? Or is it something you remain uninterested in? Louis V. Audet: I don't think that's a realistic option for us to buy. I understand everything you said, but that's not a realistic option for us. Dvaipayan Ghose - Canaccord Genuity, Research Division: That's fair. I have a couple of other ones, if I may. On the pricing issue, as you referred to in your MD&A, the EBITDA growth in Canada's cable is almost entirely being generated by price increases. We've talked earlier in the call about elasticity, but as you know, CRTC Chairman Blais was quite candid in his comments when he launched this TV review talking about price increases being well above inflation and so on. Is that a concern of yours? Louis V. Audet: Well, it -- the concern is not so much about the CRTC's position as it is about the general issue of content price increases that we then have to pass on to consumers. It's a challenge. It's always been a challenge and it continues to be a challenge, but it's one that this industry has generally faced in a very successful manner, i.e. improving the quality and depth of the services, making them attractive, presenting the alternatives in an attractive way to consumers, which have in fact been the hallmark of this industry and which has fueled its growth. Now of course, there are times in history where some adjustments have to be made, and but we've done that throughout our existence. So there are challenges, but I'm very confident that we will face them in an intelligent manner and protect our profitability for shareholders and satisfy consumers. Dvaipayan Ghose - Canaccord Genuity, Research Division: Two last ones, if I may, really quickly. On the programming side, we discussed earlier in the call Sportsnet and potential rising fees in light of the NHL contract. To what extent can you offset that with perhaps lower fees to TSN if indeed they're going to suffer from that deal? Louis V. Audet: Well, I think that's a very interesting question you're asking there, but I don't know because we haven't been presented with revised transactions and these revised programming deals. And these deals will due -- be up for negotiation at various times during the next 2 years. So I think it's a bit premature for us to make a statement, but I think your idea is an interesting one. Dvaipayan Ghose - Canaccord Genuity, Research Division: Last one, if I may, and this is going back to the cable assets. So you see a dichotomy in Canada versus the U.S. inasmuch as, in the U.S., while carriers continue to lose basic cable customers, they continue to gain broadband share. And you have some pretty good broadband growth in the U.S. In Canada, broadband is still growing. We haven't seen numbers from Bell this quarter, but certainly in the last 2 quarters, it seems that the cable industry on masked lost some pretty significant share to the telcos. Why is this dichotomy when we don't even really have widespread Fibre to the Home in Canada, outside Atlantic Canada, versus the Verizon equation in the U.S.? Louis V. Audet: Yes, well, I would make the following comment. If you're in Verizon Fibre to the Home area, of course, you would see fast movements of High Speed Internet customers, but generally speaking, if we make a -- if we exclude those territories, then I would say that the Canadian phone companies have been a lot more effective at keeping their network up-to-date as compared to the typical U.S. phone company. And I think therein lies the key difference that you're noticing.

[Operator Instructions] The next question comes from Rob Goff of Euro Pacific Canada. Robert Goff - Euro Pacific Canada, Inc., Research Division: My first question here would be on the Charter with respect to Time Warner. If you look at the relatively disciplined valuation associated with that bid, would that be consistent with the market for the much-smaller private cable market valuations? I know it's... Louis V. Audet: Wow, I've never thought of it that way, but I think it's... Pierre Gagné: Rob, if I may, Louis, it's -- when we're looking at an acquisition, it depends on the assets we're being proposed and its value. It could be lower, it could be higher. It's a very -- each asset has its own value, and the benchmark you're using is -- it's interesting on a comparative basis to see if you're within the range, but I don't think it's a -- as such, it's a full determinant of a -- of a specific value. But it depends on the potential growth of the assets. So -- and you do that on a discounted cash flow basis. So I'm not sure what you're trying to imply. Robert Goff - Euro Pacific Canada, Inc., Research Division: The question there is that, to the extent that Charter didn't offer a hefty premium valuation on the Time Warner assets, are you also finding that -- in the smaller private market, that the sellers are not looking for hefty premiums? Pierre Gagné: Yes, I think, Rob, it has to do with a -- I think it's going to be a very long ball game. I think you're just at the first inning. And we're not behind the discussions, it -- I -- we're not. And maybe you are and you know more than we do, but I think it's just at the first inning on this. It may go to the ninth inning, it may stop there, who knows? But I think that, to try to be a determinant on this, there have been transactions done a few years ago at different multiples, if you'll look at, for example, the Kagan report. And if you're trying to judge that, you have to know very well the assets. This is a very sophisticated buyers and sellers, and we don't know how -- the ramifications of the process. So I wouldn't conclude that the first bid is the final bid, as far as I'm concerned. Robert Goff - Euro Pacific Canada, Inc., Research Division: Yes, fair enough. And it should be interesting to watch. Another type of question, if I may: Could just give us just a brief update on your early days with the TiVo? Louis V. Audet: I think I would make the following comment. We are pleased with what we are seeing, but the data is so spotty at this stage that I think we would be better advised to hold back for a few more quarters before we make a formal comment, for fear that we would mislead you. So I would say, so far so good, but I would -- I think it would be more appropriate for us to know of -- to know this a little better before we comment formally.

There are no further questions at this time. Please continue. Louis V. Audet: Okay, well, thank you very much. As you know, today is our annual meeting, so those who cannot attend in person, of course, the -- on our web, it's going to be webcasted. So it's going to be on our website, www.cogeco.ca. And the annual meeting starts, begins at 11:30 Eastern Standard time, for those who would be interested, on our website. In addition, the next conference call is expected to be held on April 10. Typical hours would be around 11 in the morning. So thank you again. If you have further questions, we'll be -- Andrée Pinard and I will be a little bit up for the next couple of hours with the annual meeting, but we'll do our best to return calls mid-afternoon. Thank you very much. Have a great day. Pierre Gagné: Thank you. Bye.

Ladies and gentlemen, this does conclude the conference call for today. You may now disconnect your line, and have a great day.