Quebecor Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2026

Key Takeaways

  • Positive Sentiment: Strong financial performance: Second-quarter free cash flow rose 12% to CAD 419 million, adjusted EBITDA increased 10% excluding stock-based compensation to CAD 691 million, and attributable net income grew 24% to CAD 227 million.
  • Positive Sentiment: Wireless momentum continued: Mobile subscribers increased by 53,200, while consolidated wireless ARPU rose 2.5% year over year to CAD 35.62. Management said churn improved after a setback in Q1 and expects continued opportunity from Freedom’s expansion and Fizz’s digital growth.
  • Positive Sentiment: Capital returns increased: The board raised the quarterly dividend 12.5% to CAD 0.45 per share and renewed the share-buyback program; Quebecor repurchased and canceled CAD 185 million of Class B shares in the first half of 2026.
  • Positive Sentiment: Balance sheet remained strong: Net leverage was stable at 2.87 times EBITDA, the company repaid debt during the quarter, and reported CAD 926 million of available liquidity. Management also expects full-year capital expenditures to remain in line with prior guidance and free cash flow to be stable to slightly better year over year.
  • Neutral Sentiment: Media improved but remains challenged: Media EBITDA rose to CAD 27 million, helped by the Montreal Canadiens’ playoff run, stronger advertising and subscription revenue, and cost reductions. However, management acknowledged persistent structural industry pressures and said NHL rights negotiations remain unfinished.
AI Generated. May Contain Errors.
Earnings Conference Call
Quebecor Q2 2026
00:00 / 00:00

There are 11 speakers on the call.

Operator

Good day, everyone, and thank you for standing by. Welcome to Quebecor Inc.'s financial results for the second quarter 2026 conference call. I would like to introduce Hugues Simard, Chief Financial Officer of Quebecor Inc. Please go ahead.

Speaker 1

Ladies and gentlemen, welcome to our conference call this morning. My name is Hugues Simard, and joining me to discuss our financial and operating results for the second quarter of 2026 is Pierre-Karl Péladeau, our CEO. Anyone unable to attend the conference call will be able to access the recorded version by logging on to the webcast available on our website until the 4th of November. As usual, I also want to inform you that certain statements made on the call today may be considered forward-looking, and we would refer you to the risk factors outlined in today's press release and reports filed by the corporation with the regulatory authorities. Let me now turn the floor to Pierre-Karl.

Speaker 2

[Foreign language]. [Foreign language], Hugues, good morning, everyone. I'm happy to report once again, solid operational and financial results for Quebecor in the second quarter of 2026. In all our business sectors, we're continuing to improve our performance quarter after quarter through disciplined execution and rigorous management, resiliently delivering on our expansion plan, growing our wireless market share in all markets across Canada, generating consistently strong cash flows, and maintaining the best balance sheet of the industry. On a consolidated basis in the second quarter of 2026, Quebecor continued to improve all its key financial indicators. Free cash flow increased by CAD 44 million or 12% to CAD 419 million. EBITDA, excluding stock-based compensation, improved by CAD 62 million or 10% to CAD 691 million, and net income attributable to shareholders grew by CAD 53 million or 24% to CAD 227 million.

Speaker 2

We maintained our net debt to EBITDA ratio at 2.87, still the lowest leverage of the Canadian industry by some margin. Ask her, buying back nearly CAD 100 million of our stock in the quarter and investing CAD 174 million in capital expenditures for growth projects, investment in our core systems, and the continued improvement of our network and best-in-class client experience to fuel our resilient, profitable growth. Moreover, we did not issue any hybrid debt or perform any financial engineering of any kind in the quarter or ever as we always manage our balance sheet so as to minimize our interest expenses quarter after quarter.

Speaker 2

On the strength of these excellent results, considering our comparatively lower payout ratio, as well as the continuation of our balance sheet and disciplined capital allocation strategy, that being continuing to lower our debt and improve our ratios while renewing our annual NCIB stock buyback program and continuing to buy back our stock. Quebecor's boards of directors have decided to increase our quarterly dividend on both A Shares and B Shares from CAD 0.40 to CAD 0.45, a 12.5% increase reflecting our strong confidence in our consistently growing cash flows. I will now review our operational results, starting with our telecom segment. I'm very pleased to report a record second quarter for our telecom segment. In the second quarter, we delivered adjusted EBITDA of CAD 642 million, up CAD 32 million or 5% year-over-year, the highest quarterly growth we ever recorded for a second quarter.

Speaker 2

Our adjusted EBITDA margin was 52%, an improvement of 60 basis points. Total revenues were CAD 1.2 billion, up 4%, driven by an increase of 4.2% in service revenues to CAD 1 billion and 3. Adjusted cash flow from operational reached CAD 474 million, up 3.1%. We're proud of these results, the product of a focused team executing with consistency and discipline quarter after quarter. What makes this quarter particularly meaningful is not just the headline numbers. For the third consecutive quarter, our consolidated mobile ARPU grew CAD 0.86 in the quarter, or 2.5% year-over-year to reach CAD 35.62. Let me put this in its proper context. As our competitors are losing revenue per subscriber, we are improving ours while also expanding our subscriber base. We added 53,200 net mobile subscribers in the second quarter, a significant acceleration from the 28,800 in the first quarter.

