Quebecor Inc. (QBRA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Quebecor Inc. conference call in relations with results of the 3,500 megahertz spectrum auction. I would now like to introduce Hugues Simard, CFO of Quebecor Inc. Please go ahead.

Good morning, everyone, and welcome to this Quebecor conference call. My name is Hugues Simard, I'm the CFO. And joining me to discuss the outcome of the recently ended spectrum auction is Pierre Karl Péladeau, our President and Chief Executive Officer. Before turning the floor over to Pierre Karl, I would like to inform you that certain statements made on the call today may be considered forward-looking and refer you to the risk factors outlined in today's press release -- or yesterday's press release rather and reports filed by the corporation with regulatory authorities. I would also refer you to the presentation, which will serve as support for our conversation today. The presentation is available in the Investors section of our website at www.quebecor.com and also via the link provided in the press release yesterday. I will now turn it over to Pierre Karl.

[Foreign Language] Good morning, everyone. Before going through our presentation in more detail, I would like to comment on the outcome of the auction and highlight its strategic importance for Quebecor. As you are all well aware by now, this auction turned out to be highly competitive with several bidders on both the reserve and the open blocks. And with the prices reaching higher-than-expected levels, clearly demonstrating the strategic importance of this spectrum. In our case, we are very pleased to have one significant spectrum, both in Quebec and also in key regions of Ontario, Manitoba, Alberta and British Columbia. The outcome of this auction is, for us, the first essential step towards the expansion of our telecom services outside our own base of Quebec into key markets of Ontario and Western Canada, where we believe we are uniquely qualified through our operational track record, innovative approach and solid balance sheet to succeed in providing Canadians with well-priced technologically superior telecom services always in line and evolving with their needs and expectations. Starting with the result of the auction on Page 3 of our presentation, we can see that the competitive intensity I spoke of translated into a total auction value of $8.8 billion before the assignment stage and $8.9 billion in total, representing $2.26 per megahertz per pop. From the total amount before assignment, $1.5 billion is attributable to reserve blocks and $7.3 billion to open blocks. As anticipated, the purchase price per megahertz pop was significantly lower for reserve blocks than for open blocks at $0.92 and $3.19, respectively. The next 2 pages provides the detail of the spectrum we acquired. Our investment totaled $830 million, with the $357 million for 119 blocks throughout Quebec and $473 million for 175 blocks in Eastern and Southern Ontario, Manitoba, Alberta and British Columbia. In aggregate, we paid $0.96 per megahertz pop, less than the auction average for reserve blocks of $0.92 per megahertz pop. In our own territory of Quebec, this spectrum will further strengthen our foundation and enable us to continue the deployment of our 5G network with the ongoing development of high value-added services. Since the launch of our wireless activity in 2006 as an MVNO and in 2010 as a full-fledged facility-based operator, we have invested heavily to provide Quebecers with the best service and have quickly established ourselves as the reference with a market share of more than 21% that continues to grow every quarter. Our investment in this new 3,500 megahertz spectrum will significantly strengthen our offering in all major area of Quebec with an average of 43 megahertz per territory and clearly confirms our commitment to continue to invest in our own province of Quebec for the long term to remain the undisputed telecom leader in the province. In addition to these important spectrum additions in Quebec, we have also acquired 175 blocks in Eastern and Southern Ontario, Manitoba, Alberta and British Columbia with an average of 32 megahertz of the 3,500 megahertz spectrum in these key regions outside Quebec. Quebecor has now established the essential base on which to plan the deployment of our innovative telecom services outside of our own products. As I have stated earlier, we are confident to have the unique combination of skills, track records and financial wherewithal to succeed in providing that central fourth player role in Canada. Let me tell you why in more detail. Of course, you already know all of this, but I believe it is important to underline the numerous competitive advantages that uniquely position us to make this new and -- deal a success. Turning to Page 6 and 7 in our presentation. We are first and foremost a proven telecom and wireless operator. In wireline, we are the #1 television service provider in Quebec, having evolved to an IP platform in partnership with Comcast, a technological leader in that field. We're also the #1 Internet provider with a state-of-the-art network, fully DOCSIS 3.1 enabled and capable of operating speeds of more than 1 gigabyte per second. You might also remember that we launched cable telephony in 2005, and we were so successful that we quickly built a market share higher than that of the historic incumbent. Building on that success, we also and more importantly, launched our wireless service. First, as a virtual operator in 2006 and then having acquired spectrum and built our 3G network, a full-fledged operator in 2010. We, thereafter, continued to upgrade our network through LTE in partnership with Rogers and further on the LTE advanced 4G and more recently, 5G to be rolled out gradually over the next few years. Along the way, we continue to build a solid base of the spectrum, adding 700 megahertz band in 2014, AWS and 2,500 megahertz in 2015 and 600 megahertz in 2019. In addition to our investment in network and technology with several leading suppliers such as Nokia/Siemens, Ericsson and Samsung, we also invested heavily in developing what became one of our greatest strength, the best client experience in the industry based on superior services, such as single billing as well as second-to-none customer service. 