Q3 2020 Telus Corp Earnings Call

Oh Wow.

[music].

Conference recording has been turned on.

Good morning, ladies and gentlemen, welcome to the tallest 2020 Q3 earnings conference call I would like to introduce your speaker Mr. Robert Mitchell. Please go ahead.

Hello, everyone. Thank you for joining us today, our third quarter 2020 results news release, Mdna and financial statements and detailed supplemental and for Investor information were posted on our website. This morning on.

On our call today, we will have remarked spike and that's what's so president CEO, just pure at executive Vice President and President and CEO of Telx International and Doug French Executive Vice President and CFO and for the Q any portion of today's call. We also have Daniel Ninivaggi President home solutions Jensen co President mobility solutions Cresswell grow tall.

Group, President and chair of Teles Health and tells cut back and Tony guarantee VP and Chief customer Officer.

Lastly on slide two this presentation and answers to questions contain forward looking statements that are subject to risks and uncertainties are made based on certain assumptions. Accordingly actual performance could differ from statements made today. So we ask that you do not place undue reliance on them.

We disclaim any obligation to update forward looking statements, except as required by law and we refer you to the risks and assumptions outlined in our public disclosures, including third quarter 2020, M. DNA and 2019, M. DNA and filings with Securities commissions in Canada, and the U.S. with that over to you John.

Thanks, Rodrigo and Hello, everyone.

Third quarter tell us once again achieved strong operational and financial results characterized by excellent execution, resulting in industry, leading and record high customer growth of 277000 net additions.

Its accomplishment realized that met an unprecedented operating environment reflects the effectiveness of our world leading performance culture underpinned by our highly engaged team.

Indeed, telesis recent recognition as the top Canadian organization on Forbes' world's best employers ranking is a testament to the skill passion and grit of our high performing global team.

Leveraging this differentiation alongside the strength of our digital capability. Some products superiority, we continued to achieve robust customer growth in both wireless and wireline in the quarter.

Furthermore, this achievement was supported by strong and enhance customer loyalty across key product lines backed by the tell his team's dedication to delivering premium customer experience is overall, a world leading wireless and fiber broadband networks.

In Q3 consolidated revenue was up seven ducs, 7%, while EBITDA decreased moderately by zero dot, 6%, reflecting pandemic related impacts.

Thanks to our teams resiliency, including a relentless focus on improving our cost structure and realizing important growth opportunities, we mitigated some of the downside pressures.

Notably had it not been for the exhaustion of net impact of COVID-19, EBITDA would have grown by approximately 5% at the consolidated level for tell us.

Let's take a look now at our wireless business.

Third quarter network revenue decreased by two dot, 9% as our consistent focus on strong and profitable growth continues to be impacted by reduced roaming revenue.

As a result wireless EBITDA was down one dot 6%, partially mitigated by an intense focus on cost management.

Leveraging the strength of our superior customer experience, our world, leading wireless network and differentiated digital channels. Our team achieved a robust 111000 mobile phone net additions in the third quarter of 2020.

In terms of connected devices, we realized strong net additions of 87000.

6% on a year over year basis.

Overall wireless net additions inclusive of mobile phones and connected devices were 198000 in the quarter up 3% over last year.

Importantly, our team delivered another quarter of best in class loyalty results.

Notably blended mobile phone churn was zero dot nine 9%, representing a 10 basis point improvement over last year and it represents the third consecutive quarter, a blended wireless churn at sub 1%.

Underlying this result, postpaid churn of zero dot, 85% was better by three basis points compared to last year.

Tell us is broadband network continues to perform exceedingly well through the current environment characterized by evolving usage patterns.

The efficacy of our ongoing technology investments is again reflected in numerous awards from leading independent network authority.

By way of example, UK based open signal rank tell us is having the fastest network in the world and their September Global Mobile network experience Awards.

This award builds on our multiple third party acknowledgments, including U.S. based PC Mag ranking tell us as having the fastest mobile network in Canada.

You asked based Fuklah, recognizing our mobile network at the fastest.

Most expensive on a national basis.

And finally, Canada based that tell us, placing tell its first in respect of quality latency and download throughput across our national wireless network.

Each of these accolades I've been received now for three or more years in a row.

As we continue to rollout, our fiveg and our fiber networks in the months and years to come Canadians will continue having access to the world's best speed, the world's best quality and the world's most expensive coverage.

To close on our wireless results, both absolute and ARPU declined by approximately 5% in the quarter.

This reflects industry wide pressure on roaming associated with pandemic related restrictions and reduce travel whilst at the same time, we continue to thoughtfully migrate our base door enlist data plan and hold the line on our premium brand ARPU.

Importantly, we continue to pursue strategies focused on offerings with attractive economic characteristics.

Including.

The strong and steady adoption I'd tell us peace of mind data plan and family discount offerings contributing to more than 60% of all rate plan changes being other step up or flat in the quarter, a 10% increase as compared to Q2.

And tell it easy payment device financing plan, all of which are performing exceedingly well.

Additionally, we continue to seek out and secure new avenues of wireless revenue growth in high margin areas with respect to internet of things across numerous important verticals for our company.

We remain enthusiastic about prospect in this space and the opportunity that the increased commercialization of Fiveg will unlock in terms of new growth curves that initiate.

Expansive revenue and EBITDA growth and as well cash flow accretion, allowing us to further monetize our critical network investments.

These growth opportunities include Catalyzing dramatic innovation in Hell educational environmental and socio economic outcomes.