Speaker 2

Although the conventional wisdom in the industry has long been that you must choose between loading and ARPU, we are proving it wrong, consistently, measurably, and concurrently growing our subscriber base and our ARPU rather than sacrificing one to achieve the other. I'd also like to add that our ARPU is clean and honest, without any subtraction or creative calculations, as seems to be the norm for our competitors. While Q2 has seen a return to somewhat more disciplined pricing, certainly a pivot away from the aggressive promotional offers that defined Q1, some competitors still resort to hefty discounting in select channels, automobile clubs being a prime example, which we believe is an inefficient and disingenuous way to build a loyal and durable customer base.

Speaker 2

Our continued ARPU growth is the clearest possible evidence that authentic value creation is a more resilient, and ultimately, more successful strategy than manufactured promotion or fake employee purchase plans. Building on the successful rollout at Fizz and supporting our ongoing deployment of a common BSS platform across our Vidéotron and Freedom brands, Quebecor increased its equity interest to a majority position in Etiya, a global software company based in Turkey with more than 1,500 employees and a leading provider of digital business support system platforms powered by artificial intelligence. This transaction, which doubles down our initial investment in 2021, will also strengthen Etiya's ability to deliver large-scale BSS transformation projects worldwide, a sizable and yet untapped opportunity. As I pause to survey our telecom performance in the first half of 2026, I see a business executing with remarkable consistency. First half service revenues improved 4% to CAD 2.1 billion.

Speaker 2

Adjusted EBITDA increased 6% to CAD 1.3 billion, and adjusted cash flow from operation reached CAD 963 million, up 7%, showing our continued ability to lower our cost structure and reflecting an investment strategy geared towards long-term growth and lasting performance, not short-term results. Freedom Mobile, our national growth engine, is keeping up its momentum, and Fizz continue to establish itself as the leading digital wireless brand in Canada. Three years after the game-changing Freedom acquisition, we are performing ahead of every plan and commitment we made, integrating our operational efficiently and positioning our brands even more strategically. Looking ahead to the second half of 2026, I am confident in our trajectory. Videotron network leadership in Quebec remains strong. Fizz is reaping the rewards of an ever-expanding digital consumer market.

Speaker 2

Freedom Mobile national expansion continue to mature in Ontario with significant opportunities still ahead of us in British Columbia, Alberta, and Manitoba. Furthermore, as our rigorous cost management continue to improve operating leverage, and as our 5G and 5G+ investments are delivering the increased speeds, the network differentiation and best-in-class client experience that will drive ARPU for years to come, we continue to execute on our expansion plan with the confidence of an operator who has already demonstrated it can beat its competitors and grow profitability in any competitive market. Turning to the media segment. I'm also quite happy to report a much improved performance with adjusted EBITDA reaching CAD 27 million in the quarter, up CAD 18 million year-over-year, driven primarily to our TVA Sports fall, where the Montreal Canadiens playoff run boosted both advertising and subscription revenue.

Speaker 2

Our numerous cost efficiency initiative throughout all of our media sectors also contributed to our improved financial results, along with long overdue affiliate rates. On the NHL renewal rights process, we have nothing else to say than we're still to finalize our negotiations. In addition to the outstanding hockey performance, TVA must-see programs and original productions, including the daily series, "Indéfendable," which remains the most-watched drama series in Quebec, with an average of over 1.2 million viewers every day from Monday to Thursday, and "Révolution," which climbed to the top spot among entertainment program across all channel on the spring schedule with an average of 740,000 viewers, helped TVA Group to retain its lead in Quebec with commanding a 44.2% market share.

Speaker 2

While several challenges persist in the media business, we remain focused on operational discipline and premium content to provide Quebecers with homegrown entertainment, news, and sports content produced by Quebec creators and crews. However, we cannot ignore the structural challenges facing the industry, which remain as daunting as ever. We will continue making our case to government and regulatory bodies since we're building a viable and sustainable model for our entire industry, requiring the involvement of all stakeholders. I will now let Hugues review our detailed financial results. Hugues?

Speaker 1

Yes, Pierre-Karl. On a consolidated basis in the second quarter of 2026, Quebecor recorded revenues of CAD 1.4 billion, up 4% from last year, and EBITDA reached CAD 627 million, up CAD 22 million or 4%, despite a CAD 40 million increase in share-based compensation expense across all of the corporation segments. Excluding share-based compensation, EBITDA is up CAD 62 million or 10%. Free cash flow is up CAD 44 million or 12% to CAD 419 million, and cash flows provided by operating activities increased CAD 32 million to CAD 570 million, up 6% compared to the same quarter last year. In our telecom segment, total revenues increased 4%. Total service revenues, our primary indicator of recurring revenue momentum, were CAD 1.03 billion, up 4% year-over-year. Wireless service revenues were CAD 476 million, up 9%, driven by continued subscriber and ARPU growth across our three brands.

