Q2 2020 Rogers Communications Inc Earnings Call
Thank you for standing by this is the conference operator.
Welcome to the Rogers Communications Inc. second quarter 2020 results conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded.
Following the presentation, we will conduct a question and answer session to join the question Q You May Press Star then one on your telephone keypad.
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I'd now like to turn the conference over to Poker Peto, Vice President of Investor Relations with Rogers Communications. Please go ahead Mr. carpino.
Thank you very old good morning, everyone and thank you for joining us.
Today, I'm here with President and Chief Executive Officer, Joe Natale, and our Chief Financial Officer, Tony Staff theory, our Chief Technology Officer, She's technology Information Officer, George but and this will also be available during the two day session. A after the presentation. Today's discussion will include estimates and other forward looking information from which.
Our actual results could differ please review the cautionary language in today's earnings report and then our 2019 annual reports regarding the various factors assumptions and risks that could cause our actual results to differ with that let me turn it over to Joe to begin.
Thanks, Paul and good morning, everyone.
It's a cover three topics in my remarks.
One I'll start by talking briefly about our second quarter results, which Tony will expand upon it provides additional detail to I will also make us a remarks on our priorities during the quarters, we adjusted our business operations. During this anomalous period [laughter] and three finally I'll share how we're thinking about.
The business as the economy starts to open up.
And the critical Roar industry, and our World class networks play in Canada. This recovery.
Personally as you fully expected our second quarter results reflected three full months of the cobot 19 economy. We saw notable impacts across all of our business is a sales and new business activity essentially ground to a halt but as we said last quarter. These metrics are quoted.
Hi, Jane specific and do not reflect our underlying fundamentals nor did they diminish our long term growth prospects.
Importantly, as you would expect we took full advantage of the short term extreme environments or re examine each key aspects of how we run our business. We wanted to make sure. The decision is we're making would set us up to power out of is difficult period.
[noise] Cobot 19 did not change our plans nor the course, we were on instead, a greatly accelerated the pace of change we're doing things today that we thought would take many months or quarters to accomplish.
The business will be stronger as these changes become permanent modes of operating.
All business units were impacted in Q2 and wireless.
All metrics reflect the impacts of the economic shut down as customers are isolated and stores remain closed.
We estimate that industry sales volumes were down by 80% to 90% in the quarter.
Customer shifted from wireless usage to home Internet usage.
Well metrics like Tron, we're down to a record 0.77% and phone subsidies were down about 45% on a year over year basis. Most other impacts put short term pressure in our results.
With roaming for example, travel simply stopped and roaming revenues were down approximately 95% from a year ago.
As we have discussed during the past year.
We knew overage fees were coming down as we proactively transition into unlimited plans, we saw additional overage declines during this lower usage period, the lack of new activations as many of our stores remain close further impacted service revenue.
Well, we anticipate.
Most of the Kobe nights accumulated impacts will recover as the economy opens up there were several positives in the quarter the point to the underlying strength.
Our business.
First subscription revenue is holding up very well and it's flat year over year, while there were some customers affected by the economic impact.
Of Cobot 19, the number of customers moving to smaller plants has been in line with our expectations.
Secondly, and supporting this view the shifts to our unlimited plans continues to be strong. We're now at over 1.9 million unlimited subscribers and have the most customers who are not paying overage fees of any carrier in Canada. This is an important accomplishment is Canadians look for value in the current involved.
As we head into a five GE world.
Finally, we started to see some volume slowly come back as stores began to open up.
At the beginning of the quarter, 90% of our stores were closed today nearly 90% of our stores have reopened with modifications to protect the health of our employees and customers.
In fact, there were a couple of days in June in late June reminiscent of some of the stronger promotional periods, we typically see in the back half of the year.
It is so early days and we'll see how customer confidence response to the economy opening up but these are encouraging early signs.
In cable our business was stable, but felt some impact as we continue to provide free content and additional supports to help our customers through the period.
Additionally, our strong presence in the new condo, new home and air being be markets, which slowed during the second quarter impacted our business.
On the positive side, our cable subscription business remains healthy we're also seeing reduce promotions and discounting at our connected home business. Overall, we expect gradual improvements in these markets in the second half of the year.
[noise], while representing less than 15% of our revenue and less than 3% of our total adjusted EBITDA, Our sports and media business saw the most pressure in Q2, the material loss of advertising revenue with the suspension of live sports affected the entire industry, including sports not the lack of games.
Revenue in instead in promotions from delayed Blue Jays baseball also contributed to a tough quarter.
Similar to wireless and cable we're seeing some positive signs with live sports scheduled to come back advertisers are calling eager to participate in the return of live sports our sports in broadcasting resources are an incredibly valuable set of assets and their contributions to our business will recover gradually with this pent up demand for sport.
The entertainment.
Lock sports above all other types of content drives a loyal and permanent appetite by fans in audiences.
This quarter in particular during the global pandemic, our focus was on three three things.
One keeping our employees safe to keeping our customers connected and three driving the right priorities and investments for the recovery and the future.
Just say that cobot 19 as permanently changed how we operate is an understatement, we pivoted and the moment to ensure Canadians could continue to rely on our services.
Fast tracking service offerings that we planned and launched in record time, we did this while most of our workforce work from home 22000 over 25000 people successfully shifted to a work from home model in the second quarter, including all of our customer care agents. It was an important quarter for our customer care agents.
As we move to a permanent work from home model for agents in Ottawa after seeing positive customer and employee feedback will be applying these lessons learned to other customer care sites. We also crossed a very proud moment this quarter with the transition of the remaining customer service positions to Canada. So they all of our customer survey.
His teams across our brands are based in Canada, Our Canadian based team members are experts in our products and services and as members of their communities. They can relate to the needs of our customers do a great job of serving them and better support our lifetime value metrics.
Just as our team stretches across Canada, So too does our extensive physical distribution advantage and while more of our over 25 under store locations in Canada, our and our open we are advancing our digital first strategy an important factor in our long term growth digital sales.
Sales adoption is up over 15% year over year.
Over 90% of our five most common service transactions that Rogers are now conducted by customers online.
Virtual systems are helping more customers with routine requests. These conversations have grown by 130% year over year to over a million as AI technology continues to get smarter and better understand customer intact.
This digital enablement and our continued customer improvements or why we continue to see fewer calls into customer care down 20% year over year.
We've also adopted an expanded a contact list pro on the go service a key market differentiator for US. The service is now available to over 10 million Canadians and the greater Toronto, Greater Vancouver parts of South Western Ontario, Ottawa, Calgary, and Edmonton areas, we will expand to more markets. This year.
This personalize phone delivery and set up support service brings the store to a customer's front door at no extra cost and the early days. The pandemic. We also enhanced our TV and Internet self installation service. This change represents a clear competitive advantage in our market, we already provide a one gig capability.
