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Executives

Andre Bureau – Chairman

Ian Greenberg – President & CEO

Claude Gagnon – SVP & CFO

Jacque Parisien – Group President – Astral Media Radio & Astral Media Outdoor

Alain Bergeron – VP Corporate Communications & CMO

Robert Fortier – VP & Controller

Analysts

Adam Shine - National Bank Financial

Paul Steep – Scotia Capital

Scott Cuthbertson - TD Newcrest

Ben Mogil - Thomas Weisel Partners

Tim Casey – BMO Capital Markets

David McFadgen – Cormark Securities

Drew McReynolds - RBC Capital Markets

Michele Monger – Unspecified Company

Ross Marowits - The Canadian Press

Unspecified Media Questioner

Astral Media Inc. (AMC.A) Q2 2010 Earnings Call April 8, 2010 10:30 AM ET

Operator

[French Translation Not Available] Good morning ladies and gentlemen. Welcome to the Astral Media fiscal 2010 second quarter financial results conference call. (Operator Instructions) It is now my pleasure to introduce Mr. Andre Bureau, Chairman of the Board of Astral Media.

Andre Bureau

Good morning everyone [French Translation Not Available] I am Andre Bureau, Chairman of the Board of Astral Media and I am joined this morning by Ian Greenberg, President, and Chief Executive Officer; Claude Gagnon, Senior Vice President, and Chief Financial Officer; Jacque Parisien, Group President, Astral Media Radio and Astral Media Outdoor; Robert Fortier, Vice President Finance; and by Alain Bergeron, Vice President Corporation Communications and Chief Marketing Officer.

And on behalf of all of us here in Montreal I’d like to welcome you to this fiscal 2010 second quarter conference call. In a few moments Ian and Claude will comment on the overall results. We will then proceed to the question-and-answer period and as usual, we will take questions first from analysts, then from the media.

[French Translation Not Available]

Ian Greenberg

Merci Andre, and good morning everyone and thank you for joining us. I’m very pleased to be reporting strong overall second quarter results which were achieved in a challenging environment. We are also encouraged to see signs of increased activity in our advertising markets, fueled by gradually improving economy.

Astral’s consolidated revenues for the quarter increased by 4% to $218.3 million, while EBITDA grew 6% to $62.6 million over the same quarter last year. Net earnings reached $33.6 million while basic earnings per share reached $0.60 growing a very solid 24% and 25% respectively over the corresponding period last year, enabling us to report a 54th consecutive quarter of profitable growth and the best second quarter in the company’s history.

In television, revenues for the second quarter grew by 6% and EBITDA grew by a strong 14% over the same period last year. This performance was fueled by a 7% growth in subscription related revenue, an encouraging rebound of our television advertising revenues derived from broadcasting activities which grew by 11% in the second quarter.

The number of our pay television subscribers increased by 43,000 subscribers year over year and is now surpassing the 1.8 million mark. Our on demand and interactive television activities continue to prove popular with our subscribers. After the successful deployment of our TMN Online, Family Online, and Playhouse Disney Online services with Bell TV we have recently added our highly acclaimed HBO programming to the Bell TV online offering.

Now turning to radio, revenues in the second quarter declined by 2% which compares favorably against a 3% drop recorded by the radio markets in which we operate. As we see some signs of increased activity of the radio advertising, for the first six months our advertising revenues declined by only 1% while the overall markets in which we operate decreased by 5%.

Radio EBITDA declined by 14%. In addition to the slightly lower revenues this decrease was in large part explained by continuous strategic investments in radio programming, branding, and sales activity despite the economic recession. For example the second quarter saw the return of the Les Grandes Gueules, across our 10-station NRJ network in Quebec, with their highly popular radio show.

Last December we also announced the rebranding of our Toronto EZ Rock station to the new [Boom] FM with key programming and personality line up changes. In March our radio group also announced the signature of a long-term agreement with Chicago based Emmis Interactive, a leading provider of interactive and social media services for the radio industry.