Speaker 1

Wireline service revenues were CAD 559 million, up 0.3%, with internet revenue growth of 3.1%, partly offset by the continued structural decline in traditional services, though television revenues declined only 1.1%, a marked improvement compared to recent quarters. With rigorous cost management, adjusted EBITDA reached CAD 642 million, up 5%, our highest adjusted EBITDA ever recorded for telecom in a second quarter. With our adjusted EBITDA margin reaching 52%, a 60 basis point improvement year-over-year. More critically, our adjusted EBITDA grew at a rate significantly higher than our revenues, which is the natural consequence of the structural efficiency gains embedded in our platform. Operating expenses thus fell to 48% of revenue from 48.6% last year and to 48.5% year-to-date from 49.3%. This is not a one-time optimization, it has not come from headcount reductions.

Speaker 1

It is the compounding effect of the continued optimization of our cost base while improving the quality of our revenues. We expect AI, including our Etiya Digital BSS platform, to which Pierre-Karl referred earlier, to generate further efficiencies going forward. Telecom CapEx spending, excluding spectrum licenses, was up by CAD 18 million or 12% in the quarter, primarily reflecting the accelerated build-out of our internet infrastructure and the continued 5G and 5G+ rollout, including the expansion of Freedom Mobile's national footprint. We deploy capital where it creates genuine competitive differentiation and lasting network value for our customers and shareholders. Despite these additional investments, quarterly adjusted cash flows from operations still increased by CAD 14 million or 3% to reach CAD 474 million. This sustained cash flow generation gives us the flexibility to keep investing in our networks, expand Freedom Mobile nationally, and create long-term value for our shareholders.

Speaker 1

Our media segment revenues reached CAD 185 million, up 6% or CAD 10.4 million year-over-year, driven by strong advertising sales from the Montreal Canadiens' long NHL playoff run and higher subscription revenues. EBITDA improved by CAD 18 million to CAD 27 million, reflecting this revenue growth, as well as the benefits of our cost reduction initiatives. In sports and entertainment, revenues declined by CAD 3 million to CAD 48 million, with EBITDA down CAD 1.6 million to CAD 3 million. Quebecor reported a net income attributable to shareholders of CAD 271 million in the quarter, or CAD 1.21 per share, compared to a net income of CAD 218 million or CAD 0.95 per share reported last year. Adjusted net income excluding unusual items came in at CAD 241 million or CAD 1.07 per share, compared to CAD 227 million or CAD 0.99 per share in the same quarter last year.

Speaker 1

Looking at the first six months of the year, our revenues rose 4% to CAD 2.8 billion, EBITDA increased 4% as well to CAD 1.2 billion, held back by a CAD 87 million increase in stock-based compensation charges. Excluding SBC, EBITDA would have grown CAD 136 million or 11%. In our telecom segment, EBITDA grew 8%, an improvement of nearly CAD 100 million year-over-year, excluding SBC. As of the end of the quarter, Quebecor's net debt to EBITDA ratio stood at 2.87 times, stable sequentially, still the lowest among all Canadian telecom operators by quite some margin. As we continue to proactively optimize our capital structure, the US$1 billion commercial paper program we established at the start of the quarter is now fully operational, diversifying our funding sources and providing additional flexibility at very attractive short-term rates. We also paid down debt during the quarter.

Speaker 1

Vidéotron repaid the CAD 500 million balance on its term loan tranche maturing in April 2026, CAD 300 million of the CAD 700 million tranche maturing in April 2027, followed by a further CAD 100 million early repayment on July 8th. All in all, we have the best-in-class balance sheet with available liquidity of CAD 926 million at the end of the second quarter. During the first six months of the year, we purchased and canceled 3.1 million Class B Shares for a total investment of CAD 185 million. More importantly, upon termination of the August 2026 program, the board of directors has approved the renewal of the program for one additional year.

Speaker 1

Finally, in light of these results and our confidence in our growing free cash flow, Quebecor's board of directors declared yesterday a quarterly dividend of CAD 0.45 per share for both Class A and Class B Shares, up from CAD 0.40, an increase of 12.5%. We thank you for your attention and will now open the lines for your questions.

Operator

Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. If you'd like to withdraw your question, press star two. One moment, please, for your first question. Your first question comes from Sebastiano Petti from JPMorgan. Please go ahead.

Speaker 3

Hi. Thank you for taking the question. If I could just perhaps ask you, in terms of outlook for CapEx and free cash flow for the year, any updates relative to prior commentary, just given the pacing and phasing of investments that you're making to expand the network and expand the geographic reach of Freedom as well as your other investments there. Free cash flow, obviously, stock-based comp was a big benefit last year, I think year to date as well. Help us think about maybe, I think stability ex stock-based comp is generally how I think we were told to think about it for the year in 2026 relative to 2025. Any reason to think that things would deviate from that? Thank you.

Speaker 2

Thank you, Sebastiano. I'll ask Hugues to give you some more details on the numbers you've been talking about. Hugues?

Speaker 1

Sebastiano, I think stability, as we've talked, as we've said many times over the last few months, is the right way to think about it. We're quite confident. Our momentum is good. Our execution is good and efficient. As I said, from a balance sheet standpoint, we are continuing to lower our interest expense. I'm generally confident and to a stable, yet maybe slightly better than stable, cash flow generation towards the end of the year.