And as well, enabling our entrepreneurial spirit in Canada, and improving our productivity and innovation, including facilitating major advancements in AG Tech smart cities and home automation to name, but a few.

Turning now to our wireline results tell us once again delivered a very strong quarter third.

Third quarter wireline revenue increased by 18% and EBITDA increased by 1.6%, reflecting the increased contributions from tell us its internet growth and our smart security technology as well as to tell us international delivering once again.

Tell us is wireline financials were driven by data revenue growth of 23% through a combination of higher revenues from our diverse portfolio of services and solutions.

This includes robust growth in Internet and third wave data services as well as the resilient performance in TV.

It also includes strong growth in home and this is a smart security technology amplified by the inclusion of ABT, Canada.

Our growth includes increased revenue is from the hyper scaling of our virtual healthcare solutions and as well the resilient performance at Teluss International inclusive of our successful TCC acquisition that we consummated last year.

As we indicated at that time we.

We continue to move forward with the plans for the T. <unk> IPO, which we are now targeting for the first quarter up 2021.

Whilst we have seen some recovery, we continue experience trends, yet offsetting COVID-19 related impacts from some business customers as they navigate their own pandemic related headwinds as they postpone certain activities and tell us has to postpone.

Our own activities, including price increases that were postulated across our customer base as well as absorb impacts related to site closures or restricted access in respect of tell us how and our Telair International operations.

Wireline profitability was impacted by the flow through of the aforementioned impacts of the pandemic in the quarter as well as costs associated with strong customer growth and the dilution from J curve investments in critical growth areas, such as security Hello.

And our AG Tech investments.

This was all partially offset by strong cost containment across our business, which is the hallmark of our organization.

Looking at our robust customer expansion in wireline.

We achieved third quarter Internet net additions of 50000, an increase of 18000 additions year over year, and our highest quarterly loading since 2002.

This was further supported by an internet churn rate below 1%, which alongside an up to 25% increase in monthly recurring revenue of new consumer additions bodes well for future lifetime economics from our HRS IEI business.

We also realize healthy TV net additions of 19000, including a double digit churn improvement to 1% within our optic operations.

Notably residential voice line losses came in at 8000 in Q3, representing an impressive 4000, an improvement over last year and the lowest quarterly residential voice line losses since 2004.

Furthermore, industry, leading security additions of 18000 at tell us where 4000 on a year over year basis.

These results underscore the unique and attractive bundled offers available to customers across our superior product portfolio and our team is focused on leveraging the competitive differentiation inherent in our pure fiber network.

As a result total wireline our June net addition of sales.

29000 were up 26000 year over year, which is a notable achievement for this organization on any occasion, let along within the throws of the contagion.

During the quarter, our team expanded our pure fibrek coverage to approximately 78% of our high speed broadband footprint, a positive progression for fiveg as well given the significant synergies that exist between the two technologies the synergies between fiber.

Sure and Fiveg, which is indeed extremely potent.

Like our wireless network, our fiber network continues to receive important recognition and boy if we come a long way in respect of our pure fiber footprint and all that or to enable.

Notably U.S. based PC Mag recently ranked tell it as the fact that Internet service provider in Canada. This reinforces PC Mag previous recognition of talent as best for gaming and Twentytwenty amongst our country's major providers and this is only going to become amplified with the progression on the fire.

Gee, Brian enabled by the underlying fiber network, when we think about low latency applications, including mobile gaming.

On the back of strong a very strong third quarter performance operationally and financially earlier today, we announced the resumption of our multi year dividend growth program, which is now in its 10th year and again, we are targeting annual growth between seven.

And 10% through Twentytwenty two.

The 7% increase reflects our confidence in the outlook for our business the sustainability of our strong results, both operationally and financially as well as our robust free cash flow generation and expected continued significant free cash flow expansion prospects.

Thirdly, as we're now entering a period, where chronically our sources of cash will exceed our uses.

This marks the 19th dividend increase since 2011 and reinforces the strength of our financial and operational performance, which has enabled us to successfully execute on our industry, leading shareholder friendly program in combination with a strong balance sheet and excellent liquidity.

Okay.

Notably tell us now return nearly $19 billion to shareholders, including 13 got $6 billion in dividend, representing approximately $15 per share since 2004, which represents an enviable and atypical track record.

As we continue to advance our broadband leadership and winning go to market strategy back by our globally recognized culture and industry best customer experience, we remain highly confident in the opportunities before us deferred or accelerate our growth strategy, particularly with the sales.

Nipigon digital acceleration, that's happening within both our economy and our society.

Speaking of growth opportunities earlier. This morning, we announced the planned acquisition of Lionbridge AI, a market leading global provider of data annotation services used in the development of AI algorithms to train machine learning models.

This acquisition advances tell us this commitment to harness the power of technology and data to provide outstanding customer experiences on a global basis.

Lionbridge AI will help accelerate the digital transformation and strategic grow journey of tablets international by adding key capabilities and diversity to its suite of next generation digital solutions, which Jeff will talk about in a moment and it's highly complementary.

Great to the investments and the scale that we're already building in content moderation.

Our planned IPO Teluss International Inc. Q1, well amplify this asset as a strategic growth vehicle for tell us by supporting continued organic expansion as well as progression in key areas through selective smart acquisitions that we can inject.

Implement and deliver future organic growth prospects upon.

As we managed through the ongoing global pandemic, but tele team continues to do good in the communities, where we live where we work and where we serve.

