Q1 2021 Shaw Communications Inc Earnings Call
[music].
Thank you for standing by welcome to Shaw Communications first quarter 2021 conference call and webcast today's call will be hosted by Mr. Bradshaw Executive Chair and Chief Executive Officer of Shaw Communications at.
At this time all participants are in listen only mode and the conference is being recorded following the presentation. There will be a question and answer session to join the question queue simply press Star and one on your Touchtone phone at any time during the call.
Should anyone need assistance during the conference call. They may signal on operator by pressing star and zero on their telephone Bill.
Before we begin management would like to remind listeners that comments made during today's call will include forward looking information and there are risks that actual results could differ materially. Please refer to the companys publicly filed documents for more details on assumptions and risks Mr. Shaw I will now turn the call over to you.
Thank you operator, good morning, everyone happy new year, and thanks for joining us to discuss our Q1 results with me today are members of our senior management team, including our President Paul Mccleese, Our Chief financial Corporate Development Officer Trevor English.
Considering the environment the ongoing impact from COVID-19, we continue to have most of our employees work from the safety of their homes. Our networks continued to deliver exceptional service for our customers as data usage and voice traffic on our wireline and wireless networks remained significantly above pre recall the.
Levels.
Our retail locations have remained gold open, albeit at a reduced capacity and we have ensured that we meet or exceed the safety requirements in the various provinces that we operate in.
To better serve our customers. We have also made significant progress with respect to our wireless digital fulfillment capabilities and we continue to encourage and support self install and self help service options for our wireline customers.
Despite the ongoing impacts from the pandemic fiscal 2021 is off to a great start on.
As our strategy to scale, our wireless business and deliver profitable wireline results set new records. This quarter consumers are embracing the launch of Shaw mobile and the value proposition of our offerings to the.
Man for our bundle wireless service has significantly exceeded our expectations, resulting in over 100000, new wireless customers in the quarter.
And our broadband service just keeps getting better in November we launched our fastest in an interior yet with Fiberplus gig 1.5, gigabits more than doubling the top of the almost be less than a year ago.
Our focus we saw mobile is true bundle affordable wireless services with our high quality high lifetime value Fiberplus Internet relationships in this environment is existing internet customers realize tremendous value by adding Shaw move out to their connectivity services on with.
Multiple lines of the household.
While the Q1 net loss of 15000 in the customers is non yet where we need to be new customers are increasingly choosing faster in the mid tiers and base migrations to our fiberplus gig Internet plans are accelerating as customers embrace our conductivity bundle.
Which of course includes Shaw mobile this activity reinforces our status as the leader in gig speed internet across our footprint and is driving overall improve customer profitability, including higher internet ARPU and reduce churn.
I am confident that our of bundling initiatives provides a great value proposition for new customers and over time will drive internet subscriber growth.
The I'm equally pleased with the trends improved profitability that we have seen in the early days of bundling mobility with our existing wireline customers the.
This positive momentum within our operations and stable business performance.
Buying with efficient cost management across the entire organization led to strong financial results, including on wireline operating margin exceeding 50% of free cash flow growth of 23% in the quarter.
For almost the year, we have been successfully managing through the impacts of Cowen including slower wireless subscriber activity. The second half of fiscal 2020. However, our focus on execution has remained strong and there was a tremendous amount of work in the background to launch on mobile and expand our reach.
Well network and distribution capabilities in this challenging environment.
As our first quarter results of highlighted the success of our connectivity bundle has is firmly on track to continue scaling our wireless business and delivery of consolidated growth.
Ill now turn it over to Trevor to review the financials in more detail Trevor. Thank you, Brad and happy new year of the one and good morning on.
Consolidated financial performance in the quarter includes adjusted EBITDA growth of 3.2% over the prior year kind of flex our strategy and focus on profitable customer interactions pets.
Touching briefly on segmented the results wireline revenue declined approximately 1%. However, adjusted EBITDA increased only 3%, resulting in a strong operating margin that exceeded 50% of the quarter.
