Patrice Ouimet - SVP and CFO Louis Audet - President and CEO

Phillip Huang - Barclays Vince Valentini - TD Securities Maher Yaghi - Desjardins Glenn Campbell - Bank of America Drew McReynolds - RBC Greg MacDonald - Macquarie Dvai Ghose - Canaccord Genuity Jeff Fan - Scotia Bank

Good day. And welcome to the COGECO Inc. and Cogeco Cable Inc. Q2 2015 Earnings Conference Call. 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. Please go ahead, Mr. Ouimet.

Good morning, everybody. And welcome to our second quarter conference call. Joining me today are Louis Audet, President and CEO; Andrée Pinard, our Vice President and Treasurer; René Guimond, Vice President, Public Affairs and Communications; [indiscernible], VP, Corporate Controller and Alex Tessier, VP, Corporate Development. So before we begin this call, I would like to remind listeners that the call is subject to forward-looking statements, which can be found in the press releases issued yesterday by COGECO Inc. and Cogeco Cable. I will now turn the call to Louis Audet before we proceed with the questions-and-answers period.

Thank you, Patrice, and good morning, everyone. And welcome to our second quarter conference call. We are very pleased with the results both at Cogeco Cable and at COGECO Inc. Let us first take a look at Cogeco Cable where revenue is up 4.8% to reach $510 million and EBITDA up 4.4% to reach $231 million. On the Canadian cable side at Cogeco Cable Canada, let me begin with saying that -- I’d like to confirm actually that we are delighted with the recent CRTC decisions further to the Let's Talk TV proceeding. The decision is virtually aligned with the recommendations we had made at the public hearing thus creating the optimum environment for the future growth of our video services in [lock step] with customer expectations. So, we’re very pleased with that outcome. We are currently enjoying new customer acquisitions resulting from the launch in our Ontario systems of our best-in-class Cogeco TiVo video service on November 3, 2014. And as you will have read, we’ve also since launched in Quebec on March 30, 2015 and customer enthusiasm is remarkable. We expect that this service will help us further reduce our video customer losses. In fact when you analyze our second quarter PSU results, you will see that they are significantly more favorable than the same quarter of last year. And you may recall that our first quarter PSU results were also better than the first quarter of last year. So our customer numbers are improving gradually. Turning now to U.S. cable at Atlantic Broadband, our second quarter results are just like the first quarter results were, the two best quarters achieved in terms of PSU growth since we acquired the company. We are now selling video subscriptions thanks to TiVo and increasing the penetration of internet and phone services along the way. Our financial results are growing nicely even after discounting the effect of foreign exchange and finally the recent SEC net neutrality decision which came out a few weeks ago has no adverse impact on the business of Atlantic Broadband. Let me turn now to the enterprise data sector. We have resumed growing the enterprise data services segment which is currently in the mid-single digits. To meet the evolving needs of this sector Peer 1 and [CDF] have reduced their work force in February. The changes were made to increase operational efficiencies and streamline internal processes. The company continues to experience positive growth as it expands its product suite to better serve the changing needs of the enterprise services market. The third and the fourth pods of our Barrie data center will be completed by the end of this month and by the end of this month we will also pre-launch our new Montréal base data center. And as we fill up this added capacity and reap the benefits of the streamlining process that I mentioned earlier we expect higher growth to resume. Let us now turn to Cogeco Inc. Revenue is up 3.6% reaching $537 million, EBITDA is up 3.3% reaching $229 million. Despite weak advertising markets we have been able to almost maintain last year's performance in our media sector which you will agree is absolutely outstanding in the circumstances. And we occupied virtually all the market leading positions in both French and English radio and Montréal and this helps us tremendously. To conclude we had moderately improved our fiscal 2015 guidance, to take into account the foreign exchange realities. All of us are currently focused on delivering results and we will consider reasonable acquisition opportunities in a prudent manner when they present themselves. So this completes my introductory comment and we will now be happy to answer your questions.

Thank you. [Operator Instructions] The first question today will come from Phillip Huang with Barclays. Please go ahead.

Hi. Thanks, good morning. Quick question on the TiVo certainly just to see this fibre trend I was wondering if you have any specific data or if you could elaborate a bit on take up in both Canada and the U.S. and perhaps any relationship that you guys might have observed in your analysis between the take up and ARPU as subscriber churn.