10 years later, we now have more than 1.5 million wireless subscribers, $1 billion business and a market share of more than 21%, which is continuing to grow quickly on the strength of several quarters of winning the highest market share of growth adds in our Quebec market. I would also like to remind you that we continue to deliver, year after year, the best telecom EBITDA margin in Canada. In addition to our track record as one of the most disciplined operator in Canadian telecom, we have also been one of the leading innovators in Canada as we highlighted on Page 8. We were the first to offer pick-and-pay television plans; the first Canadian telco to offer video streaming platform, Club illico; and more importantly, the first to develop and launch a 100% digital wireless brand. Indeed, in 2018, not fully satisfied with the considerable success achieved with our main brand, we launched Fizz, a game-changing new 100% digital broadband and wireless brand that can complement our offer and better target certain key demographics and geographies where we believe we could perform even better. Fizz not only offer advantageous pricing but also a fully digital experience and complete user autonomy. It was the first carrier to let subscribers gift or carry over unused data. As consumers in general, not only millennials, are increasingly turning to digital channels, the IT platform that are in Fizz is a very valuable asset for us. This platform enables customers to autonomously manage all phases of the customer journey from sales to installation to ongoing support. Shifting customer interactions to digital channels through more self-help, self-install and self-service is the prime objective of telecom companies around the world to reduce the volume of field service trips and calls to customer service and technical support call centers. Along with our disruptive marketing, promotional and pricing approach, we are convinced that Fizz provide us with a unique, superior and scalable platform to grow outside Québec. Of all the new players who ventured into mobile 10 years ago, as part of the government of Canada's desire to foster competition in Canada mobile industry, it was definitively been -- we have been the most successful. We do not believe this is a mere coincidence but rather a testimony to our operational excellence, innovative and financial strength. Speaking to our financial strength, I would like to highlight one of our greatest advantage, which in addition to our operational track record and innovative approach, constitutes an important base upon which to plan and build our Canadian expansion. The best financial discipline and one of the most solid balance sheets in the industry. Consider our financial management over the last 20 years, despite investments totaling more than $3 billion in wireless since 2008 and the buyout of the Caisse remaining stake in Quebecor this year for a total consideration of $3.7 billion between 2012 and 2018, we managed to increase our free cash flow significantly and reduce our leverage to well below our peers and competitors in Canada. In terms of cash flow, our strong EBITDA growth, disciplined CapEx spending and opportunistic refinancing allowed Quebecor Media to consistently grow free cash flow, culminating to $790 million in 2020, while continuing to strategically invest in mobile telephony, our key growth engine to keep growing market share and ARPU as well as reducing churn. In terms of leverage, we have reduced our debt-to-EBITDA ratio from 7x in 2001 to 2.6x recently, a level that is much lower than that of our peers and competitors in Canada. This disciplined financial management was recognized over the years by both set of credit agencies, more recently when Moody's assigned a positive outlook to Quebecor Media Corporate Family Rating, the last step before investment grade. And it is important to point out that while improving shareholders' return by significantly increasing the dividend payout with the actual dividend per share having been increased by a factor of 20 since 2012. On the strength of our recent refinancing, we are also reducing our financial expenses and can now boost one of the strongest balance sheets in the industry. Page 12 in our presentation then demonstrate that the presence of a strong fourth player has the direct effect of bringing down prices for wireless services. The Competition Bureau itself stated in 2019 in a submission in response to a CRTC notice of consultation that prices were 35% to 40% lower in area where a regional player held more than 5.1% market share. Thanks to Videotron, the province of Quebec was the first place where the government objectives to reduce prices by 25% were met. Finally, an article in The Globe and Mail dated recently in May 5, 2021, stated that the big 3 telecom players had avoided the government price reduction objective by abolishing certain plans. Turning to Slide 13. With 175 blocks of 3,500 megahertz spectrum outside Quebec, with an average of 32 megahertz per territory, Quebecor has now established the essential base on which to plan the deployment of our innovative telecom services outside our own products. Having clearly demonstrated over the past 10 years in Quebec that we can successfully compete with the big 3 through superior marketing, promotional and pricing agility, technological innovation and second-to-none client experience, we now intend to take on and break that oligopoly in West Canada to provide Canadians in Ontario, Manitoba, Alberta and BC, with the same competitive pricing and client experience that has made our success in Québec. Having acquired the necessary spectrum in key areas, we now intend to roll out the wireless telecom offer, either through the acquisition of assets should they become available under the right conditions and for a reasonable price or through the opportunity made possible by the recent CRTC decision to operate a virtual network while, of course, fulfilling our obligation of network construction. In conclusion, expansion outside Quebec is a strategically important growth opportunity for Quebec, the natural next step for us by replicating the winning formula that made our success in Quebec, where we built a $1 billion business in 10 years and thus provide strong and long-term competition so that Canadians can benefit as Quebecers have for some time now from significantly lower prices. Looking forward, we are focused on planning the next step to ensure that the regulatory authorities make good on the recently announced decision. If we want sustainable competition that will benefit consumers in the long term, then it is necessary to stay the course with the fourth wireless player policy and put in place the appropriate framework. It is clear to us that we are the ones to do it with not only the will but the expertise, the experience and the financial means. I thank you for your attention, and we would like now to open the floor to questions.