This agreement will allow us to upgrade our 82 radio websites by the end of the summer and will consolidate and strengthen our concerted interactive offering to our advertisers. As we move to Q3 we anticipate seeing continued momentum on radio advertising activity with mid single-digit increases or better.

And it also appears to us that the radio industry in Canada for the first time in the last four quarters will return to year over year growth in the third quarter. Our outdoor advertising group reported solid growth in the second quarter thanks to a strong overall performance and the contribution of our recently expanded national digital advertising network.

Outdoor’s revenue grew by 23% while its EBITDA more than doubled over the same quarter last year. Throughout the economic downturn we have continued to invest strategically in sales, programming, and branding initiatives across all our platforms. This long-term vision has allowed us to make important headway in further strengthening our position for future growth in several of the key markets in which we operate.

As we have said in the past quarters we are now expecting the advertising market to rebound as we turn to the second half of fiscal 2010 and gradually reap the benefits in an improving economy.

Claude Gagnon

Thank you very much Ian, just a couple of points I’d like to highlight, some of these will be repetitive compared to Q1. I just want to reemphasize as you’ve seen in the numbers that the comparatives have been restated as we adopted Section 3064 of the CICA Handbook and we provided the details in Note 1 to the financial statements and page seven of the MD&A.

Essentially its important to remember that if you’re developing a new service or new initiatives with regard to new business development you’re no longer able to capitalize a lot of the pre operating costs, or so called pre operating costs, that were reported on the balance sheet previously. You have to run those through your operating expenses as they are incurred.

And of course the other change on the positive side since you have nothing left on the balance sheet with regards to those items, there is no amortization or depreciation related to the pre operating costs. We discussed at length in Q1 the Part 2 fee settlement, you’re well aware of that. If you require any details they are on page 11 of the MD&A. The full impact was recorded in Q1 and we are now accruing on a best estimate basis of the new capped regime for the Part 2 fees, both in TV and in radio.

Regarding our cash flow you’ll see from our cash flow statement that we repaid $30 million of our bank debt in Q2. Year to date repayments amount to $40 million and on a 12-months basis or over the last 12 months we’ve repaid $140 million of our bank debt which now stands at the end of Q2 on February 28 at $655 million.

Total repayment since we incurred the debt are now $170 million and our net debt to EBITDA ratio now stands at a pretty comfortable 2.0. As a result of the debt repayment and the lower interest rates as compared to last year, our interest expense you will note has been reduced by 31% as compared to last year, both for the quarter and on a six-month basis.

Subsequent to Q2 we repaid another $20 million of our bank debt. In his notes Ian alluded to the fact that we continue to make investments into the future, investments into our brand, into our programming, into developing our sales staff and our interactive media properties. To that effect Ian mentioned that we struck an agreement with Emmis and we rebranded a few stations and so on, as we continue to do as compared to last year to position ourselves for the economic rebound.

Now on a financial basis this has had a couple of impacts, you’ll note on page 21 of our MD&A our guidance with regards to our capital expenditures for the year has been increased to about $70 million and that relates mostly to monies that will be expended on the development of our radio interactive properties, in particular with regards to Emmis.

The other thing that’s going to occur and you’ve seen a bit of that impact in Q2 is that we are going to be adding some expenses to our operating cost base in radio to the tune of roughly $3 million a quarter in Q3 and in Q4 and I add that that includes costs that are incurred for the launch of our new FM station in Ottawa.

That $3 million we estimate at this point that about $2.5 million will be recurring and added to our cost base again because we’re developing an interactive property and we are launching a new station in Ottawa. It should be noted that during the pre operating period or the launch period of these initiatives as I mentioned earlier in my notes, we’re no longer able to capitalize any of those costs.