Notably we expanded our internet for good program in the quarter and have now provide a low cost high speed Internet did 68000, low income family members and people with disabilities.

Similarly through our Nashville mobility for good program, we've enabled 20000 kids, making the difficult transitioned out of foster care and Bonville Canadians with free smartphones and free data plan to help them stay connected to what matters most as they endure that differ.

Gold transition.

Our teams commitment to improving outcomes for our fellow citizens in concert with our leading operational execution and superior asset mix and culture continues to define talented leadership in social capitalism, not just in Canada, but on a global basis.

This was further reinforced by the Wall Street Journal, which ranked tell US 29 in the 100, most sustainably managed companies in the World report and 15th globally in respect of the sub category of social capitalism.

This international study assess more than 5500 publicly traded companies based on numerous sustainability metrics as well as leadership and governance practices in respect of creating value for shareholders over the longer term and clearly ethical investing his friends of mine within.

This pen temporary period that we live in and all the changes that were going through economically and added decide a level impressively tell us is the only telecommunications company worldwide and one of only three Canadian companies named to this global with a truly outstanding achievement by the team.

And I remain exceedingly proud and grateful to the entire team in that regard.

On that positive note, Jeff I'm going to hand, the call over to you to talk about the exciting progress at Ti.

Thanks, very much Darren and Hello, everyone. We're very pleased today to announce our agreement to acquire Lionbridge AI, a leading global provider of cloud based training data and annotation platform solutions Lionbridge AI is one of only two globally scaled manage data.

Annotation service providers in the world preparing high quality data that's critical for the development and training of AI algorithms for some of the world's largest technology companies and social media search retail and mobile with a crowd source community of more than 1 million professional entertainers qualify.

Hi, linguists in country language speaker is located across six continents and competence in over 300 languages and dialects.

Lionbridge AI can source multi lingual training data to build premium ground truth data for text images videos and audio.

The development and adoption of artificial intelligence applications continue to accelerate and proliferate the market new economy services, such as data annotation have strong tailwinds due to its dependence on digital foundation that must be trained on large amounts of clean accurate reliable and unbiased data.

The continued growth of the data annotation market will be driven by factors, including the increasing sophistication of AI models that are driving demand for customized data adoption of AI beyond Big Tech with use cases across a wide range of industry sectors, including agriculture E Commerce.

Communications and healthcare driven by our desire for convenience and efficiency in our daily lives.

The continuous trend of new emerging technology verticals that rely on.

Such as robotics, and autonomous driving and today's brand desires for enhanced digital TX solutions, such as product recommendation relevant search engine results speech recognition and chat bots.

The acquisition of Lionbridge AI will be immediately financially accretive reporting 2019 revenue of approximately $260 million, which was up 29% year over year at an EBITDA margin consistent with tell us international's, 20% to 25% range throughout.

Throughout Twentytwenty Lionbridge has been resilient in the face of covered 90 and on a year to date basis has generated revenue of approximately 230 million up from approximately 190 million in the same period a year ago.

Capex intensity for Lionbridge AI is in the low single digits driving strong simple free cash flow conversion.

As an anticipated closing date of December 31st Twentytwenty I'm excited at the prospect of welcoming the entire lionbridge.

Two our Teluss international family in the new year.

Our combined expertise and capabilities will accelerate our expansion into new markets and deepen our existing relationships with the value brands, we partner with around the world.

Turning quickly now to our Q3 performance despite persistent challenges stemming from the global pandemic T. I continued to be resilient delivering strong financial and operational results. Thanks to our highly engaged global team that remains focused on putting our customers first.

On a year to date basis.

Revenues, well surpassed $1 billion, including double digit organic growth.

We were also able to maintain strong EBITDA margins at the high end of our targeted range, while delivering strong simple cash flow underpinned by T. Mo.

Mid single digit Capex intensity profile.

These results are mainly attributable to growth in our business volumes, resulting from both expanded services to our diverse base of existing clients as well as new client growth.

While we've begun to welcome a small percentage of our global team members back into our delivery centers were extremely mindful of their health and safety at our regional operations leaders are coordinating closely with local health authorities and governments and with our clients.

Our success in enabling over 90% of our frontline team members to work from home and our ability to bring our culture to life in a virtual environment positions us to continue delivering exceptional service to our global clients on a sustainable basis as we navigate through this prolonged pandemic let.

Let me now turn the call over to Doug for a detailed update on tell US is Q3 financial results Doug over to you.

Thank you, Jeff and congrats.

In spite of the challenging environment, we once again demonstrated strong resiliency with 111000 mobile phone net additions, which were flat to the prior year within our Q3 mobile loading Pope pre paid loading was down on a year over year basis and as a reminder, we do not include tablets.

Our mobile Thong addition metrics.

We continue to see a strong mix shift mix towards our premium Telux postpaid brand.

We achieved this result, while being focused on high quality loading and reducing Nonrecoverable Seaway and COO are in the base.

Of intense promotional activity across the industry.

This benefit yes.

Will benefit both our current and future ARPU and network revenue growth.

The Q3 network revenue decline of 2.9% includes a decline of approximately 67 million from lower roaming revenue.

Travel remain restricted throughout the quarter.

Given the current outlook of a Friday endemic we expect the debts roaming headwind will persist into 2021.

Mobile phone ARPU declined 5%. However, this decline would have been approximately 1% excluding the COVID-19 impact yes.

The underlying improvement in our network revenue and ARPU trends on both a quarter over quarter and year over year basis are reflective of our consistent focus on high quality loading and profitable customer growth.