Cross our entire cable footprint to drive better greater penetration and this has significantly removed customer friction, including eliminating the need to schedule installation appointment now we can drive greater efficiency through enhanced self install capabilities.
This quarter, we also introduced a new virtual assistance tool for our tech support James.
With that I pick him now solve many issues right away without needing to schedule a service appointments. We're on track to save our customers an estimated 400000 hours of their time and save US approximately 100000 service truck rolls this year.
These changes have been helpful to serve our customers during the pandemic, but they will continue as we move through and eventually out of it they offer new service advantages to our customers and offer significant cost efficiencies across our businesses.
We're proud of these about these investments and our team members are feeling it to our recent employee pulse survey shows employee pride is at 93%, an all time high and important marker for the strength and resilience of our 25000 team members across the country.
Even during the most disruptive business environment, we have seen in our lifetime. So I want to highlight how proud I am over our company and our team members and how they responded supporting the needs of our communities during something as life altering as cobot 19, our teams felt it was our responsibility.
The most vulnerable in society, we launched step up to the plate with the Jays care Foundation to help build 390000 hampers a food at the Roger Center to get as many as 8 million meals in the homes of Canadian families in support of food bags, Canada, we raised.
Over a million dollars through the hearts and smiles campaign, selling T shirts, and masks with all proceeds going in support of the frontline fund to help Canadian frontline healthcare workers, we connected vulnerable Canadians, including providing devices and free wireless plans in partnership with women's shelters of Canada Big Brothers VIX sisters of care.
Canada, MP flag to maintain vital social connections when people needed the most.
We also recently launched the 60 project, it's been 60 years since Ted bought his first radio station C.J.C.J.
With an $85000 alone to Mark this milestone we evolved our sixtyth anniversary to focus on ways, we're getting back to Canada and investing in others volunteerism is more important than ever and the key pillar of the 60 project is the 60000 hours Volunteer challenge Rogers employees and their families were.
60000 volunteer hours across Canada to have a meaningful impact in our local communities.
Looking ahead, we're optimistic about the future and the underlying strength of our business and asset mix.
If I can recap we are the largest wireless franchise in Canada. The biggest cable operator in the country, we own and operate our own national Wireless network. We're the first to launch Fiveg in Canada and have the largest spectrum portfolio amongst our peers, we deliver the best network experience in Canada, just last week.
Whom lot a global leader and mobile network testing and benchmarking awarded Rogers, the best Wireless network and into this follows JD power in April ranking Rogers number one in the West and Ontario, and its Canada wireless network quality study.
Our media assets are focused on sports and demand for the return of live sports is high prices at an all time high with our team members and we have $5.4 billion and available liquidity in a strong balance sheet.
Overall, we have a formidable set of assets an incredible team activating them, we're very confident in the long term prospects of our company.
And for Canada, as we work to power out of the Cobot 19 period.
Just as our resilient networks provided the digital scaffolding during this health crisis, our country's technology infrastructure work will underpin Canada's recovery.
If conductivity was a lifeline during kobin 19, it will be the bottom line to Canada's recovery today. The digital economy is the economy and our country's tech driven recovery will require the right investment oriented regulatory environment. This is one of the most important lessons we can take from this moment.
Were part of an industry that has never been more critical to society and to our economy from hiring new stages of innovation on Canadian soil to ensuring more small and medium sized businesses have a fighting chance with an online presence to receive and fulfill orders strong networks are essential to Canada's economic return.
Every.
Thank you and let me now turn the call to Tony will provide more detail on the quarter over to you.
Thank you Joe and good morning, everyone.
Q2, as without doubt the most volatile quarter, we've seen in our business as we went from a hard stop standstill economy that required us to focus on the safety of our employees customers and communities to the start of what we hope is a sustainable recovery for our country.
Canadians are doing the right thing to help each other get through this and we're glad to see that hard work paying off.
I'll provide some of the Covance specific impacts we have seen in each of our businesses, which were significant in Q2, we have not adjusted our reporting numbers for these impacts, but we wanted to give you the transparency on some of the dynamics during this quarter.
Let me start with our wireless business.
In wireless service revenue declined 13% year on year, driven by approximately 90% lower roaming revenue due to global travel restrictions waving of roaming fees as well as a decline in new activations for both postpaid and prepaid services during the coded 19 pandemic.
On a year over year basis, these reduced volumes and the resulting reduction in various fees. We typically earn combined with the roaming decline contributed to 70% of our year over year revenue decline.
These declines are covance specific items, which we anticipate will recover as we move out of the pandemic environment.
Additionally, we saw a $60 million decrease in overage fees.
Over $50 million of the decrease was the result of strong customer adoption of our Rogers infinite unlimited data plans and the remaining reduction was related to covert 19 pandemic as people stayed home and relied on Wi Fi for data usage unlimited plans have done well and continue to have strong.
Underlying fundamentals.
Covance specific items noted had a direct flow through to ARPU, which was down 13% on a year over year basis.
Loading was essentially flat as we maintain our disciplined by avoiding aggressive price reactions to some of our peer promotions, we matched where needed but felt there was no need to drive aggressive promotion, what our employees and customers was we're still concerned.
With the safety of their families and communities and in particular, when total market volumes were down substantially.
With a lower activity churn dropped in that dramatically, 2.77% for the quarter.
Well this is lower than normal we don't view any subscriber metric during this period as being meaningful to any long term franchise value of our wireless business.
Wireless EBITDA was down 19% for the reasons noted as well as a significant majority of the totaled $90 million incremental provision for potential bad debt exposure is reflected in this segment.
We will continue to evaluate the economic environment and performance of our customers in the second half of the year to assess the need for any future bad debt provisions based on our current assumptions. We feel this quarter's provision will capture the vast majority of the impact based on what we see at this time.
But we will we will provide any future updates if required.
On the handset subsidy front total net handset costs on a cash basis were down $80 million compared to last year or about 44% year over year.
Let me now turn to cable revenue was down 3% due to lower ARPA associated with some bundling packages as well as the continuation of providing select free video and Internet overage services to customers during the pandemic environment.
Additionally, we have delayed some price increases.
Homes passed and customer relationships grew 2% and 1% respectively. We remain focused on our connected home roadmap driven by our ignite TV and internet product despite low activity levels in our markets Internet net additions were 5000 and ignite TV grew by another 18000.
With a flow through items noted above cable adjusted EBITDA declined 5%.
We estimate that excluding the covance specific impact items as well as the additional incremental provision in cable bad debt adjusted EBITDA would've been approximately flat year on year.
Our media results continue to be significantly affected by the covert 19 pandemic environment revenue was down 50% associated with lower advertising revenue due to the economic shutdown. We also have significantly lower spores revenue, including at the trial Blue Jays.