As we continue in the hands or internet product, whether that is through the introduction faster speeds on broader distribution and focus on bundling the internet with Shaw mobile customer profitability has improved.
In addition to this positive momentum we continue to closely manage our cost reduction in Opex is primarily are primarily due to lower the related volume related and employee costs as we benefited from the full run rate savings from BDP and reduce headcount and overall sales activity remains muted within our wireline division.
The quarter also includes less advertising and sponsorship costs as the events such as the Shaw charity Classic were unfortunately canceled this year as well as lower travel and other discretionary costs in wireless service revenue grew approximately 10% of 250 million and adjusted EBITDA increased approximately 6% over the prior year.
As we continue to scale and make the appropriate growth oriented investments within our wireline wireless business Q.
Q1 included additional investments to support a record wireless growth such as expanded retail improved digital capabilities, including direct fulfillment for new customers and other volume related costs.
The overwhelming success, we have seen with Shaw mobile is impacted the is impacting reported wireless results, including ARPU, which declined 1.3% from the quarter due to lower wireless revenue from Shaw mobile additions. However, our strategy to bundle show on mobile with their Internet services working benefiting our consumer.
Divisions Division and contributing to strong consolidated results.
Q1, adjusted EBITDA growth combined with lower planned capital investments within our wireline segment resulted in key in free cash flow of $225 million and we're on track to deliver our free cash flow commitment of approximately $800 million enough 21.
With the underlying strength of our business significant cash balance of the expected growth in free cash flow of this year, we've been active with or inside of the programs. Since November 2nd following the approval by our board and the TSX to repurchase up to 5% of outstanding class B shares in two months since commencement of the program we have repurchased in the.
Cancel the approximately six and a half million shares at a cost of approximately $150 million.
Considering the or solid Q1, operating and financial performance, including record wireless additions free cash flow growth ample liquidity and the strong balance sheet. We are on track to meet our commitments for fiscal 2021, including returning substantial capital to our shareholders through dividend payments and our NCR the program.
I'll now turn it back to Brad for closing remarks, Thank you Trevor since our entry into the wireless business. Our strategy has been focused on the scaling our wireless subscriber base and improving the overall customer experience.
Throughout this period, we have made significant investments that have enabled us to be innovative and disruptive while providing tremendous value for Canadians, particularly as we continue to face uncertainties from the ongoing co of 19 pandemic.
We have demonstrated our flexible and nimble approach with our go to market strategies and strong execution cash.
On activity matters more than ever and our Shaw mobile bundling strategy is a powerful combination of high quality affordable wireless services with our robust fiber plus internet offering which is clearly resonating.
With Western Canadian sales.
Thank you operator, we'll now take your questions.
Thank you we will now begin the question and answer session to join the question queue Press the star and won the on your Touchtone telephone.
You will hear a tone acknowledging your request if you are using the speaker phone. Please ensure you lift the handset before pressing any Keith if.
If you wish to remove yourself from the question queue, you May press star until the.
Anyone who has the question May press star and one at this time.
Our first question comes from Jeff fan of Scotiabank. Please go ahead.
Thanks, Good morning, everybody on happy new year.
I'll start with a couple of questions for Paul and then on more strategic question from Brian Paul regarding the Shaw mobile wireless subscriber.
Overall results.
On the if you can talk a little bit of both the profile of some of these customers whether these are new line the new getting.
From households at NYU wireless lines or the ports. The this gives us a little bit of cash.
Context, there and then regarding the ability of Shaw mobile too.
The list the.
The internet business on the wireline cable business.
And if you could give us a little bit of timing on the.
So a little bit of timing on now.
Sorry, Jeff we lost you.
Right.
Operator, the there.
I am Jeff has disconnected. Our next question comes from Vince Valentini of TD Securities.
Hey, guys you want to jump of Ash I wanted to ask questions you want to answer those first before I go.
Sure, Yes joint of we'll take the I will take it will take just first question. So.
Just a reminder of the question is about the profile of the on mobile customers we're seeing.