Overall Q3 wireless adjusted EBITDA declined one dot, 6%, reflecting the loss of high margin roaming revenue as a result of the ongoing endemic.

Wireline external operating revenue increased by 18% year over year as we continue to see strong contribution from acquisitions as well as organic growth.

Similar to wireless we maintained excellent momentum in high quality loading we continue to see strong product bundling across our base, including a quarter over quarter increase in the number of customers the bundle of our mobile and home offering.

On the B to B side, the impacts from a challenging economic environment continues to pressure growth. In spite of these microcap macroeconomic headwinds, we continue to thoughtfully pursue opportunities to re contract existing customers and earn new sales by providing innovative next year.

Integration solutions to our business customers.

Well, then tell us how we saw our quarter over quarter improvement in the clinic related revenue as our clinics reopened across the country.

However, the activity is still below business as usual pellets have continued to face pandemic headwind.

A breakdown of our meat of our major COVID-19 impacts is shown in our investor presentation.

On a consolidated level adjusted EBITDA declined by zero Dot 6%.

However, EBITDA is estimated to be more than approximately 5%, excluding the pandemic related items.

On our results our results were supported.

By our continued focus on driving margin enhancing initiatives and cost efficiency savings.

The 250 million goal that we set for ourselves we have achieved almost 90% at the end of the third quarter and are confident in our ability to meet or exceed that goal by the end of the year.

In terms of bad debt, we continue to see good collection cadence and accrued appropriately for the current risk profile of our customer base.

Consolidated capex of $741 million was down $7 million compared to last year.

We continue to be opportunistic with our capital spend and took advantage of cost efficiencies, but accelerating certain projects, including our fiber build in Calgary.

In addition, we had higher success based capital in conjunction with our leading wireline RG <unk> growth.

We have provided a high level breakdown of our capital and where it's being allocated in our posted slides, including confirming 2021 capital to be similar to 2021 2020, sorry at approximately two dot seven 5 billion.

Free cash flow of 161 million was down 159 million versus last year. However, this is primarily due to the timing of income tax payments as you may recall various government jurisdictions permitted installments, we deferred from the first half of the year into Q3.

Deferred amount paid in Q3 was $110 million and the remaining free cash flow decline was due to device financing related to our high quality.

Loading profile.

On a year over year basis free cash flow of one dot 2 billion is.

Is up more than 50% over the prior year.

This strong momentum we continue to execute towards achieving the lower end of our free cash flow target set in February of this year.

Additionally, as we build on strong and resilient year to date results, we continue to strive towards flat EBITDA growth for the full year.

And once again very proud by their clients the consistent execution resiliency and operational excellence, but the entire organization has shown this year.

Confident they will continue demonstrating that throughout the remainder of this year and into 2021 and well beyond Robert back to you for couponing.

Thanks, Doug Mike can we proceed with the questions now please.

Of course, and I would just like to remind everyone. If you wish to ask a question. Please press zero one to queue up.

And the first question comes from Simon Flannery from Morgan Stanley. Please go ahead.

Great. Thank you very much good afternoon, and good morning on the Fiveg. Thank you for the disclosure on the.

The rollout there, perhaps you could just give us some more color about where we go from here and what are the sort of use cases that you're seeing.

As most promising in the near term and then any comments around the competitive environment, particularly with the new I phone out there how does how do you think this this year compares to prior year as Kevin covered and everything else. Thanks.

Thanks, Simon why don't I take it off and Jim then maybe I'll ask you to to top up.

The applications layer.

And also talk about the.

I phone 12 lots in the competitive environment.

So as it relates to Fiveg assignment as I told you before.

This is a journey not a sprint.

Journey, that's going to be synchronized with the increasing availability of spectrum from mid band with the Threefive auction at the midpoint next year, and then millimeter wave coming online after that it's a commercialization that I would see running into 2023 2025.

Sure.

As greater swaths of frequency bandwidth become available, which will amplify some of the exciting applications that we would like to deliver on the Fiveg front, particularly as it relates to certain verticals that we are very well poised to address if you look at where we're at right now roughly in cash.

Canada, we're covering about 34 markets across the Canadian landscape, which would roughly equate to about 22% of the population and we're generating speeds in the one dot seven gigabit per second zone over the remaining months of the year, we want to add.

Exit 2020, with the build program that would see us in circa 50 communities across Canada bumping up against 30% of the population and amplifying the speed a little bit from a tweaking point of view closer to two Meg two gigabits per second at that particular.

All the time.

We've got about 150000 users right now on Fiveg, which is going to get amplified given what's going on within our OEM ecosystem and what you saw with the iPhone 12, we've got about 10 device models right now within the totality of our vendor.

Eco system that our Fiveg enabled and importantly, a fiveg is entirely tethered to our peace of mind endless data plans, because we want to make sure.

That as we launch this new technology, we set ourselves up for economic accretion in that regard.

I think it's also important to point out that once again, a hallmark of the way, we rolled out technology and infrastructure in Canada.

We're not singularly focused on urban markets, but as we have done with every single wireless technology deployments in 2000.

We are as focused on our rural Bill as we are on our urban Bill and we'll be leveraging our low band frequencies to support the rural expansion of Fiveg, which I think is important to make sure that the digital economy and the digital society is inclusive.

All Canadians, regardless of where they live I think we're pretty excited about what it can mean to both our digital economy and our digital society into.

In terms of innovation and productivity, which is going to be important as it relates to the co bid recovery, but I think cobot has also provided a digital acceleration, which is going to expand the use cases.