Yes. We haven't really published any specific data about this but directionally what we are observing is that a typical TiVo customer tends to take a richer video package, usually choses a higher speed internet package and if we are lucky along the way takes a phone service. So we're quite pleased that this is having a retention impact, an acquisition impact and also an ARPU list impact but it's still early days, you will recall that the TiVo deployment in the United States was completed last May. So we're currently in our first year of having it available everywhere in the U.S. and of course in Canada it's still very recent and in particular in Quebec it's only a few weeks old. So we have not published additional data, but I think directionally I'm giving you a fair idea for what it's doing.

Right. And do you see a stronger trend in the U.S. or is that still too early to tell in the U.S. versus Canada for example.

The best I could say I think is that in the U.S. penetration of the PVR was lower because of the past practices at Atlantic Broadband which is not the case in Canada. So clearly that makes our task a bit easier in the United States but that being said, you can see that subscriber trend was also in the United States, they are clearly more impressive but you can also see a change occurring in Canada. So this is good in every possible way.

Right. There is some deceleration this quarter on the revenue growth in the Canadian cable segment. Is it sort of like you expect it to be a sort of a delayed effect as more TiVo take up continues to grow that you expect that to reaccelerate the revenue growth in Canada?

Your question on the reason for it obviously as we lose on some customers on the video segments, there is an impact on revenues and this is compensated by the internet segment, obviously our margins are better in the internet segment because we do not pay for a content cost. So that’s the main reason why you can see this but we are and the outperformance of the EBITDA on revenues. Going forward well basically we do expect TiVo to enable us to retain more customers in the video segment and also to gain new ones. So as you have seen in the past and quarter over quarter year over year basically, you can see the reduction in video customers shrinking and that’s through both in Canada and the U.S. So this will help and at the same time the internet segment is growing both in Canada and the U.S.

If I may perhaps add the fact that now we are free to talk about it because we have notified our customers. If there had been rate increases that have been notices that [word] has been sent out in February. And we would expect these to start showing their impact in the third quarter. So perhaps this completes [purchase events].

The next question will come from Vince Valentini with TD Securities. Please go ahead.

I had a couple of other questions. But maybe first can you just flush out with those rate increase announcements were, how much of an impact you expect to start in April?

Yes, [we're in the] $3 range depending on exactly where and which package. So they can vary between $2 and $3 on video and on internet but not on phone. And I think your hypothesis that they would show up mostly in April is realistic.

Great and separate question, just on a couple of the guidance metrics, I'm wondering with the main factors why the interest expense guidance goes up from 125 million to 140 million.

It mainly has to do with foreign exchange. As you know we have U.S. denominated debt both at the EADB level and at the Cogeco, the Canadian division level. So that’s the key reason and there is some minor elements in there as well. But I would say the bulk of it is FX.

And the second one is your EBITDA guidance is up. But your cash tax guidance is down 10 million. Is there something -- has there been a tax reassessment or something that's caused that better outlook?

Well basically what we do during the year as we file our taxes, we gain more clarity on the exact dollar expense. As you can appreciate it’s a very complex exercise and done in many countries. So it's a readjustment basically of the tax expense for the year, so that’s the reason.

One last one relating to the interest expense question, I guess tell me if my calculation's wrong, but when we did the number on a trailing basis the debt to EBITDA is actually ticked up slightly this quarter from 3.1 to 3.2 times. And I guess that’s because of the U.S. debt that's accreting upwards. So when you look forward do you care about the trailing number or are you more just worried about what the sort of run rate is in the forward looking number when you think about your financial flexibility for acquisitions. Because I know you'd signal you want to get down to three times debt to EBITDA or lower I think before you get too aggressive on the acquisition front.

Well we look at both, obviously there is, as you pointed out, there is direct impact of the changes in foreign exchange on the debt level. So this gets reassessed at the quarter end and if the rate doesn’t move afterwards it takes a full year basically to get the EBITDA to get to the same rate. So to your question we do look at both elements down the line basically talking with rate agencies and that’s how they look at is basically as we take a longer term view at acquisitions basically looking at the EBITDA generated by those acquisitions and how they will impact the repayment of the debt and how the foreign exchange basically trickles in the EBITDA over for the year.

Your next question will come from Maher Yaghi with Desjardins. Please go ahead.