[Operator Instructions] Your first question comes from the line of Vince Valentini from TD Securities.

Thanks very much for hosting this call. This is a big development for your company, and thank you for updating us on your views. I have a few questions. Number one, and you may not want to answer some of this, but I'll try anyway. Is your intention to be an MVNO outside of Quebec, if there is no opportunity to buy existing assets? Because you seem to have bought small amounts of spectrum in a lot of places, which would, I guess, technically make you qualify for the MVNO rules. So it's just not clear to me. Or is this just fully a stepping stone that you hope to be able to be a full facilities-based carrier at some point?

Thanks, Vince. First, I would say it was important to, again, participate in the spectrum auction as we did for the last one since 2008. So we're strengthening our base here and fully complement our 5G expansion that we started in Montreal and Quebec and that we will build throughout the next month and years. Again, I emphasize the fact that we started in 2006 as an MVNO. So it is important to say and to highlight the fact that we have the proper experience in this kind of economic model, and that was also important for us after the decision rendered by the CRTC that we will be in a favorable position to consider different alternatives. We clearly stated that we have a strong interest in buying the mobile activities of Shaw through the transaction of Rogers. If for whatever reason, this was not possible, we will have the alternative to be an MVNO operator, again, with the experience we built in the past with the strong expertise in the digital. This is something new for us because in 2006, we didn't have this aspect of the business. But certainly, that give us, we consider, an edge regarding competition. And since our success in Quebec with this brand, we consider that would be an interesting -- also, a possibility. So in a few words, I would say that we have many alternatives. And we consider that having those alternatives will position us more favorably in the future to grow what we've been able to build in Quebec for the last 20 years.

That's very helpful, Pierre Karl. From the sounds of it, just to make sure it's perfectly clear for everybody on the line, you would have no intention of trying to start from scratch building a fifth network in all of those 3 or 4 provinces and continuing to buy more spectrum and start building cell sites from scratch. That would be a massive financial risk, I assume. Can you make 100% clear that, that would not be ever your intention?

Going forward, it will be impossible just to tell what will be the outcomes from years from now. But something that we can tell you, and I think it is important for you to understand what happened in the CRTC condition to operate as an MVNO is that you need to build the network after 7 years. You need to have -- to be a facility base. There's been a lot of conversation, discussion and arguments regarding how should we build the Canadian telecom industry. As you know, there is many disputes taking place with tariffs regarding TPIA. There were a reversal of decision recently. So I think that most of, if not all, telecom industry would be favorable to a facility-based model. And therefore, I think this is why the CRTC decision rendered that obligation to build a network after 7 years. So you have 7 years to build this network. And never forget that the economic model of the MVNO is completely different than the facility-based one. When we started in Quebec in 2006 as an MVNO, we went very quickly on the PR side, I would call it, and making representation in front of the government, in front of all the stakeholders in Ottawa, to mention that a consistent competitive landscape will be built only and only if there is a fourth operator. But for the fourth operator to succeed, it needs spectrum to operate a network. It needs to be a facility based on the long run. So I would say those principles are still applicable because if you run an MVNO, your margin will be very tight despite the fact that depending how you've been going, you will be able to negotiate your tariffs and all the other conditions with the facility-based operator. So never forget that at the end of the day, as a facility base, we've been able to generate margins and grow our EBITDA through and this is what telecom is all about. It's a capital-intensive industry. And there is no reason why the wireless business would be different than the rest of the telecom services that we've been offering for the -- for, I don't know, even I mean -- before Quebecor acquired Videotron.

