Q4 2019 Earnings Call
Oh Fuck dispense please stand by your conference he's ready to begin.
Morning, Ladies and gentlemen, welcome to the B.C.E.Q. for 2019 results and 2020 guidance conference call.
I would not like the during the meeting Oh 15, Mister same fotopoulos. Please go ahead. Mr. Fotopoulos. Thank you a lot on good morning to everyone on the call. Joining me. This morning for the first time, especially as president is the L.A.B.C. as Merkel bench and also here with me as usual.
As a reminder, queue for results package 2020 financial guidance targets and other disclosure documents, including today slide presentation are available on D.C.'s Investor Relations Web page over before we get started to want to draw your attention towards Safe Harbor statement on flight to information in this presentation remarks made by the speakers today will contain statements about.
Expected future events in financial results that are forward looking and therefore subject to risk and uncertainties for additional information on such risks and assumptions. Please consult B.C. safe Harbor notice constrained forward looking statements dated February 620, 20 filed with both Acadian Securities Commission and with the S.P.C. and which is also available on our website.
These forward looking statements representer expectations as of today, and therefore subject to change we displayed any obligation to update forward looking statements, except as required by law, so without handed over to mark.
Sex staying in good morning, everyone I'm very on her to go on the call with you all today my new role as President and C.O. of this amazing company. They don't want affect my predecessor, George Coke for his leadership since 2008 and for putting in place such a foundation for bells future success, we have the right assets to lead the next wave of communications.
Innovation in Canada.
And as a world mousse increasingly rapid connections and the unlimited service potential of five g.
T and artificial intelligence bell as well positioned to stay out of out front.
As you know we've updated I were six strategic imperatives to frame every action, we take to capture future growth opportunities in a converging wireless wireline world.
Anyways. These imperatives are consistent with that we're winning strategy over the past 10 years overseen by a season leadership team, but with an even stronger focus on the customer experience and recognizing the importance of all bell team members in delivering our future success.
It all begins with building the best networks.
With significant capital investment over the past decade networks have again become bells critical competitive advantage.
2020, we will continue to expand I were all fiber connections will open up wireless home Internet, even more small communities and we'll build on our for G.L.T. lead by launching the next generation of wireless with mobile five g.
These next generation networks will read the launch pad to drive market share and revenue growth with new innovative integrated services, including I.O.G. smartphone products as well as business solutions like virtual network services, all delivered over the fastest internet the best walk by and the high.
Highest quality mobile networks.
And we will continue to deliver the content consumers want on the plot forms of their choice.
We will support our network advantage innovation services and compelling content by simplifying personalizing and improving the end to end customer journey.
Our mission to make it easier for customers to do business with belt.
As you know cost discipline has become a core competency at bell.
We'll take it to the next level.
Enabled by the continued deployment of fiber.
Utilization of new technologies, an incremental service improvement.
Which will deliver meaningful operational efficiency and productivity gains across the organization.
But none of what I've, just outlined can be accomplished without people.
This is why we now have a new imperative to recognize how important our team is to bell success.
Our company's recognizes a leading workplace and we're focused on making it even better going forward.
Before diving into our detailed queue for review.
I didn't want to take a step back to comment on our overall operational execution and how well positioned we are to win.
I can confidently say that we are managing the shift unlimited wireless data plans better than our peers.
While still maintaining our competitiveness.
This is evidence by our subscriber and ask who performance that reflects our distribution and ran strength sharp focused on customer base management and a strong growth in operating profitability.
Grew wireless <unk> 9.1 per cent in 2019, while delivering a record number of gross activations.
This combined with improved posts paid customer churn drove a 7.4% increase in total net subscriber additions to 515000.
Our best annual result in 14 years.
With respect to fibre the strategy is working.
We delivered strong retail internet, an I.P.T.V.'s subscriber growth of five per cent in 2019.
<unk> 136000, noone that internet subscribers up 16.5% over last year are due to steady expansion of I work direct fiber in wireless Internet footprints.
How we're fibra built program is not 50, 53% complete with over 5.1 million homes and businesses able to access the fastest internet speeds in the market today 1.5 get bits per second.
With technology evolution like 10 G. upon.
Low speeds, we'll just get faster overtime.
We also have 250000 locations equipped with fixed wireless technology that is bringing high speed internet speeds to Canada underserved communities that are two times faster than before.
This positions us very well to keep growing broadband market share an internet revenue, which you all know yields very attractive you, but in cash flow margin margins.
For 2020, we are targeting broadband cap expending, including demand capital, which is comparable to 2019 at around $2 billion.
I tell media, our market, leading brands content and streaming services together with a sharp focus on cost control delivered strong financial performance in 2019 cash flow gross that we redirected to capital investment in our broadband networks.