So we’ve got to run them immediately through our operating expenses while we’re not necessarily incurring much revenue with regards to those investments. The revenue will build up over time. The impact of adding to the cost base will probably create some downward pressure on our radio margins as we compare them to last year. If you look at our comps for last year the margins were probably in the 34% to 35% range and we estimate at this point given what we see on the top line as discussed by Ian, and given the addition to our cost base that the margins will probably settle down to the lower 30% range for Q3 [then] Q4 until we start building up the revenue line as it relates to those additional investments.

That’s about it for now, I’ll pass it back to Andre for questions.

Andre Bureau

Thank you Claude, I would now like to open the call to questions. As indicated earlier we will first begin with questions from the analysts and then it will be followed by questions from the media.

Question-and-Answer Session

Operator

[French Translation Not Available] (Operator Instructions) Your first question comes from the line of Adam Shine - National Bank Financial

Adam Shine - National Bank Financial

Most of my questions relate to radio costs, but maybe just a quick one back to revenues, can you just again just clarify what you were saying regarding mid single-digit I guess ad expectations in the back half of the year, is that correct.

Ian Greenberg

I said specifically about Q3, as you know the bookings are still [look] for advertising sales, they’ll come late in the game. We have visibility for the third quarter obviously one month is completed, the month of March, so for the third quarter as I said we expect at least mid single-digit increases and this would be the first quarter of increases over the last four quarters.

So I think it speaks well to the radio industry and our radio business that we’re finally back to increases year over year for the first time in the last four quarters.

Adam Shine - National Bank Financial

And just as a point of clarification, you did indicate pretty clearly $3 million of extra costs for the new FM station in Ottawa, what were you saying about the $2.5 million.

Claude Gagnon

For the new FM, I said all inclusive, there’s some additional costs incurred, for our active project, we’re going to be hiring people there. We’re launching a new station. There’s additional programming costs for instance with Les Grandes Gueules coming back. There’s some rebranding expenses incurred for Boom in Toronto and so on.

Those are particular, another one is mentioned in the MD&A also, is the cost incurred maybe on research with the arrival of the new PPM measurement system. We’re adding about a total with all of this combined about $3 million a quarter, there’s probably about $2.5 million of that is recurring because the Ottawa station is going to stay there. PPM is going to stay there but expenses will probably go down somewhat.

Les Grandes Gueules will remain there and Emmis we call it Emmis but its really a whole interactive project where we’re hiring people and we’re going to really boost staff related to interactive sales. That will be there for awhile also.

Adam Shine - National Bank Financial

Can we go back then to look at Q2 and maybe talk about perhaps what related items effected the OpEx and maybe more specifically you did highlight obviously additional investments related to the PPM launch, so (a) what are the nature of these investments, and (b) is there a way to quantify any of these new items that might have surfaced into Q2.

Claude Gagnon

They’re essentially the same items and they probably amount to half of what we’re going to be incurring in Q3 and Q4. I’m not going to go into any further break down than that because it would just be misleading since we’re gradually phasing into these projects.

Adam Shine - National Bank Financial

But the nature, the specific nature of the PPM, this is perhaps realigning certain methodologies or what is it.

Claude Gagnon

Maybe Jacque could explain the PPM costs.

Jacque Parisien

Yes, PPM costs relate to research that we’re doing to realign yes, but also to get the agencies, [inaudible] the conversion from [balance] to the PPM. We’ve done a lot of presentations and conferences with the advertising community on that and that will be ongoing but phasing out gradually as PPM gets more mature with all the stakeholders.

Adam Shine - National Bank Financial

And I know you do sort of mention the key elements in the MD&A regarding the March 22 decision and you do indicate that its perhaps a little bit too early to tell, but would you say that sort of generally speaking your initial reaction would be nothing particularly adverse.

Andre Bureau

It has no immediate impact on us and we have yet to see what will come out from the Court, decision is being put before the Court to determine whether the CRTC had the authority to make such a decision and it might be appealed, whatever the decision is, from the Appeal Court, might be appealed to the Supreme Court, and then who knows if the government will agree with the decision and will want to support it or change things.

So in the meantime it has no impact on us and so we’re waiting to see what will finally happen.