Yes. No, that makes sense. I was going to pass the line, but let me further clarify something. It's not -- I hear what you're saying about a fourth operator and the economic potential there of being facilities based. I guess what I'm trying to get at is, if somebody else is the fourth network operator in Ontario, Alberta and BC, somebody else acquires those existing assets, would you then consider building a fifth network? Or is it only your view that, if it goes back to 3, then the door opens that you can over 7 years become #4, and that might work out? Is that a fair way to interpret what you're saying?

Yes. I would say, Vince, we can obviously line up different scenarios, but it would be, I guess, not possible to answer a very hypothetical situation. So we'll see throughout the -- what's going to take place. We never control what is taking place in the industry, completely control it. But again, what I can say is that we are very well positioned. In fact, we -- I think that we're the best positioned to first acquire all those assets and then eventually consider an MVNO. And again, I would not be able to say something else than what I said earlier that we built our alternative to succeed.

Your next question comes from Jerome Dubreuil with Desjardins.

Yes. There's a lot of things, obviously, that we know we don't know for the different proceedings. But maybe if you can address on the risk side of the spectrum strategy, if the Freedom acquisition doesn't work, for example, or if you don't want to pursue MVNO, what are the perspectives to sell spectrum again in a few years, maybe considering deployment requirements? Or can spectrum be monetized in some other way?

Yes. Well, it's -- I guess, what we can say of your question is basically, our previous experience where -- when we started as a wireless operator in 2006, but certainly no more in 2008, certain of you will probably remember that we participate in the auction, and we started as a -- with national ambitions. Through the process where we found out that the auction was very competitive, we decided to get out of the auction in -- on the Western side, and we saw that the auction was remaining competitive in Ontario. Remember, with the Globalive, which was a company coming from nowhere with no balance sheet and was eventually considered being financed by an Egyptian company, basically, I guess that the industry minister remember that. And this is why, again, they consider that there might be different conditions this time for the auction because they want us to -- our understanding is they want -- it's a political -- I'm not going to say political hot potato, but certainly something that politicians need to deal with is I've -- what have been said, high prices in wireless in Canada. And if they want to succeed in having a competitive landscape, a fourth operator has proven that will be the results. So again, we think that we have all the right tools, the expertise and the financial means to succeed. If for whatever reason, there should be, we call it a problem, but I don't really see what could happen, yes, it's true that the spectrum had a significant value. And this value is even -- also, you need to consider the price per pop on the reserve block compared to the non -- the open blocks, which is a ratio of close to 3:1, a little bit more than 3:1. So you get value there, but this is certainly not our objective to speculate on spectrum. It's never been, and it will never be over.

Yes. I understand that. And maybe just if you can confirm that if you believe an MVNO launch would mean -- would meet the deployment requirements set by ISED?

Yes, as you probably know, having discussions on the regulatory front is not always simple. This is a complex situation, and it will be even more complex in the coming months. As you probably know also, the CRTC recently received comments from the incumbents regarding the MVNO conditions, more the technical conditions than anything else. So we're going through this process. We need to make sure and you can count on us to make sure that we'll be loud on making sure that what we can consider being resistant from the incumbent seeing competition, we'll be able to put emphasis on the fact that we'll start it as an MVNO as quickly as possible. [Foreign Language] Next question is from Jeff, I think.

[Operator Instructions] While Jeff is getting back on, we'll take Matthew Griffiths from Bank of America.

So I just wanted to start with you outlining how the spectrum purchase is like the first step in your expansion to other key markets outside of Quebec. What is your next step? What are you working on? It sounds like your next step is to wait on the outcome of what happens with the Rogers/Shaw deal. But I was wondering, among the things within your control that you can influence, what are your next steps as you kind of walk down this road?