The on very very positive metrics as it was clear in our reported this morning on Shaw Mobiles overall performance and the composition of those customers has changed over the course of the last number of months since launch early on we were seeing a higher biased toward the eurodollar.
Unlimited talk and text plan I think with the probably a lot of customers testing on that work in making sure that it is right for them on I'll remind everybody that also on mobile customers need to be Shaw Internet customers and then the in late October we launched the $25 unlimited plan, which is tied directly to $115 gig.
So we're very pleased that over the course of the last number of months, we've seen a considerable shift away from that zero at all the plan and toward the 25 and $45 unlimited plans as confidence in our network has improved and.
Perhaps a better understanding of the of of the the overall value make its way through the market from a mix standpoint, most of these customers our ports from other carriers. There is a degree of organic growth in the markets I think consistent with some of the speculation early this morning on the reporting there is a degree of market expansion here.
But well more than half of what we're seeing is coming in from the from other carriers.
I'll, let in the finished the other part of that question when Jeff comes back in.
Vince do you want to go ahead of the horse right.
Thanks, Paul.
I have a couple of EBIT of one for Trevor just as Rod first working capital what kind of almost a $190 million of of out flow.
Is there anything unusual there just timing issues of she can help us with that and then Paul.
To follow up with you on.
On the Internet side first the.
Weve talking of asked about the Internet ARPU and the revenue per household relative to the subscriber losses that you're incurring I don't know if there's anything more you can flush out on that topic today and I think there's maybe on what Jeff was getting up into the if I can just ask it as well as the timing in terms of when.
These new Shaw mobile.
Marketing efforts that are now seem to be more linked to winning new customers as opposed to just migrating existing subscribers given the 500 dollar Bill credit you started in December.
I mean that you expect should we see a pretty immediate turnaround in your your internet and overall cable subscriber numbers or is this going to be of gradual process. Thank you.
Thanks, Vince I'll start with the working capital question, it's mainly timing Vince where we've got some lumpiness with some of our interest payments just when we make those and then of course some of our cash tax payments around installments and then the other big factor of this quarter from the working capital perspective, not surprising in the quarter was booked $75 million related to the end of the IB.
So that really sort of the healthier bridging explain the movement of working capital of you can see from our contract asset balances on on our balance sheet. Those haven't moved in the significant ways of that really has an impact of working capital in a material amount in the quarter.
Thank you.
Great and.
From going to give you a slightly longer answer to a short question on receiving the Vince and I give you a slightly longer answer to your short question. So if you'll indulge me from it I think it's just worth revisiting the strategy for our Internet business the spread.
I'd said in the opening remarks.
That business is very much of work in progress and without even a hint of defensiveness I want to be clear that our team led by me needs to deliver on more appropriate share of what modest subscriber gains I think remain available in the markets that we have facilities. So when we're analyzing what that appropriate share it will be a number of things go into establishing a baseline.
The first is and Weve discussed the last call we need the strip away some of the noise associated with fixed wireless which is as you on the were largely rural product that we know from price of the sizable portion of tell us the net growth and on disclose it but.
We see third party sources of the good sense of the contribution that makes their on as you know trial doesn't come on the off of fixed wireless due to the urban focus of our wireless coverage. So this is the structural advantage really of telesis decades long development of the wireless footprint and also their long held spectrum advantages so not something that we're competing on today on.
It's also while the small component of the growth the all should should remove the kind of the $10 an AD from good subscribers on.
An Admiral initiative, the one that doesn't have the generating the lifetime value and that we don't have a comparable.
Product for.
So we believe that when you combine those two programs and removed from that takes about half from more of tell us as reported net add the out of the play, which then gives us the our property grounded baseline and Thats really what informs our growth plans.
We the weakened economy in Western Canada, and then kind of the practical impacts of Colby things like students returning home on not having additional lines. Most industry predictions right now suggests kind of little to no organic internet subscriber growth in the west This year again at least in those markets, where we operate with facilities.
And then honestly from there the math is pretty straightforward. The the 15000 subs that we lost last quarter didn't abandon the Internet day likely one across the street the Telx.