Adam Shine - National Bank Financial

Just a little more clarity, just with respect to the fact that the licensee top up was eliminated, I know you historically have been very good in terms of meeting certain new challenges in terms of coping with [inaudible] and the other related adjustments, this particular issue you also deem to be sort of a bit of a non event.

Andre Bureau

Well first of all the elimination of the fee top up from the calculation of broadcasters spending on Canadian programming will only take effect at license renewal. And the CRTC has said that it will consider requests to adjust the required CPE level, the Canadian Programming Expenses levels, according to reflect the change that the decision could bring.

Adam Shine - National Bank Financial

So its likely to be a wash.

Andre Bureau

Its likely to be a wash and its not even happening now. Its happening only at the time of renewal.

Operator

Your next question comes from the line of Paul Steep – Scotia Capital

Paul Steep – Scotia Capital

I guess first maybe could you talk a little bit about Emmis, what it maybe means over the longer term here in terms of revenue or the potential as you get that platform in your hands in the field and then maybe just even the timing as to when eventually we should start thinking that’s going to hit the market and your folks will have that in their toolkit to sell.

Jacque Parisien

Emmis is a content management system, and the real name is base station and it’s a system by which you enhance the content of your website dramatically, in consumer content as well as advertising content. And we are rolling it out into all our stations hopefully before Q1 so before the end of this fiscal.

We are expecting the kick in to show only in Q3 and Q4 of next year giving us a chance to train people, get the right advertisers online, break it in, so on, and so forth. But we’re very optimistic that this will put us in a leadership position in terms of web activity related to our radio stations.

Paul Steep – Scotia Capital

Is it fair to say that you just really didn’t have these tools before, like that’s the biggest thing we should think about, that these are—

Jacque Parisien

You’re absolutely right.

Paul Steep – Scotia Capital

--sort of world class tools and now your folks will have them and got to get it implemented but its just makes them a lot stronger in the field, that’s how we should be sort of thinking about this process.

Jacque Parisien

You’re absolutely right. This will bring us in a leadership position in front of the parade.

Claude Gagnon

Another way to look at it, its part I guess, its taking I guess our investment in standards to a new level. I think we’ve always mentioned that part of the strategy with standard was to invest in various ways, shapes, or form to try to optimize the value of these assets across the country.

Now we had a network, a couple of networks in Quebec, and we added 50-some odd stations from standard and we’re going to put them all on the same platform, similar back offices, and so on to make the whole process, the whole national template as efficient as possible.

Jacque Parisien

Which means we will then be able to accommodate local advertisers in each market as well as national advertisers across all markets.

Paul Steep – Scotia Capital

So there is cost efficiency and revenue upside once we get there, we just have to get it put in place. Its not an exclusive deal if I recall I think one of your competitors may have done some work with Emmis in the past, is it or did you take it to another level with some of the other tools.

Ian Greenberg

We did take it to another level with other tools but I don’t want to get into any detail on that.

Paul Steep – Scotia Capital

The last two for me, one just a clarification, you talk about the $3 million relative to what period are you referring, last quarter or a year ago prior.

Claude Gagnon

Its relative to the last quarter.

Paul Steep – Scotia Capital

And then just on the new head office, any expense impact expected there and sort of the timing, I assume a lot of it will be capitalized.

Claude Gagnon

Its immaterial at this point. A lot of it in terms of leasehold improvements and all that will be capitalized.

Operator

Your next question comes from the line of Scott Cuthbertson - TD Newcrest

Scott Cuthbertson - TD Newcrest

Just a couple of little things, I was wondering on the outdoor very nice performance in the quarter, I guess the new digital network was a big part of that but I just wondered if the Olympics had an influence as well given your presence in Vancouver and the timing of the Games, because I’m just trying to figure out how sustainable the momentum is in that part of your business.