Well, our next step will be -- and it's already done partly, as you can imagine, is to finalize our business plan to make sure that, as I mentioned just earlier -- in the earlier question that we were going to have the proper technical access to network, to negotiate with the 3 incumbents' tariff in a competitive landscape to finalize. It's easy to say MVNO. But clearly, again, because we want to respect the conditions imposed by the CRTC building our network to continue also our financial plan to make sure that everybody will feel secure with the business. And from there, we'll find out what's going to happen. But we will certainly continue to watch and, in fact, it's more than watching because the Competition Bureau is asking us, and you probably have read recently in The Globe and Mail that they're pretty active on that file, given that there was also going to be the CRTC and the [ directive ] that will be operative in that front also for the merger between Shaw and Rogers. So I'm not saying it's a moving target, but it's -- we cannot conclude that there's a final plan here.

Okay. I was asking the question, trying to get a sense as to how important the 2 things that you laid out as enablers of this strategic decision are, one being the outcome of acquiring assets and the other being the CRTC decisions on a facilities-based MVNO? And whether or not both of those have to come together to enable this to come to fruition? Or if you can't acquire the assets, it is sufficient to have just the CRTC facility-based MVNO decision support your plans to move forward? And maybe one other follow-up, if I may.

Look, I think that what you just mentioned, Matthew, is all the appropriate items that just describe -- I wouldn't emphasize, we have a very favorable situation we're facing. It's always having leverage when you have alternatives, and those alternatives are really present. The conditions on the CRTC in MVNOs imposing building in 7 years will also reduce the amount of possibility of a coming from nowhere operator as there is a lot of MVNO sales in other countries, which are not telecom operators. So yes, obviously, we're for competition, but there are certainly also a certain level of competition where it doesn't make sense anymore. And this is probably why I think that the CRTC decided to promote and to favor a facility-based model. So all this, again, participate in the fact that, yes, there is competition, but there will be a certain level of competition and competition, which is same for the market and makes every player have their own possibility of financially profitable.

Your next question comes from Tim Casey from BMO.

Two from me. One, Pierre Karl, as you look to expand outside Quebec and you talked about the successes you had in your home market with brand [ denial ], you have a lot of strategic advantages with given your wireline incumbent's fee, the -- once you have the -- of the market and your customer base, that you don't -- the evidence is pretty up [indiscernible] operations...

I'm sorry, Tim. We're not hearing you well. You're breaking up a little bit. Can you repeat?

I'm just trying to assess your ability to compete outside of Quebec. Your success within Quebec has been -- is very strong, but you have a lot of advantages there. And the competitive landscape for wireless-only players is pretty tough. And Shaw -- one of the reasons Shaw is selling, I would contend, is they're not making an economic return. So how should shareholders think about your ability to compete outside of Quebec in wireless? And the second question is, what does this say about the growth prospects within Quebec on a medium- to long-term basis? Are you running out of growth opportunities within your market -- within your home market that you have to pursue wireless outside of Quebec?

Okay. I'll start with the second. I guess that you're very well positioned to figuring out the answer of this question. We -- clearly, we have -- the first -- fourth operator in wireless in 2006 and with the market share that we've been able to deliver, there is no doubt that there is a limited growth opportunity in Québec. In our case, that doesn't mean that we don't believe in our products. We continue to invest, and we look forward to continue to be successful in our video segment with the Comcast technology. We are certainly one of the best operator in the Internet access with 2 brands and the technology that has been provided by cable industry through coax and fiber still continue to deliver the best product. Again, our customer service is well recognized. For the 16th consecutive year, we received the title of being the preferred telecom supplier in Quebec. And again, we finalized our wireless business with the implementation and the deployment of a fully technical brand. So all of this precludes us, I would say, to a significant growth, which we delivered since we started in the wireless. Building on that expertise, yes, it's true that the market outside Quebec is different, given that we've been operating a quad play. But for us, that doesn't mean that there is no room for a single-product play. And there's other alternatives also that we can consider through our capacity to be innovative. You know very well that the TPIA have been taking market share in Quebec in the internet access and starting in the video segment. So all those possibilities also give some further consideration, which we can compare quite positively to what Shaw decided to deliver since they came in. Let's be honest, they came in late in the industry, certainly later than we were in 2006.

Do you -- is a network sharing agreement a must-have for you to proceed outside of Quebec?