Speaker 3

Just on CapEx, Hugues, in terms of phasing or balance of the year, how should we think about it? Maybe pick up in spend as network investments, maybe perhaps pick up as we think about the geographic reach or-

Speaker 1

Yeah.

Speaker 3

Any help on phasing? Thank you.

Speaker 1

Sebastiano, still along with the guidance we gave for the year, there's a bit of timing issues sometimes between quarters. We're in line, and I would expect to reach our guidance for the year, just like we did last year. You'll see a little bit more CapEx in Q2. There'd be a bit more, and then maybe some timing in Q4. All in all, in line with our guidance for the year.

Speaker 3

Thank you so much.

Operator

Your next question comes from Maher.

Speaker 2

Next question, please.

Operator

Your next question comes from Maher Yaghi from Scotiabank. Please go ahead.

Speaker 4

Merci. Thank you. I wanted to ask you, Obviously very strong ARPU gross print in the quarter. In Q1, I think you guys mentioned that your most sold plans are in the CAD 35-CAD 40 price range, and your blended ARPU now is CAD 35.62. I was trying to figure out how much more tailwind you have left in your subscriber base that should continue to support your ARPU growth forecast going forward. Are we to expect the same similar type of growth in the back half of the year, or any kind of directional view on ARPU metrics going forward? Thank you. I'll have a follow-up after.

Speaker 1

Okay. Well, thanks.

Speaker 2

Thank you, Maher. Just before letting Hugues, I would say it's unfortunate that we say the usual thing about this. We cannot anticipate what the market will be for the next quarters. We will certainly continue to make sure that our brands are getting more solid, our capacity to offer what could be and should be, I'm not going to say a premium, but certainly a value-added type of service should position and continue to position ourselves of growing our customer base without being forced, again, as I mentioned, to get in the trenches of deep discounting. It's always sensitive to talk about this too much because, as you know, it's commercially quite important intelligence. We'll remain prudent about the affirmation that the statement will make. Hugues, I don't know, something else to say?

Speaker 1

Well, not really. I think we should remain prudent. I think the only thing perhaps I would add is that we're very satisfied with the loading, with the ARPU loading that we're getting. We believe that there's still room to grow for us. As we did not participate in the craziness, I'll call it, of Q1 so much, I think that generally should bode well for both loading and ARPU growth going forward.

Speaker 4

Okay, great.

Speaker 2

Yeah, Maher, sometimes we think that some managers that are competitors are receiving their bonus by having an upload at the end of quarters because this is the kind of circumstances that we're often meeting. That's another ballgame.

Speaker 4

That's very clear in your results. The financial performance and operating leverage is quite clear in your results, and kudos to your team, finance team. Pierre-Karl, in your prepared remarks, you provided some context on the Etiya acquisition. Is it possible for you guys to give us some guardrails when it comes to what's the annual run rate on revenue and EBITDA from Etiya pro forma? Also, are you looking for any bolt-on acquisitions to support that business and to continue to grow it? Or should we think about this acquisition as a one-time off? Thank you.

Speaker 2

It's an interesting question, Maher. I guess that what we need to do is try to explain a little bit better. I'm not sure the conference call is the best place to do it, so I'm sure that Hugues will make his time available to explain. In a nutshell, I would say, BSS and OSS are a significant portion of our cost in the wireless business and also in our legacy business. We look forward to get rid of this legacy, which was on IBM framework. Never forget that we're coming from a cable environment. This is the legacy of the business, and cable was not invited last week. It's been there for 50, 60 years. We need to make sure that we will migrate on other digital platform that will make our cost more efficient and less costly.

Speaker 2

We found out, well, usually it's the kind of situation that is naturally the kind that you'll meet. Buying Freedom, we're not saying that the platform was not efficient. In fact, it was, but certainly costly. By getting the platforms being all together under the same roof, you can easily understand that will generate significant savings. On top of, I know that's a little bit of a buzzword for the last weeks or months, artificial intelligence is bringing some significant advantages on those platforms, and it will help us significantly, again, to reduce our cost. This is the way that we're looking at it. We saw, this is one of the reasons of the great success of Fizz, because Etiya built the Fizz platform, and we are now in the process of migrating our other platforms under Etiya.

Speaker 2

It will make our business even Well, I understand it internally, it brings a value added and something that we can be a kind of a showcase for other worldwide operators that are facing the same kind of situation. They're looking to improve their BSS costs, on top of which, again, AI should be a significant tool to achieve it. Where this business will grow in the future, can we consider considering acquisitions? As we mentioned, we own 70% now. We are in partnership with the founders, three gentlemen that we appreciate and have been doing a great job. They will continue to be part of it, and we will continue to be with them to grow the business.

Speaker 2

On top of our brands, Etiya also have significant other customers, large Turkish customers and French customers. We look forward, because of this showcase, to grow this business and have the capacity to increase our revenues in the future. Sorry for the long answer, long response. I don't know, Hugues, if you have anything to add. I'm sure, again, Hugues will make him available for further details.