Ian Greenberg

The Olympics didn’t have a major factor because the signs in Vancouver were under an agreement with [Vanops] so it was sort of capped how much we could sell on our own. As of March we’re now on our own in Vancouver and hopefully that will kick in. The fact is that the digital investment that we’ve made over a year ago has been meeting our expectations certainly and been very accretive to earnings.

The margins are better on digital than they are on traditional stationary of course and we’ve now obviously in this quarter and for the quarters to come have more boards operating. We’ve got the nine in Vancouver, we’ve got 10 in Montreal, we will be up to six boards in Toronto by June 1 and looking for opportunities to bring Toronto up to at least the amount we have in Montreal which is 10.

So the single probably biggest reason for the increase has been the digital boards and also probably the single biggest reason for the improvement in the margin. The other factor is that the TSF contract is coming along again according to plan and the fact is as we have better installation of our new equipment and the removal of all previous signing on the sidewalks of Toronto, i.e. benches or garbage receptacles.

So those are the two biggest reasons, TSF, and digital boards which allowed our outdoor division to have a terrific quarter.

Scott Cuthbertson - TD Newcrest

That’s good, it sounds like you’re going to enjoy some positive momentum in the quarters ahead on that too, so that’s great. One little thing was just I know your television airtime ad revenues were, grew 11%, but they were offset a bit by lower merchandising and website related revenues which brought the overall growth down to sort of 6% I think it was. Can you give me a little bit of color on the dynamics there.

Ian Greenberg

Its mostly in the area of family channels where we have some promotional activities from time to time whether its promoting programs of other players or promoting movies and that was the area. Its not our traditional advertising and that was the area that had a quarter that effected the increase of our overall advertising.

Straight on air advertising, traditional advertising sales were up as you say the 11%, but we did have a decrease in the promotional activities.

Scott Cuthbertson - TD Newcrest

And I guess the other thing was, I was wondering but I think you said last quarter that you were looking for television programming costs for the full year to be relatively flat year over year, I just wondered, the costs were up a little bit in the quarter and I just wondered if you’re still expecting them to kind of be flattish for the year by the time its all over.

Ian Greenberg

Just to clarify what I meant by that is a percentage, not the absolute dollars so I don’t know if you’re referring to dollars or the percentage.

Scott Cuthbertson - TD Newcrest

I may have misconstrued, I thought you meant the expenses themselves wouldn’t grow that much, but—

Ian Greenberg

I meant margin because obviously a lot of our costs are on a per subscriber basis so I our subscribers are going up obviously the absolute dollars will increase.

Claude Gagnon

In particular the [inaudible] part also there, tied into the prior year’s revenue so as the revenues increase the [inaudible] increases also.

Scott Cuthbertson - TD Newcrest

So what you’re clarifying here is that you expect your television margin to be relatively unchanged year over year.

Ian Greenberg

We expect it to be in line, percentage wise, just to clarify once more.

Operator

Your next question comes from the line of Ben Mogil - Thomas Weisel Partners

Ben Mogil - Thomas Weisel Partners

When you look at the PPM results so far sort of to date, can you talk about sort of what you’re seeing in terms of demographics that you’re losing ratings from what you had under the old diary system and where you’re sort of gaining ratings, not station specific, but more sort of genres or formats I’m curious about.

Jacque Parisien

So far PPM has been very good to us compared to the [balance] if I look across Canada. Montreal, [Franco and Anglo] we’ve seen our stations go up, in market share as well as in total listenership. Toronto also has been very good especially on the Virgin station. Vancouver you know the story about Virgin in Vancouver so that’s been very positive also, but two new entries on PPM are Calgary and Edmonton.

And in the last PPM results that we’ve had Calgary was up but not that much, just by half a point but then Edmonton was substantially up close to five market share up. So the psychology and the currency of PPM are favoring us so far and we expect it to remain that way.

Ben Mogil - Thomas Weisel Partners

A couple of questions on the financial side, I think you talked about sort of what you expect for third quarter obviously having no visibility on radio yet for fourth quarter, do you think that your third quarter 2010 radio revenue will be higher than what it was in the third quarter of 2008 or do you think we’re still going to be below that level.