And the landmark ruling by the Supreme Court. This past December overturned the unfortunate C.R.T.C. decision batting simultaneous substitution during superbowl broadcasters were very happy that advertisers. Once again had exclusive access to Canadian viewers. This past weekend during one of the most watch sports events of the year.
Like to take you back to wireless for a moment, because where laser focused on being candidates five g. leader.
With wireline infrastructure that includes high speed fiber already deployed to 88 88 per cent of our cell sites.
Central offices that become data centres for mobile computing in a five g. world.
Rapidly growing small cell footprint in urban markets, a network sharing arrangement and 30 megahertz of 3.5 gig flexible you spectrum.
No one is structurally better position then bell to deliver true five g. in the most timely and capital efficient manner possible.
And to capitalize on the revenue growth opportunities that a weight.
With the right regulatory environment supporting all facilities based operators. There is no reason why Canada cannot have the best most advanced Beigene networks in the world like we do today with L.T.V. networks.
As you read in our press release this morning.
L. is ready to deliver initial five g. service in urban centres across Canada as next generation smartphones become available.
And we will continue to be ready to launch true five G. service once flexible use three dot five gigahertz spectrum becomes available after the federal government's auction later this year.
Partnering with us for five G.'s, Nokia, whom we have chosen as bells first five g. network equipment supplier.
Nokia has quickly become a leading international vendor five G. network solutions with more than 60 commercial five g. contracts with wireless carriers worldwide.
I think it's important to highlight that were wireless capital intensity. During the five g. built cycle is only expected to increase to arrange of nine per cent at 10%.
<unk> and can be comfortably common dated within a stable consolidated capital intensity ratio of approximately 16 dot five.
It bears emphasizing however, how important it will be to have public policies and a regulatory framework that support continued investment and focused on value.
Read.
Access and coverage.
And environment that focuses instead on access to our mobile networks and grants below cost access to our wireless networks will inevitably lead to significant cuts in investments by bell invite others in the industry.
And this will harm Canadians and the Canadian economy.
Going forward.
Now all turned to slide five for some quick highlights on cue for.
Overall were quite pleased with our operating results. We grew our market share of wireless Internet, an I.P.T.V.'s subscribers with 181000 total net new customer additions in a seasonally busy and intensely competitive quarter.
More impressively this was achieved without sacrificing our consolidated you, but done margin, which increased 1.2 percentage points to approximately 40 per cent.
We also generated wireless e., but dark growth of 7.4% the best reported results among peers, while also delivering our highest ever wireless gross add in a fourth quarter.
For Bell media, another great quarter to cap off an excellent year with strong revenue adjusted EBITDA and cash flow growth.
Turning disliked six and some operating metrics by segments.
I'll start with Bell wireless.
Continued healthy posts pay growth with 122000 that ads, which were up 21% over queue for last year, when excluding the federal government contract.
This strong result was achieved despite a higher number of switchers driven by aggressive holiday offers from our competitors, we chose to match selectively.
On the prepaid <unk> <unk>, 43% on the strength of Lucky more ball and I were dollar I'm, a distribution agreement, which drove 2000 that adds a good result in an exceptionally strong year subscriber growth well some of our competitors are seeing substantives declines in that segment.
And blended AP, who declined only 0.4% compared to last year.
Spike the impact of unlimited plans on <unk> revenue and a growing mix of customers on installment plants, So really effective reprice management by the building ability team.
Moving a bell wireless.
<unk> good momentum on Internet with 36000, retailing that ads, which were 10% higher than last year.
And we added another 60000 F.T.P.H. subscribers this quarter, bringing the total number of direct fiber customers at the end of 2019 to more than 1.4 million.
<unk>, 20% over the previous year.
On the T.V. side of things, we added 22000 net new I.P.T.V. subscribers, a solid result, given the already high rate of customer penetration in our current five markets increasing maturity of all T.V. steady rate of over the top substitution and persistently aggressive cable offers.
We also continued to see nice year over year improvement in retail satellite T.V. and retail NASS customer losses, which were down seven per cent and 3.2% respectively.
Certainly anytime the rates have declined slow that is important to us from a cash flow perspective.
And last but not least spelling media.
We maintain ratings and audience leadership in Q4, and we're also really excited about crave. The strategy continues to work with the number subscribers up 14% year over year.
We think it is quite frankly, one of the best Espod services anywhere in terms of what's available from a content perspective.
Just last week, we we're proud to express to expand Crepes include French language content, and we made our Super headache, how service available direct to consumers.
So great operational execution of financial results delivered by the belt team not just in Q4, but throughout the year, which which sets up nicely going into 2020.
Finally for turning it over to glad alternative slide seven in our dividend announcement this morning.