Louis I wanted to ask and go back a bit on TiVo. I was looking at one when you acquired ABB 2012, the triple play bundle penetration at ABB was 21% which is exactly what it is right now. So I'm trying to understand the impact of TiVo that when we looked at in 2013 you talked about the attractiveness of TiVo and the fact that it's going to allow you to increase the triple play bundle play in the U.S and that was attractive enough for you to use the product. But we haven’t seen really an impact of that. Can you talk a little bit about your experience with the triple play bundle and why we haven’t seen an improvement there?

Sure of course you are looking at the relative [potential] value too but, of course we will refuse a single play customer, so the key here is that the metrics have improved, the absolute numbers of customers have improved in all categories and while I will agree with you that we rather have a triple play customer than a single, we certainly won’t turn them away. So we’re enjoying increases in all categories and I think that’s really how you should look at it, and that explains the high revenue growth after foreign exchange has been taken out in our US operations.

Yes, so, you know when I look at what you guys have achieved with ABB since the acquisition, you definitely have increased the penetration of internet into the subscriber base, but on the phone side we haven’t seen as much of a lift in phone, home phone penetration. I’m sure wireless substitution is working against you but some of the attractiveness of attracting a triple play like you say is to make that more defensible against attacks from IPTV competition. And so that’s basically where I was going with and what TIVO, if TIVO is not going to allow you to increase the penetration of the triple play in Canada, maybe similar to what we have seen in the US, will it be enough for you to defend against a much better product that is selling into the marketplace in Canada than what you have experienced within the US.

Yes, I think you were drawing a drastic…

Well I’m looking forward, I’m trying to see what the picture will look like a few years down the road.

And I have to disagree with you violently if you’ll excuse me. What you’re seeing now is the impact, perhaps the phone is weaker than we would want it to be and that’s quite possible, but have we given up on that? Not the least bit. And the TIVO product is a very powerful product and is a market leading product, well superior to what you see in the United States and well superior to what our competitor has to offer in Canada. And combine that with superior internet speeds in both countries, in the 120 megabits per second which is unmatched by the competition, we just recently launched 250 megabits per second in Burlington, Oakville; we have a clear path to 300 megabits per second with Docksus 3.0 and 1 gigabit per second with Docksus 3.1 when we launch it. Put all these things together and I think the picture you painted is not right.

Fair enough. And in terms of margins, how do you see margins in the US going forward looking like, with the TiVo product maybe increasing in penetration and your subscriber base as you mentioned you’re hoping to see. Will that have an impact on the margins or we should expect stable margins going forward?

Well going forward obviously we’ll provide guidance for the next year a bit later this year, but generally if you look at this year where we are in second quarter is where we think we’ll be when we, as you know there’s a couple of elements in there. The programming costs are increasing both in Canada and the US but it’s even more important in the US and that gets compensated by a stronger increase of the internet platform which doesn’t have any content costs. So just generally we are satisfied with the level of margins we have compared to competition in the US. That being said we are constantly working on increasing this margin through both the product offering which includes TIVO and triple plays and double plays and also making vigorous discipline on the cost basically because that’s also an important element of the margins going forward.

Your next question will come from Glenn Campbell with Bank of America.

Yes, thanks very much. First have three quick clarifications. On the Canadian cable rate hikes is that $2-3 in total or $2-3 each for internet and TV?

It’s about $1-2 in the video segment and $3 in the internet segment and we did not really provide increases in the [indiscernible].

And then on the guidance, could you give us a specific FX rate you are assuming for U.S. dollar whether for the year or the balance of the year that’s behind our revised assumptions?

Yes, so obviously we factored in the results to-date, so for the balance of the year its 125 for U.S. dollars.

And then last clarification, the magnitude of the cost savings you're expecting from the changes in enterprise on an annualized basis?

From the restructuring sides we had it's about $2 million on an annual basis.

And then for Louis I had a broader question on TV plan packaging, Louis you expressed your satisfaction with the CRTC decision and I guess I would note that you are unique in having a level of choice to customers in the Ontario market where they can choose preassembled packages, or flex packages or pick-and-pay packages. So what if you could comment about which of these are sort of most popular in your base and whether you're seeing a trend in what people are choosing? And then I guess from our perspective as we think about the margin characteristics of those different choices are there significant differences from your perspective?