All alternatives on the table. We've been operating with network sharing with Rogers. I think, as you know also, Bell and Telus have one. It's in the best interest of the industry to consider this approach. And it's been used and will continue to provide significant advantages.

Your next question comes from the line of David McFadgen from Cormark Securities.

Just a couple of questions. So assuming you launch an MVNO or you buy Shaw's wireless assets, do you anticipate that you would then file and become a third-party Internet reseller outside of Quebec? So you can offer a bundle?

Just as I answered to Tim, this is a possibility. But obviously, as you can imagine, David, we're not going to publish and publicly talk about our commercial strategy. But I guess that anybody can easily figuring out the different possibilities that are available.

Yes. Do you think that could provoke a negative reaction? Let's say, maybe Rogers does the same in your territory to resell your Internet?

Well, what I can say is that we certainly have all the proper expertise to do so. Again, we have the other items that I highlight, which is the financial means, one of the best balance sheet. Everybody need them to continue to invest in their 5G network. So capital intensity will continue to be important. So these are the realities that telecom operators are facing and will remain the same for certainly a while.

Okay. And then lastly, I don't know if you can comment on this one, but -- would Fizz be the primary brand that you would take outside of Quebec, just seeing the incredible success in Quebec? Or do you envision that you would actually take the Videotron brand outside of Quebec?

Again, this is something that we'll make public in due time. Would not be at this stage, providing any advantages to let our competitors know what will be our strategy.

Your next question comes from the line of Jeff Fan from Scotiabank.

It sounds like facility base is certainly one of the options. And buying the Freedom assets is what you touted as one of the ways to get quick access to become a facility base. But as we all know, like the fourth is as strong as the network assets that you're going to get. What we've seen, I guess, in past deals like the Manitoba deal, was exploring then got a bunch of assets, and it's arguably -- hasn't been great for competition in Manitoba. I'm not sure. I mean, maybe the jury is still out on that. The question to you is what parts of Freedom -- if Freedom is that option, what parts of Freedom do you need to keep to compete effectively?

Well, this is a very interesting question, Jeff. Well, as you know, I talked earlier about Globalive, and I guess that we can say that from a political perspective, that was a little bit of a fiasco. There were no serious real competition before those assets were acquired by Shaw. And you will remember that -- and still, the situation that, I guess, the Shaw management had -- and finally considered that operating on the network and -- we all know and we have -- you know and we know from an operational perspective that it is important to have a good network. And our understanding, as probably yours, was Shaw was not ready to put their name on this network, which was not providing the level of quality that the Shaw company and Shaw family was built on forever. But they started to change the business plan of what they acquired and investing in the quality of network. And when it was ready, they delivered a new network brand -- not a brand new network, but an improved network in Alberta and then, therefore, decided that they will commercialize under a new -- another brand, the Shaw brand. So I'm saying all this because I guess that the network under the Globalive/Shaw is different from one region to the other. So from there, we will need to have a deeper look when the process, either a divestiture, a forced divestiture or opportunistic consideration will start. But certainly, again, starting as a MVNO so we have the capacity of enjoying "an incumbent network" -- other to the condition also to build. And we always like the Shaw family. The Rogers family consider that the quality of the product is paramount. Even before we acquired Videotron, the Shaw family share this perspective. So that, therefore, first, we'll have the capacity to enjoy the best networks available in Canada and then adding the time to build our own network on the level -- the quality level that we're expecting to deliver. So I'm not saying that this is simple, but it's not completely complicated also since basically, this is the scenario we used when we started in the wireless business in Quebec in 2006.

And just a follow-up on the MVNO. Are you saying you need an independent network as opposed to the big 3 for that MVNO opportunity for you? Because when I look at the incumbent rates on MVNO, I mean, they start at the wholesale roaming rate. So they don't really give you much room for a margin. We think an independent network would be more open to helping you to become an MVNO outside Quebec. So do you have any -- can you just clarify what is the ideal network for you to be on for that MVNO?

Well, again, this is certainly more favorable, and we will continue to look at the possibility of network sharing. And on the spectrum side also, this is probably one of the reasons why Bell and Telus were less aggressive than Rogers in the spectrum auction because they have the capacity to share their spectrum in the network. And usually, this is part of a network agreement -- network sharing agreement. So maybe there's something else I should say, and you may be well aware of this. Building a network from now on, given what the -- there's been a kind of new technology environment, which are also more favorable to newcomers, I would say, the open RAN technology. So instead of being forced to deal with only one operator, also, as you know, all the cloud environment that is now available, you've been probably seeing experiences in Japan with the Rakuten, which is they built an open RAN network in the cloud. You heard probably also the Charles Ergen situation in the U.S., which -- where he bought some assets out of the T-Mobile/Sprint merger. So I'm mentioning this because we should highlight the fact that what's coming in have -- is carrying more opportunity and is more favorable than what we have been experiencing before in terms of capital intensity. So you need to deal with all those issues and consider them as part of the financial equation moving forward.