As both businesses and consumers sees the digital transformation thesis.

The other thing that Simon you and I have spoken about Oh for the past decade now is the synergistic relationship between wireless technologies and the underlying wireline network that does the front haul delivery in the backhaul redistribution I think tell us is pretty unique on a global basis with our potent.

Combination of fiber and Fiveg.

That's a major differentiator for us now and into the future, particularly given how scale. Our fiber deployment is in that regard and it's amazing because it's not a situation where we're deploying fiveg out of necessity when were already leading the world on why.

Wireless speed coverage and reliability with our Fourg networks, where our Fourg technology is beating Fiveg technology and other jurisdictions as it relates to speed coverage and reliability, which it puts us in an exceedingly good position.

To be winning on Fourg and beating other jurisdictions on Fiveg as we began to scale on amplify our fiveg footprint across the Canadian landscape.

The other thing of course is important to make sure that investors are mindful of is that we've had a very fruitful 20 year network sharing alignment with bell when it comes to new technology deployment. When you can leverage two labor pools, and two balance sheets to ensure that your speed at the peak.

Limit your coverage and the depth of your network is second to none.

That again is a nice asset differentiator for US and then just before I hand, it over to Jim.

We're very.

Cited about the applications on the Fiveg Brian.

Whether it's in the private sector or whether it's on a consumer basis on what we're doing in a wider home automation ecosystem, but when you think about what fiveg is going to mean to the productivity of society in some of the areas that we're focused on on a vertical basis, whether it's how.

Whether it's AG tech, whether it's supporting some of the activities.

Teluss international or whether it's more precisely, allowing us to better leverage data analytics and the monetization of the voluminous data generated by a fiveg I think the opportunities here are going to be very exciting indeed, particularly with some.

One of the verticals that were already deeply focused on on the health and the AG front and the positioning that.

Gee I have set themselves up or as it relates to content moderation and data annotation and then finally when you think about economics, we're very ABPU focus because one of the things that doesn't get discussed on fiveg is cost efficiency or a cost per gigabyte enter the extent to which the cost per gigabyte is going to draw.

Rob it's going to allow us to do two things that typically have been quite challenging if not mutually exclusive which is offer increasingly improved affordability for businesses and citizens and at the same time improve our margins because of those cost efficiency characteristics. So that's.

Where we're at on build technology data and infrastructure at a bit of a flavor on on some of the verticals that we're focused on and how we're going to leverage things like network, slicing or or low latency or edge computing to facilitate those applications, but why don't I hand, it over to Jim to just say a couple of words and then he can try.

In addition to answer your next question.

I'm sorry.

Thanks, Darren Hi, Simon.

On the consumer on the consumer side, we see.

Five G.

Being a real tool for us to drive a step up into our peace of mind premium rate plan suite. So.

They kind of go together like hand in glove. So like the initial opportunity is driving that step up from lower plants up and so peace of mind.

The second phase of that is as as devices kind of get out their speeds are up lower latency.

We expect bigger data buckets higher data usage more connected devices and also content.

Type applications on mobility, which will kind of drive our customers in the premium space up to higher rate plans and what we call peace of mind connect so number one driving a step up to peace of mind number two connected devices applications driving a further step out and more data usage I think also.

No.

We're going to see our t. applications coming into the consumer space and we're in a great position with smart home. So home automation connected health connected car on the enterprise side, we expect five to to help drive solutions in agriculture remote healthcare ops autonomous vehicle.

Calls and we also believe there is a significant opportunity around manufacturing campus based on private tied to deployment opportunities. So you know we're.

We're very optimistic all of that to say.

It's going to happen gradually over 2021 as devices rollout and as the footprints expands I think also the cost of premium devices right now given co that may influence take rates.

In the short term, but were bullish on the longer term.

And with regard to your question on the iPhone 12.

We saw.

Very strong.

Very strong demand during our pre registration and preorder.

It was up almost.

Almost double year over year.

Coming into market Gerard inventory constraints, right, now, which is kind of holding back the man.

But we're seeing it or it could take up to that place.

Great on the promotional activity the competitive environment.

Yes on the on the competitive side.

In Q3, we saw.

Pretty good.

If we can increase in promotional activity the.

The delayed iPhone launch drove back to school promotions through September which is quite unusual in Q3.

You know and in the West we saw the most aggressive promotions, we're in the flanker space Spark Bashar mobile one of our non sharp Shaw competitors really led on bonus data subsidy and gift cards write downs rate plans at $45. We were disappointed in the level of promotional subs.

In Q3, we believe there are ways other ways to drive device affordability and recover the residual value of the device through things like trade in programs certified pre owned.

And we think going forward, having mobile clinics clinic puts us in a great position to do those kind of thanks.

Our goal is focused on high value loading and continuing to drive the shift to peace of mind, we'd much rather add value at $75.

$45 and and right now as we enter Q4 October has been pretty disciplined it's looking more like a typical september months with the iPhone launch, but we do expect promotional activity pickup with Black Friday.

Okay, great color. Thank you.

Mike next question please.

All right next question comes from Tim Casey.

Oh. Please go ahead.

Yes, Hi, I Wonder if you could you could talk a little monobore more about T and the and the acquisition.

In late turns can you can you walk us through.

This this new entity will provide for you in terms of capabilities.

To deliver to the end user or is it more about driving efficiency.

Within the organization.

And then maybe if you could just in.

Well lets maybe could you update us on what the pro forma financial profile and growth profile you expect from T.I.