Obviously, we are very pleased and proud to announce for the <unk> and I'm proud to analysis for the first time as B.C.E.C.O.
Dividend increase for our shareholders, 5% to $3.33 per share for 2020.
It's our 12 consecutive year about 5% or higher dividend increase done within a targeted pay outrageous show a 65% to 75%.
This is being supported by strong free cash flow growth underpinned by stable absolute dollar capital spending in 2020.
Pension plan that is fully funded.
As well as a continued focus on subscriber profitability and costs discipline.
I were unmatched collection of assets, including the best networks and the most innovative products will serve as a springboard for continuing to deliver the kind of operating metrics and financial results that shareholders I expect to.
Come to expect from our team as you see reflected in or 2020 guidance targets that gland will now take you through over to you Glenn.
Thank you weren't golf and good morning, everyone I'm going to get on slide nine with a review of our consolidated financial results.
The fourth quarter.
Topped off successful year with revenue up 1.6%.
This together with the favorable impact of I.R.S. 16, which we have now lap and good overall cost management drove 4.8% higher adjusted EBITDA and at 1.2% increase in Marjah.
Net earnings were up 12.6% benefiting from the flow through up the strong either to growth as well as the lower year over year noncash impairment charges I felt media.
Nevertheless, adjusted D.P.S. was down one second compared to last year due to the pickup of last equity income from our minority interested investments and the delusion from the higher number of common shares outstanding.
Terms of free cash all we generated close to $500 million of caution queue for bringing the total for 2019.
Just over 3.8 billion or 7% higher compared to last year.
Although queue for free cash flow was down year over year. This result was expected given step off in Catholic spending consistent with our plan for the year at higher cash taxes do the timing of installment payments.
Turnover, just slide 10 Bell wireless.
Continued strong financial performance, despite the diluted impact of unlimited data plans and what I would characterize as a relatively competitive more competitive an active market. This year.
Revenue was up a solid 3.6% and continued strong postpaids subscriber growth a higher you're over your prepaid revenue contribution.
Increase sales of higher value and smart phones.
Despite the sequential stepped out of service revenue growth quite pleased with our overall performance.
Demonstrating that we are managing the <unk> decline and data overage at a more measured pace as Mark all mentioned earlier.
And as well and work also pointed out but it definitely <unk> bears repeating adjusted even that grew a strong 7.4%, yielding a 1.4 point increase in margin that reflected responsible spending joining the promotional in test promotionally intense black Friday.
Of course blocks and sales period.
Oh truly another set of standard financial results that we expect will lead to Canadian industry. This quarter.
Move onto our Wirelines segments on Slide 11, similar performance transit to Q3, combined Internet G.T.V. were revenue rock solid 2.4% year over year.
<unk> was impacted by lower pay per view revenue due to a number of high profile you F.C. events last year as well as growing O.G.G. competition. We also had to absorb some acceleration in residential service bottling discount and retention credits to match progressive competitor promotions in the quarter.
We also saw steep you're already here decline in the rate of voice revenue erosion this quarter.
Last year's results benefited from higher sales international wholesale long distance minutes, which tend to be variable and have no real impact on wireline margin already but.
In business wireline, a softer quarter as we lock the revenue growth acceleration we've enjoyed in the second half 2018.
Which also included the acquisition of Axia a decline in low margin data equipment that can be rather lumpy on a quarterly basis also moderated overall wireline revenue growth in q. for.
Regarding adjusted EBITDA steady inconsistent performance with your over your growth of 1.5%.
And in terms of cash generations Bell wireline provided a strong contribution to consolidated consolidated BZ free cash flow in 19, delivering rope and adjusted even to last <unk>, 5%.
Over to media on slide 12.
The other strong quarter capping off or rape year, that's all bell media deliver positive for Avenue, adjusted EBITDA and cash flow growth.
Revenue walk 3.4%.
Driven by Crave subscriber growth over the past year contract renewals with T.V. distributors stronger you're over your entertainment sports and news specially T.V. advertising sales as well as higher revenue.
<unk> <unk>.
Adjusted EBITDA increase 16.5%.
Operating costs were stable you're already here as higher costs for sports broadcast rights and crave content expansion were offset by the favorable impacts apply for us 16.
And with that I'll move on to 2020 financial targets.
So, let's turn to slide 13.
I believe the guidance, we're providing builds on the favorable financial results significant broadband investments at operating mode momentum, we delivered in calendar 19.
Our targets for 2020 or underpinned by a positive financial profile for all three bell operating segments that reflects our consistent and disciplined execution in a competitive marketplace.
<unk> healthy projected adjusted even across contributing significantly higher year over year free cash flow generation I'll financial Foundation remain stable and strong supporting a steady consolidated capital intensity ratio of around 16.5% for 2020 as well as the 5% dividend income.