Ian Greenberg

That’s a good question.

Claude Gagnon

Third quarter of 2008?

Ben Mogil - Thomas Weisel Partners

Of 2008, I think you were negative 4.5 in the third quarter of 2009.

Ian Greenberg

Well as I said mid digit or better so obviously—

Ben Mogil - Thomas Weisel Partners

Around flattish with that.

Ian Greenberg

I don’t have the 2008 number in front of me to be honest with you, if I had it I’d be able to give you a comment but we can get back to you on that.

Ben Mogil - Thomas Weisel Partners

I just want to make sure I sort of got you right on a couple of things, the expenses in the next couple of quarters you talked about low 30% range margins, was that for each of the quarters or was that for the second half in the aggregate, in radio again.

Claude Gagnon

It should be about the same in each quarter, therefore the aggregate also.

Ben Mogil - Thomas Weisel Partners

And did you say that you have paid down $20 million of debt subsequent to the quarter end.

Claude Gagnon

Yes.

Ben Mogil - Thomas Weisel Partners

Okay so you basically paid down $50 between the [30] and the quarter then 20 afterwards.

Claude Gagnon

That’s right.

Ben Mogil - Thomas Weisel Partners

And in terms of just general sort of color if you will on radio advertising can you talk about what you’re seeing working and what you’re seeing still struggling, i.e. either by region, local versus national, which kind of categories, I’m curious about sort of what you’re seeing as working and what you’re still seeing as being sluggish if you will.

Ian Greenberg

Let me address it on a different angle, we’re seeing national being more active than it was and retail starting to pick up but slower than national. We used to be six, seven, eight weeks ago we had difficulty getting an appointment with an advertiser, but today’s it’s a different picture, especially in the markets where we’ve done rebranding or where we’ve invested in programming.

There is momentum, it hasn’t crystallized yet in dollars but when you see the activity level that we have, we know by experience that it’s a good sign, it’s a positive sign for us. As far as going across the country, we’re seeing a good dynamic in the markets of BC, Alberta is picking up but not, its still a bit slow.

The Prairies is doing well. Toronto is better than it was but still a bit slow. Quebec is okay and the Maritimes is doing very well. And we finally located the 2008 number and the projection now for third quarter 2010 will be slightly above 2008.

Ben Mogil - Thomas Weisel Partners

And going back to some of your commentary on the color and from a perspective of, which markets are you still, I mean is Toronto still the one and I guess Alberta those are still lagging a little bit from what you can see.

Jacque Parisien

As I mentioned its better than it was but its still lagging and so is Southern Ontario, and for the obvious reasons, cuts in the industry, so down in that area, but it is picking up in Toronto and it is picking up in Calgary and in BC.

Operator

Your next question comes from the line of Tim Casey – BMO Capital Markets

Tim Casey – BMO Capital Markets

Can you talk a little bit about your ability to monetize the improving trends in television, have you sold most of your inventory or do you still have some that you can put into the slot market and hopefully take advantage of a more robust market as we’re going forward and then what are you looking forward to in terms of up front markets for 2010, if you have any view on that at all. And then my second question is on radio, just trying to understand the Emmis initiative a little more in that you’re saying it puts in you in a leadership position but Corus has it across a number of their stations and their in a number of the same markets. I’m just trying to understand what you mean by leadership and I guess if you could, just what’s the context of online relative to your overall ad ties. I’m assuming its still single-digits in terms of percentages, but I’m just trying to understand better where you think you can take that number going forward.

Ian Greenberg

You’re right on the single-digit observation but its [bumping] every year in Canada. So if we want part of that business and we do want part of that business we have to be able to offer a site that technically can support better content and more advertising which is not what we had before we entered into this deal.

Secondly we will be the only regular broadcaster having the same platform across all of our stations in Canada. No other broadcaster has the same platform across all the stations in Canada. As I mentioned previously this will be, allow us to offer national advertisers one sale, one contact, on contract and cover all of our sites, all of the markets, everywhere.