Well, we have had as you may know total flexibility in Quebec now for probably 10 years and that has worked extremely well. We’ve maintained our ARPUs, our customers are satisfied so it's worked well for us. In Ontario, you're correct in pointing out that we have -- currently have and have had for I forget what it is now maybe seven years, moderate flexibility in the way you have described. So, what you're now going to see is a move towards total flexibility by December 2016 and in an environment where we hardly get any request for a [skinny] basic service. But it's an issue that we rarely hear about, so we’ll see what comes out in reality. The way its priced is probably reasonable as far as we’re concerned. Then the issue is what happens to people who would migrate to pick-and-pay. And since you continue to offer your existing selection of channels and packages and that there is a good degree of satisfaction there, you should see migrations at the edges. And here you have the right to price this, you are free to price this as you wish. So there maybe instances where revenues will decline, but that there is in our opinion no reason why EBITDA could not continue to progress reasonably along the way. So that’s how we analyse it.

Maybe just to follow-up on that, I mean one can argue and I think a lot of people are that ala carte wont impact the market that much because the carriers will set the packaging in a way that encourages big bundles. But you can take the other side of the argument and say let customers choose whatever they will and do it on an ala carte pick-and-pay basis and if they hit a certain spending threshold across all those services that you offer reward them then. I guess to put it in another way, why should you care whether customers choose a lot or few TV channels providing their overall spend as a level that makes you happy?

Providing the overall EBITDA level that derives from it keeps us happy. Yes, I would agree with you.

The concern about penetration base rate cards, I mean I can see whether that would be a big deal on costly channels like sports. So when you get into the other channels is that likely to affect the way you put stuff together going forward?

Well, it's going to be an adjacent period for all of us. Clearly we’re going to have to -- there is going to be a fair degree of experimentation. But the penetration based rate card is not per say a problem, particularly not in the new regulatory environment that the CRTC announced in its most recent Let's Talk TV decision, where it has basically acknowledged that loss of the advertising revenue that might accrue as a result of the new flexibility that it will be inappropriate that the distributors have to account for that. And that the lack of distribution revenue that might flow from this new environment should be shared as between the programing services and the distributor. So all we have to do is make sure that we position our prices at the appropriate level given what we expect will happen with the penetration of the service and make sure we protect the EBITDA going forward. Now remember this is not going to be a landslide from Day One to Day Two. It's going to be gradual at the fringes for those people who are interested because all your other line-ups can remain as they are or different if you wish.

Thank you. Your next question will come from Drew McReynolds with RBC. Please go ahead.

Thanks very much. Good morning. Couple of questions from me just first on the capital intensity in the Canadian business is running at about 18%, just wondering big picture either Louis or Patricejustwhat are your thoughts are on the sustainability of this level, you've spoken about obviously kind of TV and TiVo being the [uptake] being popular as well as you talked about some capacity upgrades operates on internet and pending capacity upgrade. So I'm just wondering if you can talk to that longer term. And then secondly on the enterprise side can you just give us an update in terms of the timeline that you see at the moment to when you hope to get free cash flow positive in that segment. Thank you.

Okay. So on the capital intensity in Canada is 18%, this is a level we're comfortable with going forward as well. We obviously had to make decisions on the yearly basis on where we will allocate capital so you can appreciate with this number has to be controlled in all companies because there is a lot more things we could do with more capital so that’s the number we're comfortable with and it allows us basically depending on the needs of a particular year to allocated more to devices that our customers have like TiVo versus infrastructure projects but we are not expecting in the short or medium term a large increase in CapEx related to the infrastructure. And on the second question on the enterprise segment, obviously most of the CapEx is invested in our colocation centers, this is one that varies a lot more from year-to-year versus the maintenance of the business we currently have. We had more CapEx recently in 2015 and there is some more going on obviously given that we are expanding very and building the first pod in Montréal [indiscernible]. So we do expect 2016 to be a free cash flow positive year as we said before so that's still the [plan].

Thank you. Your next question will come from Greg MacDonald with Macquarie. Please go ahead.

Thanks, good morning guys. Another question or two on the enterprise side, nice revenue uptick in the quarter particularly from the data center businesses, I wonder if you might carve out whether that sequentially or year-over-year in different what the impact was from FX on that business in particular. And then Louie you made a comment on driving 'higher growth' in the data center business and I'm assuming that’s associated with the new builds in Barrie, Montréal, can you comment on timing and kind of what type of impact those expansions could have and sort of how long we might see an improvement in growth because we saw a nice uptick this quarter in the year-over-year growth profile I'm just trying to get a sense of the profile that going forward. Thanks.