<unk>.
We announced this morning.
Turn to slide 14, we are targeting consolidated revenue growth of 1% to 3%. This range is consistent with previous years, reflecting healthy wireless subscriber growth further internet and T.V. market your games in a favorable media outlook as we continue to responsibly managed to shift to one limit.
Wireless data plans and locked significant T.V. advertising revenue growth.
From 2019.
Consolidated adjust it even though we are targeting growth of 2% to 4%, which again is similar to our 2019 guidance range when normalizing for the favorable noncash impact.
For Us 16.
This also reflects about a 25 million in higher year over year noncash pension expanse.
Due to the unfavorable impact at the lower accounting discount rate at the end up 19.
Undercutting the steady growth in is a strong contribution from bell wireless where we would continue to balance subscriber growth with profitability a positive presidential wireline financial profile and improving the year over year rate of <unk> in our bell business markets unit.
AD ongoing focused on cost reduction given this outlook, we expect species consolidated adjusted even emerging to remain stable year over year.
It's turned into a pension finding on slide 15 to find that status are defined benefit pension plan remain strong and continues to move in the right direction. Despite a disk <unk> declined a discount rates in 19.
Supported by a strong 16% return on playing assets the average solvency ratio across the aggregate of all B.C. plans was over 100% at the end of last year.
Given the strong evaluation position species regular cash funding.
For 2020 remains unchanged at 350 to 375.
To put this into perspective from free cash flows point of view, we have contributed close to 3 billion. Two are registered pension plans over the last five years.
With a favorable planned find that status, which has continued to strengthen in January together with an attractive fixed income.
Mix that serves as a natural hedge to lower interest rates, we can expect that the cumulative cash requirements to drop by more than $1 billion over the next five years, even with no material increase in interest rates.
Let's move on to <unk>, our tax outlook on slide 16 statutory tax rate for 2020 remains unchanged at 27%.
Are effective tax rate Burke, adding versus purposes is also projected to be approximately 27%.
No tax adjustments are currently anticipated for 2020 compared to seven cents per share in 19.
We also expect cash taxes this year to be stable.
To 100 million lower the 2019 at around 625 to 725 million.
This reflects the favorable year over year impact of M.P.S. tax losses that are now fully utilized as well as cash tax savings enabled by the federal government investment incentive program that allows for salary to expensive capital.
[noise] over on Slide 17, summarizing are adjusted D.P.S., Oh look for 2020, which route project to be 352, 360 per share or zero to 3% higher year over year.
Disrespect, so strong underlying contributions from operations driven by either the growth across all bell segments.
Together with a modest decrease in interest expense that reflects a lower costs at that.
Partially offset by higher interest expense.
Use me higher depreciation expense as more <unk> into service.
Excluding tax adjustments adjusted E.P.S. is expected to grow a healthy 2% to 5% in 2020.
Over to slide 18 free cash flow is expected to grow 3% to 7%, which is similar to the or 2019 guidance range. When you exclude the impact of I have for us 16.
This growth reflects the strong flow through higher you, but and modest stepped down in cash taxes, while capital cap expending.
Pensions Bunny expected to remain largely unchanged year over year.
Cash flow generation provide strong support for executing our business plan.
And our Capitalmark capital market objectives for 2020, let should deliver over 1 billion of excess cash after the dividend payments, which will be deployed ended up balanced matter. On uses that include repayment of short term that AD financing of strategic investments such as wireless spectrum auction perch.
Offices, and lastly, Ah a few breed comments on our balance sheet.
<unk>.
Position as we begin the year, we have access access to 2.6 billion of liquidity together with a capital structure that provides good financial flexibility.
Our investment grade credit ratings, all have stable outlooks at our <unk> <unk> leverage ratio is projected to remain relatively stable year over year, notwithstanding the impact of any potential wireless spectrum auction purchases later this year.
This ratio should begin to improve gradually towards the high end of our target range over the next several years with steady growth any but and applying access free cash flow to net debt reduction.
Also highlighted on the slide a species favorable public debt majority schedule.
It has an average term of 11 and a half years.
Hissed at <unk> after tax cost a public that just 3.1%.
No majorities until the second.
Quarter of 21.
Finally, I'd like to add that P.C.'s approximate 1 billion annual U.S. dollar expenditure has been fully hatched well into 21 effect. So effectively insulating are free cash flow exposure until that time.
Drop industry fundamentals remain silent and B.C.'s financial stress and competitive position are as good as they ever been if dot better.
And 2020, we intend to build on that progress.