Adjusted EBITDA was down approximately $100 million, reflecting the flow through of lower revenue and some lower costs.
Moving to consolidated results total service revenue was down 16% and adjusted EBITDA was down 21%.
Adjusted EBITDA includes $90 million of incremental bad debt provision related to Kobin 19.
This provision represents approximately 2% of our receivables and is that the lower end of the 50 million to the $250 million range, we referenced last quarter.
We estimate the total kogan related impacts in the quarter on revenue were approximately $725 million or 19%.
Adjusted EBITDA, we estimate cobot impacts in the $300 million range or about 18%.
To be clear, we have not adjusted our numbers for these impacts were just providing some transparency that may be helpful going forward.
We invested $559 million in Capex for the quarter, which was a year over year decrease of 25% and reflected a CIO ratio of 17.7%.
Decrease in capital expenditures was driven by delayed expenditures improvement permitting associated with access due to the pandemic. We also continue to see improvements in cable capex efficiency associated will self install internet and ignite TV.
We generated free cash flow of 468 million this quarter, a decrease of 23% year on year. The notable decrease in free cash flow is associated with the lower EBITDA flow through and some incremental interest payments this year.
Our cash tax rate as a percentage of adjusted EBITDA was 5.8% in the quarter and should be in that same range for the full year 2020.
Despite the short term economic impact of cobot. The company's liquidity is very healthy at $5.4 billion available. Additionally, our balance sheet as well structured with long term maturities and low interest rates on our outstanding debt our weighted average interest rate at quarter end was 4.23% with.
An average term to maturity of 13.6 years.
We recently strengthen our position with an additional $1 billion of to your funds at an effective interest rate of under 1%.
We ended the quarter with a debt leverage ratio at a comfortable 2.9 times and we see our leverage position continuing in the range of 2.5 to three times for the next few years. We believe this is sound unreasonable given the spectrum auctions on the horizon and the continuing downward pressure and pressure on interest rates.
While Q2 is unique and had several short term challenges. We have responded and emerged in a very strong position our business execution was disciplined and very responses.
Positive to needs of our customers in this complex environment.
We continue to have exceptional network reliability at a time when demand has never been higher and we pivoted our operating models to adapt to the new and evolving environment as the economy moves forward, we were well prepared and highly engaged to assist our customers and the nation as we gradually and positively move out of.
[music].
In terms of an outlook, let me provide you the same level transparency, we used in our Q1, Paul and provide a snapshot of how we are trending on some key forecast variables.
We won't provide specific guidance, because it's still too difficult in the short term to predict the various combination of factors that could impact our financials, but this color should be helpful. As to how we're thinking about Q3.
In general, we anticipate modest sequential financial and operating improvements in Q3 for each of our businesses as the economy starts to open up and live sports slowly resumed.
Additionally, we expect to see some gradual cost efficiencies materialize in the third quarter from efficiency initiatives learned through this period as well as benefiting from continued year over year reductions in Capex and handset subsidy savings.
More specifically by business.
In wireless June saw notable recovery and loading as most stores were starting to open and July is trending a little bit better as well, we do not know it back to school will look like as customers are only now slowly getting back to shopping but the economy is opening up and that should help in our and the industrys recovery.
We believe ARPU in Q3 will be in the same dollar range as we saw in Q2, we were down almost $100 million year over year in roaming, which significantly impacted ARPU and we expect this same year over year dollar decline in Q3.
We do not anticipate roaming to recover in the near term, but as travel opens up our roaming will benefit from the recovery.
In terms of overage revenue Q3 will be our first full quarter of year over year comparison since launching unlimited and we anticipate overage will be down $60 million on a year over year basis. As we have previously highlighted even in a covert environment, we have seen no material impact on the underlying fundamental.
Sales of our unlimited plans impressively, we're very close to 2 million customer Mark in unlimited plans.
These plans continue to have higher ARPU, lower churn and higher customer satisfaction in less than a year, we have become Canada's largest provider of unlimited plans with customers enjoying access to our premium National network Canadians Love. These plans and we anticipate ongoing leadership in this area as customers continue to.
Arisen their mobile activities.
Offsetting some of the roaming and overage pressure on ARPU, we expect to see some benefit in in Q3 as economic activity and activation revenue picks up. However, it is still difficult to predict how active customers will be in the back to school period.
In both our cable and wireless businesses, we continue to work with customers to manage bill payment terms if needed. We will continue to monitor the environment to see if additional provisions are required but do not expect any additional provisions in Q3 to be substantial.
We continue to see positive demand for our Internet and ignite TV offerings. In this work from home environment loading should remain positive in Q3 is new condo and housing builds start to recover and self install in both internet and ignite TV continue to grow.
Opex and Capex related installation and upgrade costs should also improve capital intensity for our cable business should continued its steady downward trajectory as reduced volumes self installation and construction delays continue although to a lesser extent than Q2.
And our sports and media business, we will likely incur losses in Q3, but the restart of the MLB and other leaks will translate into the resumption of some advertising revenue at sports that.
However, we expect adjusted EBITDA to remain negative for sports and media Intel fans can return to watch the Jays live and drive game day revenue and advertising.
Overall cash flow and liquidity remains strong and maintaining this financial strength will remain our priority for the rest of the year based on the current run rate for the first six months capex for the year will likely be down approximately 500 million.
However, I want to be clear that this reduction is primarily based on projects that have been delayed in the current environment, Our network and Fiveg development spend our full steam ahead.
As the economy resumes its gradual recovery, we are positioned very well to drive growth with the best assets very strong balance sheet and a highly passionate and engaged workforce as we have demonstrated in the past we will use our leading market position largest wireless company largest cable company and larger sport asset.
To create long term value for shareholders.
I'll turn the call back to the operator to commence with our Q on it.
Thank you.
We will now begin the question and answer session to join the question Q You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request.
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Our first question comes from Vince Valentini TD Securities. Please go ahead.
Thanks very much.
Let me ask you a couple of questions on ARPU, if I can.
First off if you are down another 60 million year over year in the third quarter on overage revenue.
Okay.
You should be basically zero by then should you not so that so they win additional stopped being such a big headwind is as the crisis and then the migration to unlimited gotten you down to some 1% of service revenue coming from overdraft.
And then the second question I'll just throw it out to your first so you can think about both of them.
Thanks for those numbers, if I, if I do the adjustment on the 7% impact.
Engine from from roaming and activation fees and sort of Colvin direct things plus the 60 million impact from overage in Q2, I still come up with.
Almost a 3% decline in wireless service revenue on a year over year basis, even even backing of both of those items, which would suggest the underlying trend is still not great Didnt I thought we've been talking about higher EMR for people moving to the unlimited plans.
Plus maybe some benefits from lower equipment subsidies gradually flowing through ARPU numbers and of course, you had positive sub adds on a on a full year or Latin trailing 12 month basis. So if you can flush out a bit more why that underlying service revenue growth is still minus 3%, even even with that you adjustments and be that'd be helpful.