Speaker 1

Yeah, I think that's-

Speaker 4

No, it's great. Thank you, Pierre-Carl. Maybe Hugues, if you can give us the annual run rate of the business.

Speaker 1

Yeah, we'll discuss, because it's a little more complicated than that. It's basically a more than CAD 100 million revenue company. Some of it is internal, of course, because it's now part of our telecom segment. You need to net out a few things. We'll talk about that in more detail if you want. We always follow up after this call. I'll make sure that I give you all the important numbers.

Speaker 4

Great. Thank you.

Speaker 2

Carl, I will finish my to say, I think this is a great asset. Controlling our BSS is something that makes a difference, because we all know that we need to be agile. Agile is not just a word, is also an action, is also an attitude. When you're controlling the tool that you're working with, you're certainly in one of the best situation to remain agile and looking forward to get the full picture of where your BSS will go in the future.

Speaker 1

Merci.

Operator

Your next.

Speaker 2

Thank you. We'll take the next question.

Operator

Your next question comes from Vince Valentini from TD Cowen. Please go ahead.

Speaker 5

Hey. Thanks very much.

Speaker 1

Hey, good morning, Mr. Valentini.

Speaker 5

Thank you, Mr. Hugh. Stick on Etiya for a second just to clarify something.

Speaker 1

Yep.

Speaker 5

Any revenue you do include, I'm looking at your supplemental disclosure page, I'm assuming it's part of the CAD 54 million of other revenue within the telecom segment, and I assume that's already net-

Speaker 1

Yes.

Speaker 5

Of inter-segment eliminations for the stuff that they're selling to you.

Speaker 1

Yes. Yes to both questions. Yes.

Speaker 5

Okay. Just to clarify, I assume there was some small revenue contribution in this quarter, given you bought it in April, but was there any meaningful impact to your telecom segment EBITDA this quarter from that acquisition?

Speaker 1

No. Nothing material this quarter. I'll guide you a bit more going forward, but this quarter, because of the acquisition and some timing noise, there's honestly no material EBITDA contribution.

Speaker 5

Okay. That's good. Also, maybe just clarify a bit on the wireless ARPU. I know you don't like giving predictions, but I want to ask about something that is probably already happening today and just get your sense as to how big it is and how you think it may continue to trend. That's the step-ups. As you know, after you bought Freedom for a long time, you had pricing oftentimes at CAD 35, but the customer contract would say it steps up after typically 18 months. Sometimes it was a slightly different timeframe. It typically would go up by CAD 5. For a while, it didn't look like you could do those step-ups because the market pricing was too low, especially in the first quarter of this year, it seemed like those step-ups wouldn't be accepted and customers would revolt.

Speaker 5

Are you now seeing that actually starting to come through, and is it any sort of meaningful contributor to your wireless revenue growth and ARPU?

Speaker 2

Thank you, Vince. Just, I'll start, Hugues, you follow or you add. I think that one differentiating factor that has been very strong for Freedom was that it's a price freeze. We built significant campaign on this. To the opposite of our competitors, which are saying that they'll enjoy a very low price. They've been facing quite quickly increases, you call that step up, but I guess that the customer or the subscriber consider that as a price increase, which we do not make. We consider that the only increase, if increase there is, will be because you're changing your package. If you were to change your package, obviously, you will migrate in another one. If you remain with the same package, your price is freeze. That's a promise that we are respecting.

Speaker 2

Certainly, that gives us credibility in the marketplace for our subscribers and our customers. We remain focused on this because at the end of the day, credibility in front of our customer is part of customer service. Therefore, there's no reason why we should change our strategy since it's been working pretty well. I don't know, Hugues, if you have anything else to say.

Speaker 1

Well, maybe just specifically to, you were referring to the CAD 5. Just, Vince, a specific on this. Yeah, some impact there because we had 18 months before. We do see somewhat of an impact, but other than that, I'll stick to Pierre-Karl's answer. Yeah.

Speaker 5

Okay. Fair enough. Maybe I'll follow up with you. One last question, just internet revenue, up 3.1%. There's nothing wrong with that. It's still a good result, but it was slightly better growth in the first quarter. Is this just sort of slight timing differences from quarter to quarter that are irrelevant and rounding error, or have you seen some sort of re-acceleration in promotional intensity or competitive intensity from the telcos that has caused internet promo pricing to start to get worse again?

Speaker 2

Hugues?

Speaker 1

No, nothing like that, Vince. By the way, Vince, I have to say, in your note, you just said it again, going from 3.2% to 3.1%, you say, is a decline. I mean, come on. There used to be a time I used to call that stable, I would still call that stable, wouldn't you? I think you're being tougher on us. What's going on here? No.

Speaker 5

It's not a meaningful Yeah. I agree it's not a meaningful decline. I just want to make sure it's not a symptom of competitive pressures-

Speaker 1

Yeah, no

Speaker 5

It's just Yeah. Okay. No, if that's the answer, that's all I need.

Speaker 1

Yeah. There's no material change in the market. I think we're continuing to execute well, and I think 3.1%'s pretty good in internet for the quarter and continuity over Q1. Yeah.