And consistent with the financial guidance targets announce today and with that Saint altering the call back already have great. Thanks, Glen So before we start the q. and a pure just to keep the calls decision as possible given a time have left please limit yourself to one question at a brief follow up a few months. So we can get to everybody and q. and the time, we have a lot.
We're ready to take our first question.
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The first question is trying to catch fan.
Please go ahead.
Things from good morning first question is just on wireless.
There's a lot of moving pieces going on in industry and wanted to get your comments I'm Merkel regarding just I understand your managing better when it comes to the transition, but wondering if he can just comment a little bit on how what the level of unlimited playing.
Migration has happened within the base.
Maybe a little bit on overage exposure and as well as you look out to the rest of the year how service revenue growth.
Low compared to what we saw last year and and not have a quick follow up on the Oh broader.
Picture question.
Okay. So.
Sex Jeff.
Yeah.
Pick up where you where you started which is.
And we've shown another quarter, where.
We've managed.
The base, rather well and it's it's one of our core competencies.
You know so and we are showing that it's possible to deliver more service options to customers and in this case, particularly.
Unlimited plans, while remaining competitive as you can see from our best ever queue for gross ads and at the same time delivering financial results that investors have come to to expect so.
And that's because you know how we're managing the transition over two two and limited not force migrating every single customer overtime Unlimited plan. We have embarrass you know very slanting spots, where they could land. So ultimately what that results in Jeff is a lower you know significantly fewer subscribe.
<unk>.
An unlimited than some of our peers because of how we're managing that base and in terms of.
In terms of percentage of of revenue, which is overage, we're not sharing that specifically for competitive reasons.
Okay, and then follow up just regarding your your media I know, it's a relatively smaller segment, but.
You in I guess the leadership post just wondering.
Because you you some of the U.S. peers have been using Espod services in a way to differentiate the wireless broadband offerings given your position in Canada with media and particularly with Crave what are your thoughts on that progressing as.
Potential topic or even the strategy.
Great. So.
I like our assets and I like are integrated strategy in in right now.
<unk> being vertically integrated does allow us to segment customers and target each segment.
The customer base with the right products or whether that's crave, which you refer to which caters. All these things you know to over the top yours in linear viewers as well whether it's fault.
Gives customers, who might otherwise cut the cord it a nice landing spot or whether or not it's it's five which is still those large majority of our T.V. subscriber base, you know having that breath of a product mix allows us to to target.
Customers with the right product so that's.
That's why being vertically integrated gives us that flexibility now in terms of.
How we're going to package very services with wireless and broadband that that's that's for the future.
But right now we're going to keep on our plan of using the vertically integrate strategies to continue to segment the base.
Okay. Thanks.
Thank you and the next question is from ever make sure to channel with J.P. Morgan. Please go ahead.
Great. Thank you with the pressure from service revenue and wireless competition should we still expect.
Wireless margin growth and how you manage the margin versus the ads and then as a follow up to that shall we still expect growth in wireless me, but the or maybe more of a contribution as wireless gets a little bit tougher.
Good morning, Richard it's quite and.
I think our.
2020 guidance today is is indicative of.
Our performance and 2019, and and actually 2018, and you're looking at complete stability, 1% to 3% revenue two to four per se any button three to seven on cash flow is is in line normalizing Fry for US 16 to what was experienced this year.
They'll give any specific guidance by our be use which we don't do what I can tell you is as I said at my opening remarks, we respect positive contribution from all three bell segments on revenue even in cash flow ultimately feeding that that guidance that consolidate a guidance.
Margin I said to my opening remarks, I expect margin to remain stable. So you know in conclusion guess, we expect wireline to continue to derive positive either the growth and margins and in performance in wireless to to be consistent.
You've seen this year.
<unk>.
Thank you.
The next question it's from a car.
<unk>. Please go ahead.
Good thanks to take it my question I wanted to ask a question on the enterprise side of the business you've alluded to strong business market profitability in Q. for logo can you just talk a little bit about how you see 2020, playing out in some of the dynamics Ah Ah, both up and down in that sector and a quick.
Follow up on the wireless side, you know, but we saw <unk> appliance in that queue for considering instead of the competitive environment in the in the market as well as the over age factor do you see some sort of price stability as we get to that middle to latter part of the yet.
All jump in on the on the second part of the question and our call handler B.B.M. part, but wireless who declines as you as you mentioned in Q. for approximately 0.4%.
Really the the two factors driving that.
Decline are the absorption of the the unlimited plans, which ultimately users all the results and lower data overage and of course, we expect that will continue to your calendar 2020, and and and remember the success, we're having on prepaid.
Been it's been phenomenal and we expect that similar successful continued through 2020.
And.
Obviously that <unk> going to impact your <unk> final part.