Everybody I'm sure some share base, a little bit surprised that ARPU in service revenue growth number this quarter. Thank you.
Vince its Tony Thanks. Thank you for the questions a couple of things I'll start with the overage.
We had anticipated that.
Based on our projections of number of customers on limited.
Period compared numbers to pre Cove. It that we were quoting we would have been slightly higher in terms of.
The number of customers on limited, albeit.
We're very close we had expected about 2 million considered about 1.9 million.
Customers are on limited and so some of the overage drag will spill over into Q3 as a result, but the bigger reason is keep in mind, the seasonality and while we have the overage melt of customers moving to unlimited. There are also customers that would have continued to incur overall.
Based on their existing plans and usage patterns during the summer months, we're not going to get that and so much like in Q2, I talked about 50 million related to unlimited $10 million of that secondary factor as we move to Q3 that $10 million will be more.
In terms of we expect lost revenue and the overage melt be less than the 50 million.
So thats sort of the unpacking of that.
And then secondarily tried to articulate the ARPU declines and as you get to a net number of just under 3% or slightly less there are few other coded related impacts in terms of freebies that we provided.
And so that negative 3% moves to about minus 1%.
And the minus 1% is in line generally with what we expected we had said.
Based on pre cobot.
We were going to.
Get into the second half of the year with positive growth in ARPU.
And so Q2 was always expected in terms of underlying ARPU to be slightly negative.
And Thats, where we stand I would say, it's less than 1% short of what we expected.
We are seeing some what we would call ARPU growth pressure as customers. We just to get didn't get the volume coming in on higher plans that always helps and then I would say very subtly customers looking to optimize their plans.
At a very small impact as well.
So all that to say the underlying subscription revenue is solid and flat year on year on a dollar volume and the underlying subscription ARPU.
It's just slightly negative.
But nothing that were concerned about.
Thank you okay.
Thanks, Vince next question area.
Our next question comes from Dave Barney of Bank of America Merrill Lynch. Please go ahead.
Hey, guys. Thanks, so much for taking the questions.
I guess the first one for you Joe.
If we go back to the decision you guys made about the dividend policy in choosing not to have a growth policy, but rather have more of a tactical approach to the dividend is there anything about the degree of uncertainty that you're facing this year that makes you want to potentially reconsider.
The amount of capital you're allocating to dividends in the short term.
And then a second question for Tony.
As you kind of gave those numbers. Thank you so much for the color as we kind of headed out of June into July.
What kind of the.
The visibility do you have on kind of the mix it he he versus subsidy customers and if that's been affected at all by maybe the economy or the aftermath of coated.
Just some color on where we stand in that transition. Thank you.
Sure.
Dave Thanks, very much for the question.
First of all let's start from the beginning our cash flow expectations for the year are intact, we expect to lend the year at roughly $2 billion of cash flow.
In that zone as we have anticipated overall and then some doesn't really no change from from that perspective.
And it's coming from the fact that we're doing better from a capex efficiency point of view.
In terms of self install activities that we've coded we've quoted is doing better from some of the better unit prices that were getting in the marketplace. A there is a bit of a slowdown in terms of shovels in the ground around housing starts and therefore some of that work has been delayed so generally speaking Tony quoted circa 500 million dollar.
Lower capex it really holds the cash flow position intact as a whole. So then in terms of our capital allocation policy Nothing's changed from my perspective, our number one priority is investing in the business investing in fiveg investing in the future of the business because the underlying.
Fundamentals are still there and still very important to us.
If we have surplus cash than we do have.
NC IB.
Thats out there and available to us should we choose to take advantage of it and that was sort of be the second priority.
Third priority will look at dividends from a time to time basis, but so really no change from a dividend policy point of view.
The second part of your question, David I'm not sure I understood. Let me highlight a couple of things and then allow you to.
Elaborate on it we've moved to a 100% VIP.
From the subsidy model and so as a result, what you'll see on our balance sheet is a split out between contract asset and in some of the details.
Device financing receivable.
In total quantum that has come down slightly as a result of the lower volumes.
But im not sure if that was your question, though if you could please just clarify did.
Yes, I apologize I think what we saw kind of creep into the competitive landscape was that the subsidies were creeping into the IP planned in the phones were not being sold at full price rather subsidized price and I was wondering if you've kind of comment how that's evolved where appears to be evolving as we get into the third quarter.
Okay got you.
So couple of things on that.
We introduced fear rewind the clock.
Way back in July when we introduced.
Plans the intent was to substantially on a roadmap to substantially reduce the amount of promotional discounting on handsets, we knew it wasn't going to be.
Turnaround.
And as we fast forward to Q2, what we saw it is.
Promotional discounting down circa 20% to 25% so keep in mind some of the numbers you see.
In terms of discounting our relative to MSRP on their some bins there have been some changes to MSRP.
For some devices and secondarily.
There are incentives provided by Oems.
As you're aware and so that provide or pace for some of that discounting that you might see in the marketplace. So overall, we're pleased with the way that's trending.
Overall.
For where we're at.
Okay, great. Thanks, guys.
Thanks, Dave next question area.
Our next question comes from Tim Casey of BMO. Please go ahead.
Hi, Thanks.
Couple of for me.
Tony could you talk a little bit abode.
This season.
Of roaming and how should think about that going forward given as you mentioned.
You know travel and certainly business travel doesn't it gets konica kind of come back anytime soon just wondering.
How we think about that both from a service revenue and EBITDA impact.
Over the next step four quarters.
Maybe if you could from a relative perspective, and also seasonality and then.
Second question, probably more for you Joe how are you thinking about.
Your costs strike.
Going forward.
And I guess, we're going is.
You know one side would just be just keep it as is and waited out and wait for things to returning to normal.
But I'm just wondering if you think.
The new normal is going to be.
Significantly different than you are going to have to make changes to your distribution base or or other big cost items, how has your thinking evolving on that thanks.
So with respect to the first question on roaming in the profile and think about.
Referred to we said before roaming was a roughly $400 million annual business for us think about.
Q1 is being the lowest.
Followed by Q4, and then Q2 in Q3 or really the high points Q2, having the most business related roaming typically.
And then in the summer months flips over to consumer roaming reach.
At its peak.
In Q2, I talked about roaming revenue being down 100 million. It is about the same maybe slightly more in Q3 in terms of year on year impact of so it will be in the circa $100 million to $110 million range, we expect for Q3.
And on the.
Tim on the second question, we have a very.
Active.
The cost management program underway.
In fact have been added all the way through co bid in the last number of months think of it. This way there are a number of activities that I would have called the business as usual margin improvement cost reduction activities driven by a number of things already being rationalized and our business whether its.
Call volumes coming down 20% or.