And then lastly, with respect to the IPO could you remind us what your equity position is now and what I expected it will be.

Most acquisition.

If you follow what I mean and then.

Are you still.

Focused on retaining a majority position of equity in telecom international or is it more about control. Thanks.

Thanks.

So Jeff why don't you handle.

The question and Doug and I can top up as required.

On a pro forma basis, that's a bit of a no go zone for us, but I think.

Jeff can give you a flavor of our growth profile, but give you a very good explanation as to what the data annotation is all about.

Why we are bullish on it and then Doug and I can top up on Jeff's comments as required in terms of the current and prospective equity position so over to you Jeff.

Thanks, Darren so in a nutshell data annotation as you May know is really the function of providing the source data.

The labeling and the underpinnings of building.

Driven algorithms. So lionbridge expertise is really around the labeling an annotation component of that ecosystem, where they are preparing the data for labeling so they're selecting the relevant rod data put into a labeling system, they're recruiting a workforce in this case predominantly.

Crowd based workforce, who.

The relevant skills, whether its language domain expertise et cetera on boarding that crowd two it platforms, ensuring that that crowd is trained appropriately ensuring they're qualified and tested properly.

Farming that crowd with tools and and work flow capabilities to allow and enable them to work more quickly through terabyte of data the crowd that tags entities classifies moderates that data and submits it back to the engineers that are using.

That annotated data in order to build train and refresh their AI algorithms, which are then used for a myriad of purposes around.

Search.

And advertising just by way of example, so we see that as a natural adjacency to our content moderation capabilities, which weve built and now scale materially through our recent CCC acquisition that we consummated in January of this year the growth profile for this industry globally.

No is double digit starting with the two although the hyperscalers represent the lion's share of the community that are leveraging this capability today, we see a near and longer term opportunity as AI proliferates across really every facet of industry and commerce.

As I referenced in my comments earlier.

And we see that as a really exciting element of our overall gross.

Bishop and profile for Teluss International going forward as we continue to leverage digital transformation on behalf of our customers had.

Back to you, Doug and Darrens for the balance of the response.

Doug do you want to top up on the.

Equity positioning in a in a loose sense. If you will sure. So you remember when bearing major investment was approximately a third so.

So the ratio was relatively stable and not not in.

In that zone of two thirds tell us when third bearing after post IPO, we expect it still will be made.

Mid mid Fiftys of ownership.

And for the long term, we expect to control.

So whatever structure that would take to do that and that's probably the best guidance I can give you.

The very long term.

This is a core asset.

For us and an important asset for us as you know our number one priority tell us is.

Having the best customer service in the World.

And we can only do that with the support of Ti given the talent suite that they bring to bear but the other thing that's critical for US is that he Abi is a leading practitioner of facilitating digital transformation.

And not for US is huge because it's T.I. supporting telesis digital transformation, where we've enjoyed great success, but it's also to you I product I think that capability set and supporting other organizations within their targeted verticals go through their own digital transformation strategies.

Thank you.

Mike next question please.

All right next question comes from Jeff Fan from Scotia Bank. Please go ahead.

Thanks, Good morning, just a quick follow up on T.I. in in a bigger.

So your question regarding competition.

Just on T.

Respected this acquisition can you just give us a debt equity and how you're going to finance it.

It sounds like it's going to be debt issue that T.I., but just wanted to see if we can get the split and what tolerances equity position would be after this acquisition.

And then the second question.

Probably for Darrin.

Regarding the competitive environment in Western Canada, not like I guess I'll blend the wireless and.

Wireline into this question.

Sure cable competitor is.

Now willing to really price aggressively in the wireless bundle and I know tell us in the past and continues to differentiate on products and bundling and customer service.

But when your competitors does something like this at the price point in order to try to strengthen their internet space. How do you see the competitive landscape I guess, both on the bundling and wireless and wireline individually evolve.

In Western Canada.

Okay. Thanks, Jeff Doug I'll, let you kick it off you can hit this nail in the head pretty quickly and then Xeno I'll handover to you and then all top up accordingly.

Doug Yeah got it so the before and after a will be the same ownership.

Or tell us and bearing as we were gonna proportionally put in whatever cash is required I. We're still looking at the exact ratio of debt financing and an increase in the debt facility at the T.I. level versus the cash that would come from ourselves and bearing and I think the you know the wonderful thing about.

This asset and you have highlighted at very high growth very low capital. So they also de lever extremely quickly.

As well and so it's a it's a.

Very quick payback on on de levering from any of that increase in that that facility.

Maybe one of the things that we can do as an additional piece of data insight.

Is to show the T I, a leverage concurrent with the CTC acquisition.

And where it is X months, hence pass the CCC acquisition to actually give a metric on the speed of deleveraging by looking at the two data points what it was when we consummated the deal.

What it is today I think that would be very indicative and good data analytics for the street to be aware of.

Well take that a way to do that.

Then over to you thanks, Doug.

Thank you Darren Hi, Def.

I think we definitely had HM claim.

Quite a bit of competitive activity in in our in our I like territory in the west.

At the end of the day, we're really pleased with our loading performance as Darren highlighted we've seen some of our best Internet loading since 2002, and it's really important to highlight that that is driven on the back of.

Achieving 1% churn, which highlights our customers first priority. So the beauty of that strong turn performance is it puts less pressure on on the growth floating overall, but in addition to that we've also seen an MRC improvement quarter over quarter since last year by 25% on with new Internet loan and.

We continue to see customers.