Remind you is that the who calculation doesn't include the equipment financing. These so if I normalize for that in the quarter were very close to zero.
And just.
Final point on on on Nap, who.
To what Glenn upset as well as you know.
Taking everything into consideration think it's really important for for investors to focus on total wireless revenue growth.
And and just look at our performance in that regard as it relates to the enterprise segment.
Overall were quite pleased we've had a strong 18 month run now and we were laughing strong results from the back end of 2018, and we're continuing to see improvement in the rate of V., but that declines all very positive and fiber investment <unk> benefiting the segment as well so that bodes well and looked like transparency the reprice.
Can use to be a challenge, but we're managing it quite well.
Thank you.
Thank you.
<unk>.
I don't see any with T.D. Securities. Please go ahead.
Yeah, I think so much you know welcome aboard.
Congratulations on the new role two questions for you if I could sorry thing you can beat me up later, but job one just on the <unk> and I know, you're regulatory history, and I know, there's a big a big hearing coming up soon you know I'd agree with what was written in the Golden Mail recently that some of the inflation that.
The policymakers seem to be worried about for consumers is driven by smartphone prices as opposed to actually what you another carriers charge for Schervish and eventually case should we not focus on our poo versus Abu and and I'm I'm still not sure why you guys don't disclose that because it makes it difficult for the the regulators and politicians to see the figure if you're not even.
Giving it to us every quarter, so I like your thoughts around that in the in the second one is this your big picture thoughts on <unk>, it's been a big portion of those girls story during George Coaxed tenure and curious if you still think that is possible are likely in the future I'm not talking about small talk ends but those are any sort of transformative stuff that you think could happen over the next year.
Three years or is it more just an organic story. Thank you.
<unk>, so I'll I'll I'll <unk>.
I'll address your your question at a general sense, and then turn it over to Glen for some some more precise comments, but.
You know at the highest level I 100 per cent agree with you that you cannot ignore the increases and the cost of handsets and the impact that that has on the consumers pocketbook I mean, you just can't because that is the big big component of what the customer ultimately pays for for wireless service.
By the same token Norman shifting gears, a little bit, but you also can't ignore when you're when you're looking at what consumers are paying you can't ignore the fact that when you walk into a store whether or not I sat back to school or at Black Friday or you know boxing week. We're at other times during the year, you're being offered 400 dollar gift cards are free someone else.
Players are free tablets, those add tremendous value to the customer, but they're not calculated and all the analyses that you read about.
When it comes to pricing. So you got a factor in the complete and total value that the customer gets both in terms of promotions in terms of the headset pricing that that that that that gets absorbed and also speed access coverage latency. All it's all part of the mix.
And if you want to comment on our Cooper says that ashore.
Says no you would appreciate my focus is always on cash generation I think one thing you have to focus on looking at out who was who is your closest metric for cash and we can't lose sight of that all that's sad.
I can assure you that government officials of regulatory bodies are well aware of Iraq, when we disclose that and have discussions completely in line with what you laid out here today over time as P.I.P. becomes the majority of our loadings will start to see a convergence of there are few and and <unk>. So I think it it fixes.
Itself with time, but never lose sight of the flow of cash I I'd like to say events.
And on the <unk>.
Oh fence on Emoney I'm, not gonna common emanate until there's something to comment on.
<unk>.
Thank you and the next question it's from it meant Yankee with T. shirt on please go ahead.
[noise] sort of taking my question I wanted to ask you and like in terms of Ah strategically positioning yourself in terms of cutbacks four five g.
You're more star team, they're all out you're starting the investment and you'll be that's a lot and and the backbone, but now you are getting ready to get onto your.
Less less connections and the regulatory regulatory environment is still a fluid then.
I wanted to ask you how do I manage such a large investments when the regulatory environment is.
Flux like that like that and.
When you talk about.
The reduction in cutbacks that could be.
The solution to overcome potential negative outcome, and and and and possible regulatory decision. What are we talking about can you quantify how much you can pull on your cat packs to offset.
Possible negative outcome and and regulation.
Thanks for the question.
So how how.
How we manage the investment given the uncertainties. So we take a step back and I have faith that yeah.
T.C. will basis decisions on the wreck on the evidence on the record and the evidence that's on the public record is rather compelling.
That deciding in favor of mandating N.B. and those would be the wrong thing to do.
That's the first thing.
Two is the way you manage the the the risk is you actually you you make judgment calls so the first.
<unk> will be in urban areas. So with that means is your you know you you wait and see what the decision is gonna be before you make any concrete plans to build out in the less dense areas and that has an impact on on rural area isn't it has an impact on suburban areas as well I mean these are all the the consequences of regulatory overhead.
That's how you manage it.