Digital adoption going up where some of the other sort of efficiency measures.
We largely took a pause on those and during.
Q2, and during the Cobot period, we focus certainly on managing what I would call discretionary spend some of that happened for us as traveled stop and things of those nature stop, but we manage discretionary spend but some of the structural cost programs. We had underway were paused as we focused on.
As I said earlier, you know focused on safety and well being of our people keeping our customers connected and thinking about the future and how we leverage these ideas and opportunities for the future second category of cost improvement of ideas that have been accelerated through co bid I think our substantial and material in nature.
You know we went.
To assist them of supporting field service.
With tools and apps from video chat to monitoring and analytical tools, and we think thats going to save.
100000 truck Rolls as an example thousand truck rolls as a pretty significant expenditure on an annualized basis, you add to that the self install we went from really almost no self install in January very small pilot project and now we're at 100% self install a our goal is to stay.
Hey in that zone in terms of self install.
And continue to leverage the benefit not just from a cost point of view, but also from a customer flexibility point of view think about self install as situation, where we can make sure that the connection is working outside the home either remotely or whenever it's convenient for our team to do so and then.
Send the customer of their CP either equipment for inside the home and they can schedule a time.
If they need support otherwise they can do it themselves, we've launched a whole bunch of apps.
To walk them through the installation process, if they got into trouble vacant in the moment hook up a video chat or schedule video chat and that's worked really really well whenever going back from from my place overall.
In other areas around channel mix, where you know out of necessity of moved more of albeit limited sales volume.
Gross adds in wireless we're down about 38%, but there were still reasonable volume to try some of these ideas and push them and that is index more to digital sales and direct sales where the C. O. A profile is vastly different from some of the third party retail and other channel.
Was that we have as a result.
We move the call center to work from home.
Service levels and productivity has never been better from my perspective and in the case of auto for example, we decided to close the building.
That was coming up on end of lease and now the customer service cost center operations in the auto area on permanent work from home and we'll make that decision a few other geographies as we kind of roll through sort of a series of these that our material in nature born out of co bid or accelerated through co bid that we're going to take action.
On.
Through the pace I think it's fair to say that through Q2, we didnt really go after any structural costs. It just didn't seem like the right thing to do and secondly, we were looking to see what the recovery might look like to your point. Tim. This is going to be a sharp recovery. It would have seem like a bit of a crazy thing the kind of go student body of.
Left student body, right, but seeing now that the recovery may.
Maybe a little more extended ramping in the right direction, but we're not sure what what's in store for us.
In terms of a second wave or what else might be out there.
And therefore, there is much more focused on taking action with some of these structural costs and ideas that I, just itemize and you'll see those coming to fruition.
And they're just not going to help the back half of the year. They will help the the structural profile and the margin of this business through the next long, while and then as the economy does recover around things like roaming revenue in the like of things that we've discussed will get.
The full EBITDA flow through of that recovery into a much better more efficient cost structure. So there's a team working very hard exactly on this point, we've got a series of actions that will unveil to you as we make them happen.
Thank you.
Thanks, Dan next question area.
Our next question comes from Maher Yaghi of days are dead. Please go ahead.
Thank you for taking my question.
Thank you for all the.
The information that you gave on the call that impact I wanted to ask you on the cable side I.
Thank you took longer than usual.
Some price increases on Internet.
That contributed to your minus two cents and growth.
The boat deliver Hong Kong pricing environment, what is driving these pressures.
At this point on that.
Seeing economic pressures on tier customer level that just trying to alleviate and by these new pricing.
Promotions that you are doing and my second question is on.
Government funding.
You we've seen other companies in the media segment for example benefits from some support.
On the government side have you been able to access any of these fundings part of your media business or any other segments, but your operator. Thank you.
Thanks Meyer.
First of all let me start on the cable question.
We.
We had a price increase in motion.
We halted it we also that didn't do it whatsoever and.
We are now looking at the timing of that price increase which will likely which will happen later on this year. So there's no question that contributed to the downward pressure on the revenue front.
Overall.
And you know.
There were some other pressures in the cable business that are temporary nature. One is we gave some concessions to our customers during the cold period, we removed overage caps on Internet Wi Fi usage, we gave people a lot of free content a member of things with what were the right things to do a there now.
On from the equation and they will kind of.
Helped ameliorate those results overall, maybe Tony you can give a bit of a breakdown of that and I'll come back and talk about the funding situation sure.
If I just.
Two top up Joe's comments, so the price increases across all our products not just internet and as we implement those.
In the fall.
What you'll see is not only ARPA improved but had we done it in.
Two or as originally planned than what you would've seen is a much better profile in Q2.
As you look forward for our cable service revenue business, you should expect sequential improvements in Q3 and as we approach the ended the year in Q4.
The full or impact of the price increase and the taking away of some of the freebies that you saw in Q2 come out.
And so you'll see a healthier growth profile, albeit modest in Q4, but it's the beginning of resumption of the strength of cable revenues.
And on the question of the funding Meyer we did.
Qualify for received some funding for our media business that essentially ground to a halt.
And you know, we availed ourselves about funding for the reasons you why you would expect the choice of bird to either furlough employees and have them go on.
Individual subsidy or to keep employees here take advantage of that support mechanism or trying to figure out in anticipation of when the games might resume.
And I think that tradeoff worked out well for us because the games now are coming and they're all coming at once fast imperiously and having fewer people on standby and ready.
Versus having the call them back from for low wasn't advantage to us as a whole.
So it was really kind of a think of it as a flow through either would have happened directly for individuals or as a flow through by keeping them and ready for the games to come.
Okay. Thank you can quantify that.
Among that's where we see.
No we're not disclosing that number for a few different reasons, but as and in many respects. It's irrelevant as Joe said the subsidy either would have been at the individual level or at the company level and so.
As I said, we're not disclosing it.
Okay. Thank you.
Thanks, Matt our next question area.
Our next question comes from June Mick Reynolds of RBC. Please go ahead.
Yes, thanks very much good morning.
First a clarification I guess for you Tony on the bad debt.
Makes sense in the corner that the $90 million did I hear that correctly the bulk of that is in wireless.
That's right through.
The bulk of it is in wireless and just to clarify what's the incremental provision that we booked in the second quarter.
And just for modeling purposes, you able to just give us the numbers maybe offline or are now bought by segment on on the incremental 90 million.
Yes the.
Roughly $80 million for wireless and just slightly above $10 million for cable.
Okay perfect.
And to others from me first on the back to school dynamics.
To get too much into the we'd see here, but just can you wrote just remind us.
What the norm normal begun deltas are on the seasonal aspects of back to school. Just so we can kind of better understand what what what could or may not happen. This year.
And then secondly, probably knew Joe on the Fiveg Road map at that 3500 auction delay.