In some of the share of leakage comes from our customer retention metrics with debt are as we understand them weaker than then tell us and this is an area that frankly, all knowledge of our competitor excels, we operate against a very well run competitor intels with a strong the legacy of customer service and delivery.
And we are likewise investing considerable energy across all the shot here to improve our performance there, but some of those markets are the gate or excuse me losses are attributable to the spread in.
Okay.
In retention did it the better the better for the rate the teluss enjoys but our focus here is rapidly changing for the better.
It's important though we were pulling all of us apart that in analyzing the data we've learned a number of other things one of the customers that are leaving us are inherently more transient they carry of profile of that.
Is one that sort of optimizes the leverage is available promotional pricing and accordingly have a lower the lifetime value than our average customer. These are kind of classic promotional hoppers and there is a lot of opportunity to do that still in this country, where you can run between carriers and optimize the pricing.
It's also clear that in recent quarters tell us who the gains have been more reliant on discounted internet pricing relative to the market. Both on the standard rate card as well as on the in the form of additional service credits of gifts and very heavily discounted to entreaty bundles and I've spoken before about the wisdom of that in a mature market I want the labor.
It further but I do think it is an important distinction to drive what we're doing on our rate card versus will tell us the deal on our rate card and that distinction is never more clear of than when you look at the operating margins of our respective wireline businesses. So you saw it in our reported numbers. This morning, Vince we are.
We had a nice beat on.
On the consumer wire line.
EBITDA, we've seen pretty significant improvements on Internet ARPU, which we can speak to any share the 5% up on the the last quarter idea were 5% of 5% up year over year right. Yes. So when you dig more deeply needed numbers I'd encourage the analysts on this call to consider this not all the customers are created equal.
Right. So we have.
Made great strides in the last year to pursue higher value customer relationships and perhaps forego some of the slower value. The were lower margin stuff that is out there in the marketplace. So let me give you a little bit of color around how well weve done on that front and some of the things that are underpinning our numbers first.
And this is kind of in and perhaps the new level of disclosure for us So bear with me for a moment.
First off we are onboarding, new internet customers at a much higher revenue rate than we ever have in the company's history right.
Right now fully more than 20% of our customers are activating that are coming on board or activating on one and one of the haskett plans. So the run rate of that which has been improving over the last number of months continue to demonstrate that the great work that our technical teams have done to deliver the these new speed tiers is being really embraced by cut by customers.
Base migrations, the second plant on race, which for years were relatively diluted the events. So when customers talk to the so much change in the rate plan. The easy went backwards are now consistently positive 30% of our total migrations, 30% of the times on calls us to improve the to change the rate card, there similarly going to gig or gig and a half speed.
Tiers.
And the combination of those factors. The now means that we now have nearly 100000 customers on the high quality high speed tiers that didnt exist. This time last year, so that would be 750 gig and gig and a half on.
On that.
Customer embrace of our higher speed tiers is clearly creating financial benefit for our shareholders. I guess as you saw that our EBITDA EBITDA performance. We published this morning. So we've made it clear in the past that our focus is growing higher value hopes for the relationships anchored in broadband complemented by wireless dish on mobile bundle and.
The success of that goal of course of seen in our high net growth today.
Let me kind of portable around this.
We have become rapidly become the preferred provider for higher value Internet customers in Western Canada, we see it in the key metrics, we see it on our research and our customers are seeing it reinforced in our products our advertising our retail stores our service delivery across the board we are getting the higher value customers that are currently choosing.
The internet in the western marketplace. So.
Our balance scorecard as Brad indicated the onset is always going to be high quality products delivered to the appropriate financial return.
I don't want to confuse our conflate some of the low value.
Lower revenue and lower lifetime.
Our subscribers that are being on boarded by our competitors without that we are on boarding I think theyre chalk and cheese and that's really the something were given to the focus on so on yours now that I've answered. The question you didn't ask.
When is that going to bring on new internet growth.
Yield slowly it's a slow moving target.
Principally because I think internet overall internet gross add activity is up considerably year on year on its difficult to get customers to change the internet provider during the pandemic with everybody on doing the things they are doing.