And it will also offer us more flexibility for the retail advertisers. The limits of this platform and I’ve seen it work in the States, where they have established some early conclusive experiences, its incredible and the only limit of it is the creativity and innovation that you want to put forward. And we’re working right now on some very stimulating activities and strategies to develop this service. And that’s what we’re expecting.

And so far as the advertising on TV while I mentioned radio we expect that third quarter mid single-digit in TV, its more optimistic then that. I think its closer to a high single-digit. We’re getting to the point where there won’t, I think the industry and TV seemed to rebound and basically because of the car business there’s been a return. When you look at the quarter last year GM particularly was non existent.

They’re back in full force as is Ford and so I think with what we’re seeing as trends as far as Q3 its more in the high single-digit but that’s pretty well where we were when we were a little over, we were very low double-digit in the second quarter but I think we should see somewhere in the range of that number in Q2.

So its, frankly refreshing to see the kind of increases in, whether its radio, TV and outdoor for that matter going into Q3 and hopefully that momentum will carry us into Q4.

Tim Casey – BMO Capital Markets

Do you have inventory available to take advantage of that.

Ian Greenberg

Its, not much.

Tim Casey – BMO Capital Markets

So its obviously encouraging for next year then, when do the decisions start to be made for the up front for 2011 fiscal 2011.

Ian Greenberg

Late summer.

Tim Casey – BMO Capital Markets

And lastly any signs, you mentioned Ford and GM, any signs that Chrysler, I know everybody is waiting for them to come back, any sign they’re going to start to move.

Ian Greenberg

They have not been as aggressive as the other two, but we’re hoping they’ll be there but the other brands also because of the activity of the two big American brands, brands like Honda and Kia have also stepped up to the plate.

Jacque Parisien

One of the reason why Chrysler hasn’t been as aggressive as the others is that they’ve gone through a major, major agency review recently so we’re expecting more from them shortly. They have changed agencies across the country.

Operator

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

David McFadgen – Cormark Securities

Two questions, first of all just a clarification, when you talked about the TV margin for 2010 being in line do you mean in line with the 2009 restated numbers.

Ian Greenberg

No it would be better than the restated numbers. So in line would be based on last year’s numbers.

David McFadgen – Cormark Securities

Last year’s reported numbers, not the restated numbers.

Ian Greenberg

Yes.

David McFadgen – Cormark Securities

And then just a question on the outdoor business, what’s the latest with that new Toronto tax, when does that come into effect, can you just give us an update on that.

Ian Greenberg

The tax comes into effect in April, we’re the smallest player from the point of view of outdoor billboards. You have to remember PSF is not effected by this tax. So that has no effect on us but I have to tell you that the industry as a whole which we’re a part of of course, has gone to court against the City of Toronto because their premise for the tax was based on a volume that frankly in our opinion as an industry is erroneous.

Their numbers were like three times the actual number of the revenue and they based their tax based on that number. So there is a court case that’s been presented. It will take a while but from a national perspective in any case it is not that meaningful. Its not a material number for this year.

David McFadgen – Cormark Securities

But you had started to accrue for it right away in April, though.

Ian Greenberg

Absolutely.

Operator

Your next question comes from the line of Drew McReynolds - RBC Capital Markets

Drew McReynolds - RBC Capital Markets

Just two follow-ups, first just you’ve spoken about 2010 CapEx, can you just give us a little bit of help on 2011 in how that would change just based on the increase in CapEx in 2010.

Claude Gagnon

It’s a little early for us to comment on that, if I had to pick a number the most recent increase to 70 obviously is non-recurring. A lot of it is specific to projects that are ongoing for this year so I suspect we’ll have a running, somewhere in the 50 to 60 range. Again that’s the best I could do right now.