Speaker 2

May I add also, Vince, I think our product is improving every day, we continue to invest in our networks in Quebec on the Vidéotron side. Cable certainly had an edge many years ago. We lost that edge, we are realistic about it. We don't consider ourselves fools. We know and we knew that we need to invest to make sure that we'll catch the speed being offered by our competitors, this is what we're doing. We will continue to do so to have as good or par quality service than our competitor. We look forward also to have our fixed wireless capacity. We're moving forward, certainly slowly, but surely. Fixed wireless is certainly for us a consideration that we'll keep live in our mind and consider it as an opportunity also in the future.

Speaker 5

Thank you.

Speaker 2

Thanks, Vince.

Operator

Your next question comes from Jerome Dubreuil from Desjardins. Please go ahead.

Speaker 6

Thanks for taking my question. First one is on free cash flow. Hugues, just want to clarify what you said on the free cash flow comment earlier on the call in answer to Sebastiano. You said something like stable or slightly better than stable for free cash year over year. Last year, we had CAD 14.26. Just confirming that. Is this the new base level of free cash flow generation we should be expecting going forward, or maybe there's some working cap items that are boosting the near-term numbers? Thank you.

Speaker 1

Merci, Jerome. On free cash flow, let me be clear. My answer to Sebastiano, he was asking whether he's still working on the hypothesis that our free cash flow will be stable year over year, I said that's probably the best way to look at it. That being said, I added that we are confident. You'll see that we keep generating very strong free cash flows quarter after quarter, to your last point, without any unusual or timing-related adjustments or pickups or influences or impacts. I'm still confident with being stable, slightly ahead of stable year over year.

Speaker 6

That's great. Second question from me. You launched 5G+ recently. In the past, you were talking about having to close the network performance gap before closing the pricing gap. I was going to ask specifically about the pricing gap here, do you think you are getting closer to closing the network performance gap? Where do you see your network versus the others? Thank you.

Speaker 2

It's an interesting question. I guess that some of our competitors are building on the fact that 5G will dramatically change the landscape. We were not of this opinion. Instead of emphasizing, I'm not going to say go crazy, certainly aggressively building a 5G and a 5G+ network. We did it as we've been doing other kind of investment in our other businesses. We did the same in cable. We call that modernization. For the last 20 years, we've been improving our products. This is what we've been following as our investment strategy. We can say that, the numbers are there to prove them, that we were not impaired by this strategy. From 5G, from 5G+, we consider, we don't play that game.

Speaker 2

I don't remember what's the name of the company or the study that give, well, this is the best speed in this area. That's interesting, but certainly not considering things that our customers will follow on a day-to-day basis. We still continue to consider our other features, once again, customer services, credibility, quality of the product, as the key elements to move forward and continue to maintain and sustain our growth.

Operator

Your next question comes from Stephanie Price from CIBC. Please go ahead.

Speaker 7

Good morning. With the Etiya acquisition, the dividend increase in the renewed NCIB, just curious if you could give us your updated thoughts on capital allocation here.

Speaker 2

Yeah. Good morning, Stephanie. Yes, to my prepared notes, I refer to them. I think it's worth for Irvin to tell you maybe in more details the way that we consider that we will continue to operate in the future.

Speaker 1

Stephanie, as you see, we've announced as to capital allocation. I just want to make sure I heard, because your question wasn't terribly clear, but you were asking about how we intend to continue on our capital allocation strategy. Is that right?

Speaker 7

Yeah, just curious about uses of capital here when you've got the dividend increase for your renewed NCIB and the Etiya acquisition.

Speaker 1

That's right. Yeah.

Speaker 7

Just curious how you think about capital allocation and what the top priorities are here.

Speaker 1

Well, as you know, for a number of years, our capital allocation has been quite balanced, I would put it, in terms of debt reduction to improve our ratios, stock buybacks, and modest increases in our dividends. As we continue to churn out very reliable and very resilient cash flows, the Board of Directors has decided on the base of that confidence to raise the dividend a little bit. It's not our intention to become a dividend stock in any way, shape, or form. Certainly, our intent going forward is to remunerate our shareholders a little better as we have the opportunity to do it with our growing cash flows and also the fact that our payouts and our yields are way at the bottom of the fourth that we had given out.

Speaker 1

I think in terms of capital allocation going forward, more of the same, with a slight tweak in favor of continuing buybacks and increasing dividend a little bit while still continuing to invest in the network. Our CapEx, as you see, are solid, and they will keep covering our network extensions and our growth-related projects. There will be cash allocated as well. There'll be extra cash allocated to continuing to delever beyond the 2.86 where we're at.

Speaker 7

Thanks for the color.

Speaker 2

May I add, Stephanie, just quickly and refer to that, I think it's worth to mention it, commercial paper and our capacity to reduce our debt. If you look from one quarter to the previous ones and the other previous one, you'll see a decrease in terms of interest expenses that we face or we incur. This improvement, I think that it should be considered. This is certainly one matter that was raised at the Board as a possibility to reallocate this portion of improvement to the shareholders, because at the end of the day, they are the ones that is able to enjoy this balance sheet being improved and financial conditions also being improved.