On our churn is down considerably year on year, our growth is down considerably year on year and our economic return is up considerably over the year on year. So for now that's the trade that we are comfortable where you are not going to see us doing anything other than using the bundle to chase more market share on the internet growth. The we think we have the right strategy recon.
Got it and then on I've said before it's something that's going to take time to the for that Numerated the shift the denominator, but.
I would encourage everyone on this call to look kind of cost to just the internet losses and think about the quality of what we are gaining relative to the quality of what were losing we're comfortable with that trade today, while I'd certainly love that number to be in the black.
The understand that we're happy to make the trade for higher quality and higher return.
The Paul that was comprehensive and excellent let me just follow up with one thing maybe more of a truck.
If this is the case.
In terms of transparency I mean, the anecdotal disclosure of ARPU growth is nice, but if this is such a key focus for you and is there any chance we can start to get.
Internet ARPU or Internet revenue whichever one you want to disclose on a line of concern.
Consistent quarterly basis.
And given what you said about 5% up year over year, just to the level set of everybody does that mean you somewhere in the $75 range is what your Internet ARPU would be in Q1 of 21.
Yes, the exciting.
It's just over $73 in terms of or or or ARPU for internet, Vince and I will say.
Our broadband business from a revenue perspective, now contributes about 45% of our of our consumer wireline revenue amount. So I think those are two numbers difficult region and frankly of that mix also with the pull talking about just leads into our wireline EBITDA performance. It's just a different mix of customers at a higher margin.
And like Paul said at the very deliberate strategy on we'll continue to look at our disclosure Vince and provide data points to help.
Investors on the Street bridge of the financial results mirrored within partnered with our strategy.
Excellent. Thank you.
Great. Thanks, guys has thanks Vince.
Our next question comes from Jeff Fan of Scotiabank. Please go ahead.
Thank you and sort of for cutting off earlier my question was actually for Brad the again the more strategic question.
You talked about.
The focus on scaling wireless and providing great services for the customers.
I'm wondering if you can talk about sort of level of confidence.
And in the ability to do that as an independent company.
In light of from.
The scale of investments that.
On the industry is talking about related to Fiveg et cetera.
And I guess balance out with your growth opportunity again your confidence in delivering all of that as an independent company. Thank you.
Yes.
Thanks, Jeff I am I was surprised to get that question, but.
You know I I.
It's been the as I look back in the you know when we.
Got rid of media on the.
Datacenters and make the pivot to wireless and.
We've done a lot of work that I think is just reflective of Q1 performance and I really feel were on the it's early days. When you look at where we are from of bundling point of view, where we're looking at from of management point of view, because I would say when I look at this I don't think we've ever had a better focus and a better execution from a management level and all that.
Bose and.
Hi, as you know I've been here, a few years and of seeing a lot of different things, but I really think with the team. We're on the right trajectory I think it's early days when they see things and see the opportunities I get excited when I see Paul talk here and talk about where we're at in the cycle and.
I think we're on the right path we have on.
On the family's very comfortable with with the trajectory with the strategy with the execution of.
And we're going to continue to pursue the the opportunities we see in front of us and.
I think is there's more to come and I think we're on the right path, but that being said I think you always.
The only always want to make sure we're delivering as we said and as we wish as Paul said, we wish the Internet number was hired as a few other things, but we have to be patient and we have the key delivering on those key things that we said we want to do and I think it's all going to be.
The very beneficial for shareholders and.
Time will tell and we're continuing to make sure we.
We focused the heat a day our to our end.
That's what it's going to take from from our team to be successful in so we're very committed to that and.
We want to play.
The way that story.
Thanks, Brett.
Our next question comes from true Mick Reynolds of RBC. Please go ahead.
Yeah. Thanks, Thanks, very much happy new year and good morning, a couple of follow ups for you Paul Thanks for the the detail on on the Internet questions comments. If you can on just again competing against fiber to the home versus the non fiber footprints that the dynamics there.