Okay. So on your question on FX there is a definitely an FX component in there, so the increase year-over-year was 6.4% in Canadian dollars, without the FX impact this would be low single digit increase. And on the EBITDA side there has been an increase of 13% in Canadian dollars and without the FX it will be in the high single digits.

Okay.

Louie, you want to comment on the second question?

Yes, I would.

More generalized Louie, I'm not looking for [indiscernible].

Yes, please repeat the question I'm sorry.

That’s okay. You commented on expecting the data center business to drive higher growth going forward on top of 6.4 would be a nice number, so?

Okay. So let me try this for you. Our objective is to be in the lower double digit growth pattern and that’s what we want to do for next fiscal year. We have had to go through a transition period in the current year and the growth that we have enjoyed was not bad but below what we would have wanted. We have come to the conclusion that the investment in data center is so significant that the price at which we sell it is very important to generating appropriate returns and there is not an over capacity situation in the markets we serve. So we would rather be patient, bring in the customers who value our service at the appropriate price and that is all worked into our expectation for next year which I have just articulated.

Is there any way that you can talk about the mix of co-lo versus cloud services in the entire data center portfolio?

We have not disclosed any of this but we can certainly think about it amongst ourselves.

I think that would be helpful in terms of understanding pricing power potential. And then the final question I have is just on margins. A very nice margin uptake in the quarter. I'm wondering is there any in fact seasonality in this business or is the margin increase that we saw just a function of the revenue growth profile?

It mainly has to do with revenue growth and cost containments as well. So not necessarily as much seasonality in it so we would expect going forward to be in the same kind of margins that we've achieved now and as we ramp up our co-location business within Canada basically that would be able to raise this further going forward.

Your next question will come from Dvai Ghose from Canaccord Genuity. Please go ahead.

First one for Pierre and second one for Louis. So Pierre on the FX exposure if we can just revisit that we estimated about 25% of your EBITDA or thereabouts is in U.S dollars, but 67% of your debt is in U.S dollars. I know you are partially hedged but as for the previous question net net, the strong U.S dollars seems to have hurt you because your net debt to EBITDA has risen and your net debt has risen I think to 2.9 billion now from 2.6 billion at the end of fiscal 2014 despite very strong free cash flow generation and a very low dividend pay-out. So could you just quickly go through your hedging strategy and whether you should hedge more against this sort of risk?

So it's Patrice by the way.

Sorry, sorry. I have old memoires.

Yes, yes so we have it right in the transcript. So yes there was an impact and as I explained before obviously the debt moves faster than the EBITDA because it's direct at the end of the quarter whereas the EBITDA needs a full year basically to kick in. The impact on the quarter was about 0.2 times that was the FX impact which was about $160 million because otherwise we would have reduced our debt through generating cash flow. Now to your question on hedging we do hedged that and there is different reasons why we're hedging, one is economically and another one is for accounting reason as well as we don’t want to start booking large gains or losses in our P&L because of simple changes in foreign exchange. That being said, the issue of the debt to EBITDA changing faster than the EBITDA will remain because we are not actually hedging the EBITDA we're using financial instruments that fall below the EBITDA line. So I don’t think there is a way to necessarily hedged against this when you're looking at this particular ratio although we're doing it on a full P&L basis with financial instruments.

Right but is it fair to say that you're debt in U.S. dollars is two and half times the EBITDA generation in U.S. dollars, is that fair in terms of a formula?

Well I guess if you're looking at the overall impact, it's probably point two on your leverage. So on a consolidated basis we finished at 3.2, if you didn’t have this FX impact it would have been more around the three times levels, so if you're looking in the grand scheme of things, it's not that significant and that's point to over the next quarter if you have a stable exchange rate should pretty much iron out.

Second question to Louis if I may is on price increases. I find it interesting that on Canadian cable calls one of the quick and central questions are when did you increase prices largely because there is now growth in PSUs across the board. Isn't this a little bit dangerous given the fact that number one as you mentioned you can't really increase [sellers and] prices anymore because it's increasingly relevant product, perhaps one can say that about video, the traditional TV product when it comes to younger Canadians at least leading really internet as the only area where perhaps you can maintain pricing power. And number two given the massive government scrutiny just not on wireless but on the whole communications industry, isn't this industry little too reliant on price increases for growth?