We are perspective, what does that do for free youre kind of goals here in the next year or so on fiveg bow to that to the positive and negative again just related to that 3500 delight. Thank you.
[noise] grocer with the back to school hopefully I got the.
We are you going with the question in terms of.
Volumes continue to be lower than we'll continue to have the savings related to handsets, but similarly, some of the fees like activation fees that we typically get and a few others along those lines that are not insignificantly certainly impacted us in Q2, but those would then continue to impact us.
On a year on year basis in in Q3 based on the volumes. We are seeing we expected to be slightly better than we saw in Q2 as volumes.
Continue to rise.
But to the extent there they are down and that will continue to have an impact on on service revenue and ARPU.
I don't know if I answered your question.
And sorry, sorry, Tony just one just on on the cable side is there anything any dynamics there.
It's typically on Internet will you.
He is on back to school is internet volumes pick up.
Again with much of it looking like.
It's back to school online, we already have much of that captured in our.
In our base today.
And so the incremental would be much more muted this year, we expect than prior year.
Okay.
[noise] drew on the Fiveg.
Make a few comments and George front end as our CTO is here with us so I'm going to ask him to.
Help us support with some commentary so on Fiveg. Its full steam ahead in terms of our focus.
And development of Fiveg.
As you know where the first to launch and we also have a very advantageous position with 600 megahertz spectrum across the country.
And George will talk about the deployment plans on that spectrum.
And yes, 3500 auction regrettably has been delayed.
But you know bear in mind that.
We have.
Other spectrum available to us in the midrange frequency in Georgia kind of cover our plans on that front, including the tranche of 3500, we already own.
Hi, Andrew Good morning. Thanks for your question as you would I heard me talk about US before 600 megahertz is indeed, a foundational spectrum that we're using for rollout and given that this spectrum has now mostly been cleared up across the geographies for usage.
Well, we're rolling that out as we as we speak so.
We expect to have a very good coverage using the 600 spectrum that you acquired and as you know.
In southern Ontario, we have a particularly good advantage.
In that sense as well.
As Joe mentioned, you know the fact that we have Ericsson as a single vendor that allows us to use.
The as dynamic spectrum sharing that I've talked about before as well.
This is a this is a great advantage for us because one.
Some of the importance flagship devices will support both 600 and spectrum sharing which allows us to use some of our existing fourg spectrum.
To provide coverage and capacity for fiveg without having to do major work on our network and overtime as as Joe mentioned when a three to five becomes available for a full for wireless usage. We will then add that onto our strategy. So.
This doesn't really change any other plans that we've already communicated in the past and we feel very good about the planet, we haven't place and we're executing.
Thank you.
Thanks Drew next question just one more quick comment on that five GE is about the network.
Fiveg is also both the commercial contract I mean part of our decision to go to unlimited and as we said earlier were close to 2 million customers on limited is that we need a consumer construct that complements the capability availability of fiveg. It would be a shame to have a fiveg network and have a three or fourg pricing.
Construct with the overage considerations around it so the to go hand in hand, and then no fiveg developed markets across the world, that's an essential pairing of capability network and customer construct.
Thanks, Joe next question area.
Our next question comes from Simon Flannery of Morgan Stanley. Please go ahead.
Hello. This is the area for us filling in for Simon. Thanks for taking my question I'm going back to the incremental bad debt provision range. You provided can you just speak to some of the trends you're seeing both on the consumer side and at the SMB side recently.
Sure in terms of.
Early on we had anticipated that.
We would see.
Oh word I'd use but no material amounts of either deferrals.
Or inability to pay and would otherwise be disconnects I would say.
What we're seeing in reality over the last.
Not only in Q2, but in the last few few weeks of July as well is much lower volume in terms of delayed payments.
Or suspended account so I would say that's trending much more favorably than we expected.
And so in putting out our provision we tried to be prudent and conservative.
And try to capture as I said in my notes the vast majority of the risk.
So we see the incremental exposure as being very minimal as we look to Q2 in Q3 will have to see how some of the specifics unfold, but but overall trending better than we expected.
Thanks, that's very helpful. And then secondly on the media side can you maybe give some color on what the financial impacts I'd with us.
Which you know a timing changes the league as well as.
Related to media why you're seeing in advertising market and outlet for the rest here.
The games or just a recently been announced in terms of scheduling et cetera, and so as Joe mentioned in his opening remarks.
Bookings have been solid in terms of advertising revenue on the media size subscription revenue continues or affiliate revenues continue to be solid.
And so if the resumption of advertising were quite.
Quite optimistic about the revenue profile in Q3, and we'll see what Q4 brings us but to be clear.
We still expect you think about the broadcast feed costs.
And the loss of game day revenues at the Jays just overall, we still continue to expect.
A loss overall in media in Q3, and probably Q4 as well.
Great. Thanks, a lot.
Thanks Diego next question please.
Our next question comes from Jeff Fan of Scotiabank. Please go ahead.
Thanks. Good morning Hope everyone is doing well my first question is just a clarification on the free cash flow.
Being intact for this year.
Regarding 500 million of Capex being down and free cash flow is intact.
It's sort of assume that your consolidated EBIT Dod decline would.
Materially improve.
As we get into the second half the year.
Im wondering if that's correct, especially compared to the minus 20%.
In the quarter.
And then my second question is probably for Joe I'll regarding the wireless retail environment.
I'm wondering.
Given what we've seen so far out whether you've seen retail traffic actually pick up as you we opened stores.
Through June and maybe in the early part of July.
And yes, physical retail traffic doesn't pick up.
Yes, there's some pent up demand regarding falling upgrades and so forth.
How do you feel about your digital platform to be able to enable activations and I'm not talking about just queries or customer support, but actual customer activation going from start to finish and being but I addressed that potential pent up demand. Thanks.
[noise] Fola Taco the first part of your question like a couple of things.
One on terms of specific profiling.
We do anticipate EBITDA to be stronger in the second half.
For a few reasons some of the revenue we talked about profiling will be slightly better.
In all three of our businesses and too.
Once again, the bad debt provision that you saw in Q2 and weighing on EBITDA.
We don't expect that magnitude in to repeat itself in Q3 in Q4, and so that'll be a benefit when you combine that with our capex outlook.
500 million is an estimate and so if we go back to the macro picture. We had originally anticipated to deliver free cash flow. It just above $2 billion, we see a stable path to that.
And whether some of the dynamics will vibrate within EBITDA or within Capex, maybe slightly more than 500 slightly less.
I don't know that we want to put that fine.
A number on something that is a bit fluid. During this environment I think the key message to take away is we're on track for continued solid cash flow delivery.
Thanks.
Jeff on the wireless retail environment.
As I said in the last part of June early part of July we've seen a lot of good retail traffic and we've had some volume days.
With that our reminiscent of sale periods in the back half of the year as a whole mall traffic has been the good given the circumstances.