Demonstrate that they are selecting us based on the value that they see in care fiber as they continue to work from home learn from home and socialize from home. We're also seeing up tiering speeding feeds and bundle and bundling improvement.

And I think fundamentally even though we are faced with competitors that are commoditizing. Our core services, we're continuing to diversify our bundle and add more value and you seem not quarter over quarter, we are investing heavily and our network superiority our services and our.

Anything customer experience just unmatched in the environment. So when you look at the difference between a fully bundled customer.

And <unk> and a standalone high speed customer as an example, you can see up to a five time improvement in lifetime value on that customer and then if you look at how we're continuing to diversify our bundle in terms of quarter over quarter, adding new quality attributes and capability.

Last quarter, we talked about our inclusion and their unique partnership with Amazon Prime and our optic bundle Jeff.

Just recently, we launched a multi dimensional partnership with calm as Wallace Norton Lifelock, providing peace of mind capabilities from mental health to online safety and cyber insurance, we continue to expand capabilities in Babylon by Tele health from a virtual health perspective for our consumers. So.

So we are very confident in the diversification of our product portfolio and our ability to drive increased household ARPU stronger churn performance better cost efficiency on a per product basis and higher value for our customers in the face of that competition.

I think Jeff sales hit the nail on the head, but you know I would just add to just go back and look at the hard facts as it relates to sustainable performance front tell us.

Related to our operational and financial track record on the wireline front.

Its unsurpassed on a global basis in terms of what we have delivered from a loading point of view and from a financial point of view within our wireline operations and then I would just ask you to do the tale of the tape in terms of our structural advantages.

We have scale on fiber and we will have greater scale on on Fiveg. Those are not easy things for a competitor's balance sheet to replicate and I think it's important that that's understood.

We have vastly greater scale on our channel front and diversity of channels to market in that regard. So it's not just scale, but it's also diversity.

We are phenomenally progress on the digital front and still growing.

On that side of things, whether it's marketing, whether it's the selling whether it's fulfilling whether its carrying whether its billing and collecting we are a digital continue on at tell us buttressed by the T.I. operation you.

You know where our customer service has gone in terms of best in class and when you combine that with best in class network.

Those are pretty meaningful structural advantages and then on the product front you know I guess, you would say were subjective but we do believe our products are superior, but it'll be suite that to one side and switch from this objected to the objective. We just have services that are unique to tell us whether it's our security offering whether it's our health offering.

Or whether it's our home automation offering.

And then I think there's some intangibles that will play well, whether it's our brand strength.

Whether it's our social capitalism thesis that brings us closer to communities and customers along the way, whether it's our culture and our talent pool or just overall, our you know our financial strength.

If you look at the tail the tape you know.

The only 60% of our business overlaps with Shaw, we've got a national footprint and a diversity of revenue and profit sources again that are atypical to to our organization. So when I make the comment that you know the sources of cash are going to.

Chronically exceed the uses prospectively I don't make that comment lightly and when we have been and that type of period. Historically, a tell us I think investors have done very well.

Great, Thanks, and have a competitive advantage.

Thank you all.

Thanks, Jeff Mike over to the next question. Please.

Of course I'm next question comes from Vince Valentini from TD Securities. Please go ahead.

Yes, thanks very much.

Thank you for this extra capex disclosure.

As you can appreciate thats going to lead us to ask different types of questions now that you're giving us this info.

Why is the projected percentage for broadband network build so similar in 2021 or even a touch higher than 2020 or aren't you going to be patched, 80% on fiber to the home by the end of this year and reaching to finish line. So if you can flush that out for us a bit it'd be helped.

Well, maybe it'll why.

Carlos broadband instead of fixed it and I'm just reading it wrong.

Checking them thing I'm not sure I know what you.

Flash technologies is and I don't recall talking about it when it was acquired but looks like you spent 315 million on it. So if you could spend a second just letting us know what that is.

The thing is that you bought and then one last clarification is the.

68000, Internet for good customers, which I commend you on for doing for society, but can you clarify is that in your Internet sub count and did it form part of that the 50000 adds this quarter. Thank you.

Okay.

Let me first of all I'll hand over to you.

In a second.

Vince as it relates to broadband that's wireline and wireless in combination. So you've got the mathematical outcome of fiber build continuity complemented by the scaling of our fiveg deployment, particularly as we start to accomplish.

And our existing frequencies with the Operationalizing of the three dot five gig spectrum that we would hope to pick up in the spectrum auction in 2021. So that's the math on on that particular point.

Well why don't I hand, it over.

Over to you.

And then we can come back on the Internet for good front or not come back to what I could just deal it up right now yes. It is included.

That is a total number it is a immaterial component to our 50000 net adds that's the the cumulative progression of what we have done on that front. Yes. We included it is immaterial as it relates to the number that we posted in the quarter.

Okay, well, thank you Darren.

As it pertains to fast you have to take it in the context of our push into the AD tech vertical so as we all know access to quality unsafe food will be a growing challenge across the globe as the worldwide population continues to grow.

We saw an opportunity to.

To tackle this challenge head on.

We are indeed pioneering the first end to end digital solution across the entire agriculture food value chain we.

We see an opportunity to increase yield reduce waste and.

And twice trade the quality of our food and the safety of our food from its origin, all the way to our dinner table so to speak.

Were they fs, we've actually acquired the leading global food supply chain and promotion management technology software company.

Fs gives us a foothold in the global value chain closest to the consumer.