And I'm not going to quantify the the potential impacts on cuts in investments from regulatory decisions, because I need to see what the regulatory decisions going to be but I can tell you that negative regulatory decisions will result in cuts and investment already saw it last summer and I hope, we don't have to see it again, but it's but you know that's that's just.
The way it works.
Okay, and just my follow up question.
When when you look at.
Yeah, you're you're you're in charge now and you're looking at the company how your new set self priorities. When you look at the 5% growth model that George had and you know positioned the company to deliver on what's your view on that five per cent.
Growth model and how sustainable it is going forward.
Supportive and yes.
Huh.
Okay. Thank you.
Thank you. The next question from assignment plenary with Morgan Stanley. Please go ahead.
Signed Q. good morning, I'm, just staying on five G., perhaps you can just talk a little bit about the Nokia deal today and are you planning to use multiple suppliers and tie that in perhaps to the Y. way review and.
I think a lot of investors are just trying to understand what the timing of any decision from the government might be and we saw a decision in the U.K., perhaps you could just reflect on that and and see if there was a similar decision counted or what the implications would be thinking okay. So.
Might ask him in today's at Nokia will be the first provider of five G. ran equipment in our network.
And.
Stressed to work first what I'm trying to signal here is that we need to be able to work with many equipment suppliers today and in the future and today that includes Nokia includes while wait includes Ericsson include Cisco and it's always prudent to have multiple supply sources and we're always looking for that.
Flexibility.
We're still waiting for the government's decision on the security review as you know, but as as we've shown this morning, we're ready to deploy initial fives G. service, because we will always be competitive and we're going to be doing this within our normal overall cutbacks envelope in normal normal.
Capital intensity ratio I don't know when the government's going to decide.
A couple of things and we need we we we do want clarity on that and we also worry you'll have your <unk> eagerly awaiting the <unk>.
<unk> dot five spectrum auction, so that Canada, frankly can get going on launching real fight Jean 2021.
Okay go any comments on the U.K. decision.
No I mean, it's.
No comment on the U.K. decision, we what we're focused on is what candidates decisions going to be.
Okay. Thank you.
Thank you.
The next question <unk> <unk> <unk>. Please go ahead.
Thanks, very much a good morning on the but dug wrote guidance of 2% to 4% glad you're alluding to obviously that being pretty consistent with prior years Merkel. Your 0.2 next level cost deficiencies and you know certainly investors are used to a a decade of some pretty impressive cost efficiency in cost.
Function that B.C.. So could you just flush it a little bit of you know, what what changes or what kind of incremental cost reductions inefficiencies are expected to flow through and then a follow up a completely different here could you just comment on the wireless competitive environment here through Q1 through.
They didn't really part of February here. Thank you.
The morning drew it's quiet.
As a as you've loaded two or even a growth guides consistent data before him.
Of course underpinning the the even the growth Guidances, our our success and our track record around costs deficiencies and.
I believe you'll see that continue certainly under Hercles leadership as much as it has in the past when we look at the investments were making and the opportunities to reduce the way we serve the customer the costs and the in the manner in which we serve the customer.
As you heard me say before good customer service is cheaper as we rode fibre we see costs efficiencies.
And as we look at serving our customer better.
Eliminating challenges we have in our bill eliminating troubles, we have another network reduce calls to the contact center all of that delivers efficiencies as we look at the investments for making them where ramping up to do essentially rebuilding 140 year old copper network on were more than 50 per cent done as we look at more self serve more.
Opportunities I, I think the futures bright and and cost efficiency and and actually over time as we fix platforms and we check spelling stocks you get to a point, where I think we can see an acceleration in cost efficiency.
Yes, I agree with that with glad it but it's.
Cost efficiency remains.
One of our course strategic comparative so that's that's a very very important signal and it comes down to repeating a little that would've been says what I'm going reiterated because it's important more fiber means fewer truck rolls means fewer calls.
Let things like unlimited players means fewer calls we're going to be leveraging technology like artificial intelligence, we're gonna be leveraging self serve platforms, where modernising. The core network were making services more on demand more one touch all those things result in cost goodness.
So that just to punctuate to a point.
And on.
The competitiveness in wireless think one of the things worth mentioning.
Early days of 2020, and particularly early days of.
Of February I think we'd like to the early results of installment plans that we've seen on the bell brand with with our smart pay program.
Ah that's in shoring up front affordability for our customer and it helps us manage what was what word ever increasing subsidy costs. So that's a win win all around actually for the customer and for for ourselves.
We followed quite closely what one of our peers has recently done with it.
Slanker brand and installments and I got two comments on that.
One is.
You've heard I say this before we will always remain competitive and you'll see some something soon on that and too much like I said in <unk> of last year I think when we had to do some I.T. work to get.