I would say to you that you know.
Our factory capacity is down a bit just because of the conditions, we're employing to keep customers you know safe and hygiene intact et cetera. They give it this way you know depending on the size of the store footprint, we limit the number of people in the store. So in some of them all locations, we actually have lineup some people.
Kind of come in as one person goes out most of the nature of coated right now we have to work through that sort of trade off.
So you know a the on the day our goal is to continue to.
Execute well on the physical bricks and mortar side and as you recall, we have a strong advantage on that front with two and a half thousand locations across the country at the same time to continue driving in investing on the digital and direct side of things.
And I think on that front, we've got good capability in a growing capability.
The one issue that we've been managing well is what I would call.
Customer authentication eligibility.
And so I'm not talking about you know.
As you said service transactional talk about buying transactions online.
The challenge in our business is always been authenticated my customer and and.
Driving eligibility understanding the teams and working on that from well before co bid from last year and driving hard on that front.
We think about a transaction, where you're going to put a very expensive phone in someone's hands. It's really important you got the authentication and eligibility right.
As the team did a good job of that and managing the fallout on a daily basis, and frankly, it's going in a very good direction you couple that with our other direct capability. Besides the web and we think we've got position of strength pro and the go is a material advantage we believe.
On the go now is available in almost one third of the country and we're growing region by region as we speak for the rest of the year.
So that offers an ability for a customer not to even think about going into a store, but they can transact with us either online or transact over the phone and then the store experience shows up at their door, that's unique to Rogers capability, and it's going very well the satisfaction scores are off the charts.
And the economics are very compelling from sea away point of view and attachment rate on other.
Oh jewelry products et cetera. So we think it's a good capability to have as a whole.
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You know we've gone from a as an industry. We've gone from a very small percentage of sales happening online. The industry is typically operated North America, not just Canada, maybe 5% to 10%.
Transactions happening online.
You can think about that world right now the non store transactions are closer to 50 50 at this point.
And the key we believe is to be good at both you go to both we already had a physical bricks and mortar capability.
And we're going to continue to invest in and drive capability on the direct side, a and that will serve us coming out of cobot as well and allow us to be more efficient not just from a store footprint point of view and retail distribution cost point of view, but the seal way is real.
Marketable impact on our business you know in some third party channels, we will spend two to $300 sometimes a per.
Outside of any sort of subsidy just truly on commission and fees et cetera to the retailer.
And during a promotional period, if you had a gift card to it you can go north of that number whereas in the direct channels, it's sub $100.
And therefore, there is a structural cost advantage available to us with the capabilities that we have in our building. So that's sort of the game plan as a whole and we feel well equipped for wherever this goes if this goes to a place where there's less mall traffic because people don't feel comfortable shopping.
You know, we see evidence of some back and forth in different markets in the U.S. in California in places like that where it kind of opened up and then in closing are curtailing again, we're ready for either eventuality and we've built our plans and our approaches to swing in either direction from a mix point of view and we're prepared for it.
Thank you.
Thanks, Thanks, Jeff Aero next question.
Our next question comes from Aravinda Daily Pedigree of Canaccord. Please go ahead.
Good morning, Thanks for taking my questions.
For me I think in the past you talked a little bit about Adam said, the inbound calling coming in.
From those segments of yours subscriber base Thats, feeling some financial stress and looking to reprice I know you've seen that originally and cable and perhaps also though wireless.
If you don't give us an update that how material is that sort of component and that was that.
Meaningful element to the decline in Q2, and then secondly.
Maybe just touch on that promotional intensity as at the volumes start to come back.
Sporadic promotions that happy that at least on the face of it looked a little bit classic, particularly 20 game plans around the $65 level it may be lower.
Anything material to touch on there. Thank you.
[noise] are going to offset with the first one in terms of coal volumes.
In re rating.
As I referenced earlier we.
We had expected the worse and we're I'm surprised by much lower volumes coming in in terms of reprice, that's in both cable and wireless as customers look to optimize their plans.
And or try to get into some of the promotional.
Pricing that they had previously seen in market.
But I would say those were very minimal.
Did impact ARPU in both wireless and cable, but a very small.
To a very small extent much less than 1%.
In fact, even less than half a percentage point in each of those so activity was there but very small.
I've been done in terms of the promotional intensity our general stance. During Q2 was this is not a sales quarter.
When you are facing the fact that 90% of your stores are closed and you've got thousands of people with nothing to do because they work in those stores.
It seems counterintuitive to be aggressive around promotion there were some promotional skirmishes in the quarter led by our competitors and of course, we matched.
And we were right. There every step of the way above our stance is very much let's focus on.
Let's focus on the basics those work on.
Our operating model cost efficiencies and managing.
Cash flow liquidity, managing the how the safety of our people all things we've talked about and.
You know, we're ready for the competitive environment to whatever degree it evolves I would say that on the equipment subsidy IP front. It has been a disciplined.
Mindset from the get go in January when the industry move to ERP.
I imagine there will be promotional aggression points throughout the various periods as people try to understand what volume is out there and how to swing the volume there away a I would say to you that between our bricks and mortar channel and our digital channel were well equipped for that competitive intensity always had been and.
We'll continue to be that way.
Thank you.
Thanks, Arvind next question area.
Our next question comes from Richard Choe of Jpmorgan. Please go ahead.
Hi, I wanted to ask about the cost structure in the wireless business.
The drop off in service revenue now.
In an impact.
It seems like the overall cost structure has stayed the same.
Is this something that could change over the last few quarters or how long with today and how do you view.
Sure.
Yes look at our operating expenses outside of the equipment subsidy piece of it which we've talked to you will see if you back out the bad debt piece that I spoke to of roughly $80 million, you'll see year on year declines some of that decline relates to annual.
Sorry relates to variable commissions.
That we saw less of in terms of volumes.
But the rest of it does relate to real.
Options year on year in absolute dollar cost structure, having said that as Joe referenced earlier.
We are looking at moving forward with some of the efficiencies that we see not only in wireless but across all our businesses and we think those will drive material year on year advantages.
And you will see those picking up in the back half of the year. Some in Q3, but primarily into Q4.
And then you have to about 2 million on the unlimited data plan of your 9.4 million postpaid, what's the kind of target there and we'll we are we through the worst of the ARPU pressure just from the his transition to unlimited or should we expect more pressure.
From the transition to unlimited.
In terms of the transition a couple of things if you were to ARPU profile.
We've talked about the cove, it impacts and I would call those sort of variable revenue pieces of it.
And then Richard I think what you're getting at is the underlying sustainable subscription ARPU and what that profile looks like.
Knocked about us continuing to be impacted by overage.
In the third quarter, but we are fairly confident we'll continue to see good improvement in underlying subscription ARPU.
Especially as we head into the second half.
So I think we've covered those pieces of it.