Also on the higher value customers, we hear that everyone's going after higher value customers feeling of your base, how far you away with kind of gaining on a degree of comfort that.
These promotional hoppers or perhaps the subscribers that are less worth to you have had been flushed out.
I've got a couple of more one on his stop there of course.
Okay hit your house because the.
We're starting to see.
The pace of fiber to the home flow after three or four years of pretty frenetic growth.
From tell us as a I think on average about 80% of the of the footprint and we've talked in the past calls about our use of relatively new use of data. We have built a much more sophisticated data team over the course of the last nine months or so in nave started the provide real insights into where our opportunities lie we.
Spent the last three or four years been on the receiving end of tell us being able to use their data to better deploy more thought from deploy fiber to the home and then quickly fall about on with the ordered our marketing and.
Better targeted activity against our base, where we had perhaps speed the didnt equal there's on on so grateful to is on in the technical teams for launching really in rapid succession 750 gig and then gig and a half and then vastly improving our upload speeds over the course of the last six to nine months. So we've got.
On frankly, a much better product offering now than we have ever had and now we were able to use the data that our teams at the together to go into those hundreds of thousands of.
DSL households that remain for Telx and provide them not only with a product offering that is on available to them. The reminder, that per everyone that we made the decision on some years ago to provide global service to all of our covered homes, whereas tell us of course.
They have their own strategy, but only provide good global speed to a percentage of the of their cover footprint. So our opportunity now is to be more sophisticated in the pursuit of those higher value customers.
Better sense of where to go get them and where those opportunities lie against DSL, and then where we can use wireless on taking advantage of the asymmetry that I spoke of that on the prior call.
To really drive that point home.
The customer choosing gig speed today.
On the perhaps is converting from tell us and we're seeing a number of those on.
Also has the ability to add $25 on limited lines to their to their proposition and I can tell you that that's happening in decent quantities right now so.
When you're adding new revenue of 115 for Internet and then Tim.
Typically when people buy on mobile they buy by the impairs two of the times are adding another 50 in wireline wireless service revenue all of the sudden you've got a $165 plus household add some video and of the things of that you get up on a couple of hundred dollars of ARPU, that's all new money to us through so that is that's the strategy that you're just starting to see employed reminder.
Federer when we didn't launch are $25 unlimited.
Unlimited plan the to the end of October So we're on a couple of months into that that the results. So far as you've kind of would expect of been I've been very very strong.
In terms of the promotional customers.
And I you know as Fred said I'd love to keep every customer that we have but if youre going to choose to lose some lose the ones that have the higher operating costs and you won't be surprised to know that when people.
How of that profile of kind of running between carriers. They also tend to incur.
Higher operating cost associated with the things that customer care and retail interactions and they are there.
I guess, what you'd call kind of high maintenance customers and while we embrace all customers.
Losing those in favour of gaining.
Higher value subs coming from from other places of certainly something we're comfortable with right now on.
I don't know just how big of that bucket is true, but I would suggest there is always going to be an element of that running kind of back and forth. It certainly exists in the wireless business, which I and the little more familiar with the.
We see people that having of still carry multiple Sims and will go back and forth depending on what their rate card is that's been something that's been in existence for 30 years. So we are on.
We're comfortable now that we have a better understanding of who they are on what their profile is and in a sense. We're looking to acquire less of them and we'll we'll be more thoughtful about keeping them. You know one of the things I talked about I think on last call was making sure that our better customer get the get higher quality treatment of better access to things that.
The summer care. So we now have priority cues that we didnt have before if you're a high revenue household you'll get your phone call answer to much more quickly than if you were a low revenue were low margin household were starting to align our investments better there than we ever have before on so.
So while it's always going to be a feature it's going to be one that we watch very closely over the coming quarters.
Okay Super I had two quick ones here, maybe Paul just.
Describe kind of the wireless competitive dynamics and you can through the quarter and maybe what you saw through the temporary put some context around that and then not to get into great detail here, but I think we're all still trying to figure out when fiveg means for everyone, but particularly of the regional players and integrated players like Shaw realm.