Great. And maybe just one last technical question about the auction. I think many people are asking this. How did Videotron actually qualify to bid outside of Quebec, particularly not so much in Eastern Ontario because we know you have a business there, but in places like Toronto, Southern Ontario and the West? I guess, the understanding going in was that you actually have to offer commercial services. So can you just -- now that the auction is over, can you just clarify that technical detail for us?

Yes. I would say that we have operation in Ontario and Western operations. We -- there's a company called [ Detel ] Telecom which is a backhaul operator. And we continue to offer backhaul products, especially in Toronto, and we're servicing companies outside the province of Quebec for many, many, many years. And we will continue to do so. And this is the reason why we were able to qualify as a bidder. And I think there is the last question from Drew?

Thanks for hosting this. All very informative. Just 3 final ones from me. Pierre Karl, can you talk about the importance of future set-asides in terms of spectrum auctions coming down? Also, I had to hop off during the call, so apologies if this is repetitive. What kind of, I guess, maximum leverage ceilings are you kind of willing to commit to from a balance sheet perspective? And are wireless partners here a consideration as you kind of work through all these options? Last one, how do you measure success on wireless expansion outside of Quebec?

Good. Well, it's true. You really have many, many questions.

First one is the set-aside going forward.

Yes. Obviously, we're not the ones that are creating the rules, but we've been always a big promoter of set-aside. And from a regulatory and policy perspective, without any doubt now, it's been proven that if you want to have a competitive landscape to be able to offer innovation and better pricing, set-aside is necessary. You just compare the 2 prices and how competitive the prices went on the open block. I mentioned earlier the ratio of 3:1 -- more than 3:1 compared to the reserve block. So there is a limit of new comers have the possibility to deliver in terms of financial power. And I would say that when you have so strong a position in the market, you will be ready to pay whatever it needs to continue to pay for maintaining your position. And that's the way that the incumbent has been thinking, and this is why, I guess, that the industry minister decided that you need set-aside if you want to have a full operator. So I guess that -- yes, it's true that the results have been mixed. But -- and we're certainly working in Quebec, where prices are low. We've been successful in -- by adding many other services. But we also operate which is mainly as a wireless provider, and we will continue to do so. How we will be able to measure success in the wireless, I mean, it's growing our revenue, growing our RGU. And there will -- certainly, as I mentioned earlier regarding the model that we use in the -- when we enter the wireless business in 2006 as an MVNO and then creating significant margin after building our network. In fact, rule of life, as you know, from the MVNO conditions that the CRTC elected to rule and to promote. So again, there is good reason to think that we'll be able to achieve the kind of margin that we deliver elsewhere. In terms of leverage, Drew, I think that we made in the presentation loud, but maybe not loud and clear, but when we acquired Videotron in 2000, our leverage was 7x. Clearly...

We don't want to go there.

I remember very well that -- those years. And we've been able to reduce our leverage. In fact, this is why I think that the debt market has been so loyal to Videotron and then to Quebecor because we -- the first roadshow we accomplished, I remember very well, and I said that we will focus on growing our EBITDA and reduce our debt. And year after year after year after year, we delivered. And this is basically one of the reason also we've been successful. We reduced the pricing of our debt, the financial burden of our company. This was providing the capacity to continue to invest, providing the best quality, the best product, the best network. And we know so well how it is important to have a decent leverage. So we will continue never to forget this, and you should not worry about having a too high leverage. So I think that the questions are over. We would like to thank you very well -- very much attending this conference call. We thought that it will be important. As you know, this is not something that we do very often. But regarding the importance of the situation, we thought we will do it. And as you probably know, Q2 conference call is taking place next week, so we'll have the chance to talk to you again. Since then, we wish you a good time and a good weekend. Take care.

Ladies and gentlemen, this concludes the Quebecor Inc. conference call in relation with the results of 3,500 megahertz spectrum auction. Thank you for your participation, and have a nice day.