Maybe I'll leave it there.
Just just Richard and when we did.
The move to unlimited Wi.
On the basis of a number of key opportunities one to reduce churn to to have a net ARPU positive impact when you look at downgrade as Russ Upgraders three to drive likelihood to recommend or advocacy from customers and for.
To diminish the calling patterns and the impact on our operations because they call less overall all four of those items are exactly intact in terms of where we expect to them to be around the move to unlimited on top of that you know, yes, theres been more pressure on over just people stay.
At home, but the behaviors that Theyre building inside the house.
Around you know video conferencing zoom calls as online shopping all these things we've already seen a trend in the last few weeks of June and July those behaviors have moved outside the house into the wireless and mobile world. So we think it actually plays very well into both the strategic decision to go to on limit.
Good but also in terms of the value economics, I'm going to unlimited and that's all completely intact, where we go north of 2 million, we're going to keep pricing on the point immediate is Rogers only it's not available on our flanker brand Fido. So it'll just naturally progress over time.
People want to rise up to the $75 price point.
And as they have a greater appetite for use but.
We believe that we are moving through the thick as part of the overage melt through Q3, and then we'll see that really familiar rate in the quarters of follow.
So it's fair to say outside of co bid after Q3 or you're on the other side of this.
It's fair to say that outside of Cove. It you know.
It was going to happen in the Q3 period.
Oh vivid.
Has made that a little a little more complicated because of the additional pressure on the originally talked about so all things being equal all things being equal yes. The question. If your hesitation is I don't know what's going to happen with co bid in the second half of this year right I'm looking at what's happening in different parts of the U. S. ICD.
Joining me with.
No I said, the the seesaw around let's go out, let's come back and et cetera, I don't know, how that's going to play into this dynamic, but if you're to hold the current conditions constant absolutely we see coming out of this you know it's somewhere in the Q3 Q4 time period as we've said before.
Great. Thank you.
Thanks, Richard Aereo, we have time for two more questions.
Certainly our next question comes from back to your Levy.
Please go ahead.
Great. Thank you two questions first on the wireless side with some pickup in activity now can you talk about how we should think about churn in the second half of the yard.
On Capex.
Can you provide more color on future Capex plans and would not be passenger load capex. This year on delayed projects being added to a normal run rate next year and maybe what do you how you think about.
Most runrate intensity for cable and why.
Going forward. Thank you.
Hi, Bob I'll take the churn questions arise Tony to cover the Capex question.
On the churn front.
No question, we've seen a.
A massive improvement in churn this quarter.
And going from 0.99.
Postpaid churn wireless 2.77 me, that's not sustainable in open market as a whole, yes, we'll continue to improve churn because we've been on that path for last few years, we'll continue to see the right sort of March to better churn overtime.
Which is great, but also bear in mind that gross additions were down as I said earlier.
For us about 38% or 135000 year over year. So.
You know as gross additions come back, we'll see more froth in the marketplace. Some therefore churn will ill get back to that normal improving trajectory that we've seen the last few years, but it just not sustainable at 0.77 in that range outside of coated.
I bet you on your question related to Capex, the 500 million less this year.
Some of it much of it will flow through to future periods, how much of it it ends up being in 2021 difficult to predict again sort of how the whole pandemic plays out.
And the second part of your question on Capex, maybe is more helpful. We continue to see throughout the period end probably into next year.
Wireless capital intensity in the 12% to 14% range may see it 13 or below this year, but resuming back up to 14, and maybe even slightly above next year again, it's really around how much work, we can get done but those are kind of the ranges and then on cable.
We had a previously stated goal of getting to 20% to 22% capital intensity by Q4 of 2021.
We are tracking ahead of that and as we push forward some of the investments into next year.
Thats, probably still the right goal to think about for us.
For the.
The exit rate in 2021.
Got it thank you.
Great. Thanks, batches and last question area.
Final question comes from David Mcfadgen Cormark Securities. Please go ahead.
Okay, great. Thanks for squeezing in just a couple of questions. So when I look at the 7% impact to the wireless service revenue you said about 100 wise.
Lower roaming and then I guess, the bounces nor activation fees that should come back has got some activity picks up right.
That's correct.
Okay, and then just on the roaming revenue can you give us an idea Nazi have missing Sharon.
Can you give us an idea how much of that would be business for instance personnel.
Just trying to understand as well returns to normal how that could come back.
We don't split that out.
David and in some ways, it's a bit of.
An arbitrary it just relate yeah, I think the better barometer that we'll look to is just travel in general.
Because whether it's on business accounts or the personal accounts that eventually flow through that and expense. It's the total travel or the consumer absorb that.
We look to probably the more relevant one is total business total travel I should say.
As a better barometer.
But we don't see that moving for sometime.
Okay and then just lastly, just just a clarification maybe just on the gaze.
[music].
It's a blue Jays not playing line gains with people in attendance decent attendance does that mean that that would.
Keep the EBITDA for medium from going positive.
Essentially drag.
Oh.
It's a it wouldn't make it very difficult for media to be net positive.
Without the games I mean, it's possible depending on the amount of advertising revenues and so we don't want to.
Stretch ourselves in terms of trying to forecast that too far out.
But then the jays loss of revenue game day revenues is a material amount for the media business.
Okay all right. Thank you.
Thanks, David I'll turn it to Joe.
Just a few comments before we go.
I think it's important to bear in mind, Miss the way, we look at the business.
There is a solid business with a strong and resilient base of recurring revenue.
And wireless 90% of the revenue is in that strong recurring base. We spent a lot of time today talking about the 10% the vast majority of which is impacted by coded and will recover on.
Various timelines roaming being one and activation fees being another but it will recover overtime and as I said earlier, we're making our way through of the curve on unlimited and the overage mouth roughly to the same schedule that we.
We discussed overall, so it's a solid business strong base a recurring revenue wireless the same can be set of cable. The cable there were a ill look at the macro trajectory of the business as we've been driving cash margins as we've been driving a resiliency.
We we did forgo the price increases I described for all the right reasons as we kind of continue driving on the cost efficiency side and get the revenue metrics are where they need to be that business has all the potential we've described before the cobot period.
And on the media front.
As I said small piece of our valuation, but the same time. These are things that will recover given the importance of live sports as a whole.
And lastly, I'll say as you can count on us to adjust and adopt a the cost structure of the operating model to the new realities.
That's the nature of our responsibility and we're looking at our every aspect of the business do you understand what the.
New operating environment might look like in the short term in the medium term in the long term and to pivot appropriately to make those adjustments as necessary.
But we've got.
Strengthened view more than ever in terms of the growth prospects of this business and the industry as a whole given the importance of our services and offerings to both individuals and businesses.
Into the long term so thank you for your time, Thank you for.
The questions.
And we'll talk to next time.
That concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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