Drew McReynolds - RBC Capital Markets

And just back to radio and the digital contribution, just wondering when you look at the online revenues that are generated for radio and when you sell online, when you look out call it two, three, four years, are those incremental revenues generated by the industry or do you view it as offsetting some revenue pressure in the traditional business.

Ian Greenberg

Its probably a combination of both.

Drew McReynolds - RBC Capital Markets

Okay so in effect you have digital revenues coming into the picture, net net if it’s a combination of both it is incremental but not to the degree of the 100% of digital.

Claude Gagnon

We think it is incremental in part and I think it helps us also sustain our base on air revenues also.

Operator

Your next question is a follow-up from the line of Adam Shine - National Bank Financial

Adam Shine - National Bank Financial

Actually I think David touched on it in terms of the margin I guess just when I look at my model and I just reflect on the upside in the margin performance in the first half of the year are there any specifics sort of the one-time related programming costs that are causing you to point to a sort of more flattish type margin pre restatement.

Ian Greenberg

Well the only things as we mentioned before is that our pay television subscriber base increases, the Canadian content obligations increase. And so I don’t know how much room there is to go beyond this frankly and we’re certainly not predicting any.

Operator

[French Translation Not Available] Your next question comes from the line of Michele Monger – Unspecified Company

Michele Monger – Unspecified Company

[French Translation Not Available]

Andre Bureau

[French Translation Not Available]

Operator

Your next question comes from the line of Ross Marowits - The Canadian Press

Ross Marowits - The Canadian Press

I’m wondering if you could elaborate a little bit on your auto improvement, is that equally improved across all platforms, is there any that are doing better than others.

Ian Greenberg

It has improved against all platforms. Probably more in TV than in radio. TV and outdoor would probably see the greatest effect of the increased activity of the automobile industry.

Ross Marowits - The Canadian Press

What is the percentage of your advertising revenues that come from the auto sector.

Ian Greenberg

Frankly I don’t have that number in front of me.

Ross Marowits - The Canadian Press

Is there any ballpark, 10%, 20—

Ian Greenberg

I’d say its in that range.

Ross Marowits - The Canadian Press

And how much of the improvement going forward do you expect to come because of the auto advertising versus other sectors.

Claude Gagnon

Too early to comment on that, just not enough visibility across all platforms to comment on that but obviously it goes in line with the improvement of the economy whether it comes from auto or retail, it will be beneficial to each one of our platforms. But we can’t say to what extent auto itself will have positive impact.

Ross Marowits - The Canadian Press

But what you’re saying so far is that you’re seeing an improvement from what it was.

Claude Gagnon

Correct.

Ross Marowits - The Canadian Press

And the last thing I’m wondering do you have any plans to add any US specialty channels.

Claude Gagnon

To add US specialty channels?

Ross Marowits - The Canadian Press

Yes, like you do with HBO—

Ian Greenberg

You mean US programming.

Ross Marowits - The Canadian Press

Yes, sorry.

Ian Greenberg

Well we have agreements in place with just, you’re talking about specifically on the pay TV side?

Ross Marowits - The Canadian Press

Sure.

Ian Greenberg

On the pay TV side we’ve pretty well got five out of the six studios. We’ve got Showtime, we’ve got HBO, and other programming from Stars so there isn’t much more to buy. We pretty well have everything.

Operator

Your final question comes from the line of Unspecified Media Questioner

Unspecified Media Questioner

[French Translation Not Available]

Andre Bureau

[French Translation Not Available]

Operator

[French Translation Not Available] Since there are no further questions at this time, I will ask Mr. Andre Bureau to give closing remarks.

Andre Bureau

Thank you everybody. I would like to remind those needing more detailed financial information that the complete [inaudible] dated financial statements with the notes and the MD&A are available on our website at www.astralmedia.com and they will remain on the site until April, 2011.

If you have any further questions, please contact Andre Bureau at 514-939-5008 following this call. [French Translation Not Available]

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Source: Astral Media Inc. F2Q10 (Qtr End 02/28/10) Earnings Call Transcript
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