To enable bell the bell bred to be competitive on installments, we're going to be doing the same thing to enable the virgin brand to be competitive on installments soon.
Okay. Thanks.
Thank you.
Next question is from a different bargain Bank of America. Please go ahead.
You guys think some particular questions and <unk> I guess my questions I guess would be related to the handset side of things.
Talk about the subsidy.
Expense profile that you absorb 2019 versus 18 and Flynn, how you see that you folding in 20 from a competitive versus kind of an E.I.P. standpoint.
And then related question, if if like cool.
Just there's a debate.
In the lower 48 about.
<unk>.
Potential for a handset supercycle and.
They're getting older and customers are ready to make this big upgrade to the by G. I phone. If that's what turns out to be what have you kind of assumed in your 2020 outlook for upgrade raid in in the velocity Oh that comes with with this next upgrade cycle things.
I have data all I'll start off and then I'll leave the handset supercycle.
Comments for Merkel, but look on the handset side of things, it's it's not news to anyone that as we watched.
More and more costly handsets.
In the marketplace that we've seen.
You know continued costs pressure in the ever increasing subsidy expanse of our business and I I think that 2019 was no different than that in the first half of 19, we watched frothy promotions, which ultimately at a certain periods throughout the year U.C. zero price handsets once again.
Despite the the the land it costs for them they still find their way to zero I think what what gives me some confidence looking into 2020 and managing of that ever increasing subsidy cycle is G.I.P. in the end installment plans and I think.
Manage correctly and what we're seeing it's early days, but managed correctly I think we have an opportunity or to provide customers choice.
Separate the their time packet just from the equipment packages and and give customers the opportunity to choose the handset that meets their needs and with $0 up front finance it over a over 24 month period and the the when when it that is while giving customers what they want I think we have an opportunity to mitigate that ever increasing subsidy.
Cost of our business and see a significant that earnings and cash flow opportunity, albeit it'll slow transactions, which we you know Merkel said earlier, we have to focus on total revenue because I think you will see the potential any idea of transactions slowly, but that could lead to a significant opportunity and.
In earnings in cash flow generation.
And on the handset cycle.
Look I think the initial five g. handsets are likely to cater more to early adopters.
And we've managed just before we manage the cycle from two to three g. from three to four g. friend for G. to L.T.E. advanced and.
Much the same here certainly in the early days.
<unk>.
Thank you and the next question from.
P.B.S. piece go ahead.
Thank you two questions quickly as you think about the competitive environment on do you think we can expect to see churn going back to you for your improvement this year and a clarification on the wireless capital intensity, you expect to reach 9% to 10% after the type auctions.
Or is there enough spending right now as you as you pay for it to five T. network that we will see that level early on India. Thank you.
Well, the 9% to 10% on wireless C.D. ice throughout for the entirety of the five you build cycle.
And then on your question on <unk> goes to the the comments I just made about D.I.P. and I believe in a world where we see the the installment plans starting a new car my a big portion a significant portion of our loadings I believe you'll start to see get a client ensure I mentioned that you'll see a slowing up <unk>.
Actions, which ultimately can slow service revenues and.
<unk>, it's slower slow surface ready to slow straitjacket transactions, but managed properly can improve even to improve cash flow final point I'll make on turn improvement is don't lose sight of the fact that it did it for for B.C.
Sure did improve and 2090 so.
Three basis points.
Right.
Thank you.
Question and the time, we have left.
Thank you. The last question will be from Tim K.C. with B.M.L.P.'s go ahead.
Thanks, Glen could you tie your comments on subsidies and.
You are measured rule load of unlimited plans are balanced <unk> I guess is better way into the assumption that you've made for guidance in other words have have you assume that you'll ramp up the intensity of of of uptake of unlimited plant.
In your guidance and do you expect some material relief into expenses on the subsidy side.
From E.I.P.'s in your guidance <unk> <unk> <unk> <unk>, the assumptions, you're making poor I would say the short answer to your question came in the short term.
Onto your 20 is no we're not expecting a substantives shift in the subsidy reductions do I think that in the longer run. This creates a great opportunity for the industry gas highly depended upon that to deliver on the guidance and 20, no do I think unlimited, we'll we'll wrap merkel.
Made numerous comments here today that that our job and what we've proven for a number of quarters. Here is that we will take a balanced and managed approach to to the data old rich decline or the shift to unlimited, while giving customers what they want so I think a lot more of the same in 2020.
What you you saw from us and second half a 19.
<unk>.
Thank you Tim.
So on that and when I think everybody for their participation today on the call and I'll be available throughout the day, they usually am for any follow ups and clarification. So with that have a good rest of the day like everyone.
<unk>.
Thank you.
<unk>.
Okay.
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