Speaker 7

Thanks for the color. Maybe just switching over to the wireless environment. Pierre-Karl, you gave some good insight in the beginning of the call, just curious what you're seeing about the start of back to school and how it compares to what you saw last year at the same time period here.

Speaker 2

Well, at this time of the year in the few days to come, we should see how the market will move or react. Do we have, at this stage, a little bit of color? I would say that would be dangerous to answer that without doubt. I think that, again, as we mentioned, we will remain prudent. We know that we're always the best position, there is no reason why we should change. If the market was to change dramatically or, not completely dramatically, to change significantly, we will certainly react accordingly.

Speaker 7

Thank you very much.

Operator

Your next question comes from Matthew Griffiths from Bank of America. Please go ahead.

Speaker 8

Good morning. Thanks for taking the question. Just wondering if you could make any commentary on wireless churn this quarter and what you're seeing, what you're experiencing on a year-over-year basis. Obviously, with the improvements to the network as you continue investing, one would expect, I guess, a decline and just how that expectation may have played out given the competitive dynamics in the market that may be pushing in the other direction. Secondly, if I could, you've commented on the past about areas where you have completed a network build. I'm thinking of the Chatham example, for instance. Are there any other areas that you can call out that you've made an investment to bring the network to a net new area? That would be interesting to hear that type of progress. Thanks.

Speaker 2

Thank you, Matthew. I'll answer the second part of your question. I'll ask Hugues to do the first. Again, if we refer to what Stephanie was asking earlier and what we also refer in our prepared remarks, capital allocations is of importance. We know that each time that we're investing in our wireless network, we have the capacity to improve our cost because of roaming expenses going down. We always consider, because we are a facility-based legacy cable operator, that there's nothing more paramount than running your own network with the best quality possible. We will not change our philosophy. We will not change our mind. We know that, on top of that, we have obligation in front of ISED. We will respect our obligations, that building our network and using properly our spectrum is of importance.

Speaker 2

Mentioning specifically areas where we will focus from one to the other could be considered as commercially sensitive. We know that we have room to grow significantly in Alberta and in BC. We consider those markets of great interest, where we have the possibility to increase our market share, to increase the way that we operate. This is just almost an evidence. Therefore, we will do what is appropriate to be able to piggyback as much as possible to those areas. I will let Hugues answer the first part of your question, Matthew.

Speaker 1

Yes. As to churn, Matt, improving. Our churn's improving in the quarter. A number of things. Of course, the performance and the quality of our networks. We're continuing to invest, and it's continuing to improve quarter after quarter. There's also obviously a more rational market environment in which we are evolving. Also globally, an improving, what I would call customer experience. That's not just due to a better network, but also our everyday low price pricing approach is increasingly well received by clients. We give a lot of value in the packages that we sell at low prices. People are recognizing this and are increasingly coming to us as opposed to going from promotion to promotion, as is the case for our competition.

Speaker 1

I think they're increasingly relying on our approach and having more confidence in our networks, in our experience, and just overall in the quality of our service. Churn, after a bit of a setback in Q1, and I think that was probably the case for the entire industry, it's back on track, improving.

Speaker 8

That's great. Thank you so much.

Speaker 2

Thank you, Matthew. We'll take the next question.

Operator

Your next question comes from Tim Casey from BMO. Please go ahead.

Speaker 9

Thanks. Good morning. Pierre-Karl, if you could talk a little bit about the wireless strategy with respect to building out the network and capturing ownership economics, which I think you followed a success-based model that as you have density in a certain area, there's obviously incentives to build there. Could you talk a little bit about your MVNO arrangements? How are those contracts set up as they age in time? Are there potential cost increases in terms of those carriage arrangements that further incent you to build your own network? Or are you protected as you grow your volume of MVNO subscribers? Could you just talk to us about how you're thinking about the balance between build-out versus MVNO cost?

Speaker 2

Yeah. Good morning, Tim. With pleasure, I'll do that. MVNO, it's not completely MVNO where it's more of our roaming agreements with colleagues in the industry. We've been seeing, and this is a significant trend worldwide, and roaming is not only domestic in Canada. I'll come back to that because, again, we have obligations that we intend to respect. Roaming is also a worldwide business. We roam with French, Italian, French, British, everywhere. In fact, also, as you probably, and we emphasize on this, Freedom offer more location with roaming prices that are part of our commercial offers. I will repeat, that's a trend that been seeing prices per gig being reduced. We see the same in Canada. Certainly, roaming was a large part, and you guys probably know that more than I do because you have the capacity to talk with the other operators.

Speaker 2

That was a significant portion of the revenues before, which is quite different today because, again, domestic prices are in a more competitive landscape and seeing Freedom and Vidéotron and Fizz being an interesting customers for them, they would see us as a quite object of adding revenues to their top line. This is the way that they act. This being said, again, and I think it's important to repeat, that we are a facility-based operator on top of which we have obligation, we prefer to build our network, assume the one-time cost of building it, and enjoy running on it without being forced to pay for using it, obviously, to the exceptions of maintaining our networks accordingly to the requirements of our customers to move forward. Luc, would you have other things to add on this?