I think your painting a somewhat pessimistic picture here. Our job is to generate return for shareholders; our job is to manoeuvre all of the circumstances whether they are increases or decreases in popularity of certain products. And I wouldn’t declare the video product irrelevant or dead, far from that I think we're still in an exploratory phase right now. And I think our TiVo product which combines both a linear television on demand television, and over the top television is something that’s actually going to solidify the video product. But in the larger scheme of things, our job is to generate returns no matter what happens and it looks like we’re managing to do that in what is admittedly a disciplined market.

With that being said you and all your peers every year increase your internet prices by about $3. Are you not concerned at some point the government’s going to come in either and try and regulate prices, force resale, as we’ve seen in other industries where clearly they have objected to price increases.

Well you know, that’s always a risk. There are no signs that this is on the table right now, and also keep in mind this internet service has increased in performance at dramatic rates. We keep giving customers more speed, more throughput in terms of gigabytes usually for the same price. So they are moderate price increases, it’s not a big deal.

My only concern there is the wireless carriers are clearly bandwidth and the government doesn’t seem to care, it looks at the price though, I wonder if the government really factors what you get for your dollar. So…

I think there is also another key difference, it’s that in the wireless sector you have limited effect of competition. There is no third party resale, there is no MVNOs. Whereas in the wireline business there are resellers in the market that are very active that are undercutting all of us and that are leading a successful life, we’re leading a successful life so there is, there are counterbalancing forces on the wireline side of the business which there aren’t currently in the wireless business. So this is a very important distinction that I think you should keep in mind.

Well of course, I'd say in response to the 3-5 facilities base players versus two in the wireline business but I take your point.

So I think you should cheer up, I’d much rather be doing this than making shoes not to insult anyone.

And our last question will come from Jeff Fan with Scotia Bank, please go ahead.

Thanks for squeezing me in. Just one housekeeping and then one question related to the CRTC TV decision. On the housekeeping Patrice, maybe you can just help us. Within your enterprise segment can you just give us your revenue or EBITDA exposure to the US dollar, that might help us in terms of mulling the impact going forward.

We actually have, we have that disclosure in our financial statements under the….

So if you go on page 12 of our quarterly report we do mention what the variation of 10% in the foreign exchange rate have on the revenue and EBITDA side. So let’s say that you’re looking in the last quarter if you had a 10% variation in the US dollar, why yes it’s the US dollar and the British pound, this has an impact of about a million on the EBITDA and on the revenue side not far from four million.

Okay, we’ll go back to that, thanks. On to the CRTC decision, Louis, two parts, one, your comment regarding the skinny basic, you said that there’s not a lot of request for it, does that mean that you don’t think there is going to be a significant migration to that $25 package when it’s being offered.

I do not expect that there will be very significant migration to a skinny basic, that’s correct.

Okay, and suppose that there were under a $25 revenue cap do you think you have the ability to bring your content cost down enough in that package to maintain as you said the EBITDA dollar or the gross profit dollar on that subscriber.

Yes, absolutely.

Okay, and then the last question is regarding I guess some of the carriage agreements decision that came out, [indiscernible] response about maybe revenue could come down but you think you can maintain the EBITDA under the new rule. Obviously that means you expect to see some content cost reduction as a result and that might come from the flexibility. So the follow up question to that is where do you think your content cost savings could come from? Can you help us understand that a little bit?

Sure, well I would argue it a bit differently, but I would be careful in doing so because this is still somewhat tentative but I’m not sure you should expect content cost to decrease, it may actually increase. You as a distributor your job is regardless of the prices which is it sold to you, the question is how much margin in dollars do you realize when you sell it to your customer? And that’s really what we’re talking about here. So I think the expectation that content cost will decrease I am not sure that’s right.

But if the people spend lots on television in order for you maintain your EBITDA there has got to be some cost coming down.

Well, there is -- there -- maybe there are unit prices going up too.

So you mean like the subscribers that end up staying in the system end up paying more?

Well they end up paying more per channel, but less overall because they are taking fewer channels, assuming that this is the way it goes.

If I can add on this, with smaller packages basically have less channels, so you would expect to stat on that front on content costs, because the package is smaller as well and obviously our job is to ensure that we are protecting the EBITDA line with that smaller package for those who will choose to take it.

Well, thank you everyone for participating in today’s call. We look forward to disclosing our third quarter results in early July. We will issue a press release to that effect later on and until then we remain available if you have any questions in the meantime. So thank you to everyone and operator back to you.

Thank you. Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation. You may disconnect your lines. Have a great day.