And complementing the acquisitions, we've already made in the agriculture sector. We've indeed acquired a collection of trusted experience agriculture assets across North America, UK, Europe and Australia.

Our approach in AG.

He is very familiar to us if you look at what we've done over the years in health combining assets to create significant value for our customers and told us along the way leveraging our digital playbook.

We used in health and applying and now trigger agriculture, we see important parallel no precision health with precision agronomy, our data processing and analytics capabilities, but we also see linkages between what we do in house and what we're doing now.

Agriculture, because when you think about creating better food outcomes that eventually leads to better health outcomes.

So.

It's also an excellent manifestation, if you think about it of our social type of capitalism mission and action.

We're gonna be holding an event on November 12, two announced the launch of our tell this agriculture Bush.

And during that event, well, we're going to be able to share a lot more detail. So we'll we'll welcome you to two other event. Thank.

Thank you Sir.

That's great Vince by the way if you want to look at how our Internet business is performing in terms. The economics have a look at the lifetime revenue given where zane on the team have delivered a driven churn below 1% and looked at what's happening on the monthly recurring revenues on.

The Internet base in terms of the growth and the financials that we're deriving from our new net additions in terms of being accretive overall.

I think that would be an important complement to the answer that already provided to you and I alluded it alluded to it this morning in my earlier remarks.

Thanks, Vince Mike we have time for one more question. Please.

[noise] of course, so last question comes from David Barden from Bank of America.

Please go ahead.

Hi, Thanks for taking the question, it's Mathew sitting in for David I, just wanted to ask about the wireline EBITDA growth.

[music].

I know the disclosure on the cobot impact is helpful. It sounds like T I.

Was firing on all cylinders I was just wondering if you could talk about some of the initiatives that are under your control that some may be rolling off in the coming quarter or into next year that can see the the EBITDA contribution increase I'm thinking obviously of 80 Ti for one.

But I'd be interested to hear how maybe some investments in health and also maybe.

Maybe keeping that EBITDA growth number somewhat lower this quarter and maybe into next year any color would be helpful. Thanks.

Daniel and Doug why don't you take that one day know why don't you kick it off and Doug you can clean it up and I'll I'll add anything that has slipped out.

Sounds good thanks, Darrin so as you've highlighted we certainly had very strong foundational elements in our EBITDA performance in the future related to the MRC is that we're seeing and the added contribution of household ARPU I'm kinda bundles that that we have in our base what you.

I can see from our disclosure at this period is that we had several one time impacts due primarily to investments in post acquisition integration efforts as you can see we've done a number of acquisitions on the wireline side across the verticals that we've invested in.

And in addition to that we've been conservative in bad debt in provisions that have also invested heavily in supporting Canadians and customers through the challenging times of coal that so those onetime impacts have also materialize. This quarter in terms of some of our expansion of the programs that in that Darren highlighted waving.

And delaying plan pricing activity and of course, I standing up numerous community inevitably support initiatives.

At the end of the day, we absolutely have been investing in profitable growth and we see that based on our product intensity thesis and its success continue to materialize in the market. We're very confident in the prospective financial growth, but Doug I'll hand, it to you for any top up.

Yes. The other two items there are three items I guess are richer and the wireline margin number would be the business pressure.

So we still are seeing when you bring in the pressure in the small and medium business that.

That is under a little bit more of the call. It delayed coal that reaction, where as government funding starts coming to an end.

They are under more pressure to to bring scale back or their business and when you think you.

Ontario, and Qubec that are starting to get a phase two that.

That that puts more obviously a price sensitivity and.

You know that that group of customer base is it's going to need more help that weve extended.

Through the initial comment period.

Health care side that you know, France, I was talking to the clinics and and well being services are still not firing at a 100%. So that is also a cost structure in which you're not getting the full revenue line on which is holding the margins down a little bit as well and then a couple of the acquisitions and.

The that we've had that we've done in AG techs are good examples of that where there's a little bit of a J curve start up but leading to significant long term value.

What should be the third.

The incremental items to what on saying I was referring to within wireline margins.

I think the other thing in terms of looking forward when you are delivering.

50000, Internet ads and you know that.

A pretty good result relative to the lot or 18 years.

And at the increment, we're seeing a monthly recurring revenue improvement of circa.

20% to 25% on those new customer additions.

That bodes well for us prospectively and highlight the attribute of our underpinning pure fiber program, where we're seeing much greater product intensity.

On the bundling up front.

And we're seeing much much better cost efficiency, which is going to be a huge part of the story for us prospectively on the wireline front. So that we can deliver a very attractive financials alongside very attractive loading as we did with 50000 Internet loads 18000.

The Intel security loads in 19000 TV loads.

In combination so that they're financially accretive.

The other thing that is important to point out is in addition to the cost efficiency comment that I made related to fiber and how it supports home automation, how it supports fewer truck rolls a better repair relationship. If you will with the client and then better cost efficiencies through economy.

He's a scope by having more products on a per household basis. The other element that is going to be key for us from a cost efficiency point of view prospectively is a terrific progression that we're making on digital and I think thats, a a a missing component from the wireline conversation and leveraging our digital strengths and.

That regard again should give us the mutually inclusive outcomes prospectively, a very strong operational performance flowing through to attract the financials.

Great. Thanks, a lot.

Okay. Thank you everyone for taking the time to join US today, please feel free to reach out to the IR team with any follow up questions you may have and take care everyone.

Ladies and gentlemen, this concludes that tell US 2020 Q3 earnings conference call. Thank you for your participation and have a nice day.