Speaker 1

No, I think that's fine. What you just said, Tim, I think it's something you and I have talked about in the past, where it's logical, where it makes sense for our business, where we've built a significant market share and business. We obviously believe in building and running our own network. Where it doesn't so much, then we will have some decisions to make. Yeah, I think that's all I'd say, yeah.

Speaker 9

Thank you.

Speaker 2

Thank you, Tim. I think that we'll take the last question, operator.

Operator

Thank you. Your next question comes from Drew McReynolds from RBC. Please go ahead.

Speaker 10

Yes, thank you for squeezing me in here. Two for me, mainly follow-ups here. Just on the expansion in Western Canada. Just wondering, I know you've publicly talked about, obviously, first network build and enhancement and then followed by, clearly what will be a marketing and sales push, just to build the brands out in the West. Wondering on the network side, just the status of that, and then just to level set expectations, all of the commentary you've had around just the positive trends, obviously, in the core telecom business and the operating leverage. Once you start that Western Canadian push, do you see one step back in some of that, or can all of this be absorbed within largely the trajectory you're on? Then second question, and probably for you, Pierre Karl. Thanks for the update on all the capital allocation. Great to see the dividend increase.

Speaker 10

It's the opinion of some, including myself, that there's some further consolidation that's required in what looks like a maturing telecom industry. I'm just wondering, how your position in Quebecor for maybe future industry consolidation and how that impacts your target leverage and frankly your payout ratio, just to make sure the company's prepared to be opportunistic. Thank you.

Speaker 2

Thank you, Drew. That's interesting questions. Certainly the second one. Maybe I should start with it. Having a good balance sheet is certainly something that we've been working on for many years. I remember, when we started buying Vidéotron in 2000, I guess I'm probably one of the oldest CEO in this industry now. We had seven times debt EBITDA ratio. We, throughout the years, reduced first of all, we bought all the Caisse de dépôt position, the 45% they hold. We did it in three installment through the year, but increasing the leverage during the first or the second year of the purchase. Then, we had the Freedom deal, which also brought our ratio a little bit higher. Always saying that we will continue to work on it and reduce it.

Speaker 2

Again, we delivered, and I think that this is a strong sign of credibility to the debt market, which we have the capacity to get very quickly at, we emphasize on earlier also at very interesting conditions, without being forced to be creative and issue hybrid debt for a ratio purpose. Our ratio is pure and clean. There's no other debt than clean debt in our balance sheet. We are at 2.87. It's always a question from the directors, the board, and the management, where do we want to go? Do we want to go to two times, to one time and a half? Is it logic to go there? Is it the best things to do or use the balance sheet to provide tools to get the proper allocation between dividend buyback and debt reduction? One portion could move from one to the other.

Speaker 2

If debt was continued to reduce significantly as we've been able to do, maybe the allocation for debt reduction will be reduced and provide additional fuel for the two others. I don't want to make any projections. I'm just talking theoretically about what could happen in the future, and this is the kind of thing that we ask ourselves moving forward. On the consolidation side, this, I really don't know. We've been facing consolidation taking place in the cable business, Shaw Rogers, that gave us opportunity to get the Freedom asset. We've been doing things acquisition-wise with Etiya on the BSS business that also could be considered a direction for improving or getting our capacity to grow our business differently. I don't think there's any more to say on this. Go ahead, Hugues.

Speaker 1

I was just going to cover, Pierre, Drew, your first question with respect to the West. In short, yeah. We said it in our prepared remarks, lots of opportunity out West. Our market shares are lower. We are actively working on improving the network. We were facing performance and quality issues in some areas. We're actively working on that. We also have a plan to be more commercially aggressive out West because it is an area where there's no reason for us where we can't be as successful in the West as we were in Ontario and in Quebec before that. For us it's just a huge runway ahead of us. Yes.

Speaker 2

I would add to that also. Maybe we can finish on this, Drew. We increase our presence in B.C. and in Alberta. I think it's important. Freedom brand is more present than ever. We had this wonderful venue in Vancouver, which we recently inaugurate. That was a lovely and funny and there were a lot of people there. We are still present at the Stampede in Calgary, with this cool brand called Freedom. It fits very well in this landscape. We will continue to be highly positioned in terms of marketing our brand and advertising them with the proper offers in those specific areas.

Speaker 10

Okay. That's great. Thank you both.

Speaker 2

Thank you, Drew. That is ending our conference call. I'd like to thank you all joining us. I understand that, fortunately, we didn't have would you say that, Hugues?

Speaker 1

A little bit of an overrun?

Speaker 2

Yeah, an overrun on our colleague previous conference call. Maybe we should make sure that we're going to continue to make sure that you guys are available and not being forced to pick one instead of the other. We'll make sure that always, to make sure that we have the capacity to talk and to share with you guys. In the meantime, I will wish you a nice end to the summer, and we'll talk to each other at Q2 conference call. Thank you very much, and have a nice day.

Operator

Ladies and gentlemen, this concludes the Quebecor Inc.'s financial results for the second quarter 2026 conference call. Thank you for your participation and have a great day.

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