Moving to the national players any any initial thoughts on on that thank you yes.
Yes. Thank you.
Well I'm pleased to report.
That I'm weightless animated about the competitive dynamic in wireless than it was last time, we all got together so.
It remained fairly chippy really on through Christmas on including some kind of silly, one off bounty things and stuff and I feel about those.
And so we saw in the you'll see this in our in what in our freedom.
Churn number overall wireless churn of which has been largely reflective of the freedom turn on to being up in the quarter.
Again disappointed in that but I know recognizing that there are simply less available subscribers right now for all of us to pursue again with the limited organic growth same dynamic that affects internet growth limited migration things like that we're seeing very little organic growth on the wireless side as well so.
On that means people get more aggressive in chase things, particularly towards the end of the of the victories fiscal quarter on which of course was with December but we saw we started to see a moderation really are on boxing day drew and net.
That is continued through.
On the into the first part of January.
I was encouraged by some of the recent announcements from belt around changes in their price structure.
I may comment.
Unintended the controversial comments on the call around the monetization of Fiveg the.
Point being being able to secure a return on those investments of sizable investments on network in the spectrum with something that I was ex.
Expressing caution on and what we're seeing at least from balance near the days of some of the rate changes are looking to make in March probably are their path to monetize the fiveg and I would encourage everyone to sort of.
Look closely at that we certainly will be in terms of our pricing over that period of time.
On so encouraged by competitive column I said would say in January so far and I hope to be able to see that continue to the of the rest of the year and it sets up I think nicely with many of you of reporting on on calendar 21 for the big free and perhaps the return to some ARPU growth as I said last time, you don't get out.
Of the an ARPU deficit by cutting price generally so in the nice to see some movement there.
On Fiveg the.
I said previously we are so excited about the opportunity. This is going to bring in it is really a long term thing I think our peers of signal of as well that they see most of the gains really beyond F. 20 at 21 as we start to bring on Iron key excuse me another similar applications for the regional players on.
Kind of trying to get on the subtext of your question for the regional players.
I'll go back to the use case for consumers the right I've been.
Speaking on the extensively within the business and our our aspiration on Fiveg is to bring it to market as quickly as we can and to quickly be able to put that badge on our phones in our stores in our merchandising on our website and make sure customers know that we have a very high quality fiveg network available to them where they work.
On the where they play.
Our LTE network.
Frankly, weve never risk fast or as wide as the big three and as you. All know we've been more the capable of generating significant market share gains despite what I'll call deficits, but in practical terms for consumers really aren't that much of the deficit. There's not a whole lot you can do on a 150 megabits per second that you can.
They are down to 50 megabit per second that you can't do on 150 or frankly on 80, so the fiveg speed and latency benefits that we are going to see have practically speaking little benefit in the short term for consumer applications. There certainly are.
Enterprise level that will require the require some of the benefits over time, but we're very comfortable that being in the fiveg business.
Prominently in proudly.
On is very similar to on.
Our being in the LTV or the iPhone business prominently in proudly even if the there may be some speed differences related to some of our.
The deficiencies in historical spectrum holdings, those are all things that will work to remedy over time, but we are confident that our cash fiveg product is going to deliver exactly what customers are looking for and we're still on track to start delivering that in the calendar later in this calendar quarter. So I don't think we've missed the much of the party and we're looking to the.
Joining it later on later in March.
Thanks for all the appreciate it thank you.
Yes.
Our next question comes from Aravinda Galappatthige day of Canaccord Genuity. Please go ahead.
Good morning, Thanks for taking my question on happy New year on a few from me.
I'll, just switch gears, a little bit to the to the B to B side.
Maybe Paul on track the Q1 is that maybe discuss how GAAP.
Area has trended down in terms of not just in terms of subscribers. So in terms of receivables and bad debts and net and see anything.
Meaningful debt, but I just wanted to get your thoughts there.
Secondly, perhaps.
Perhaps of Paul with respect to the job.
Distribution side in wireless I mean, given the locked down periods, obviously, the digital channels become more relevant and you're up against that sort of incumbents in a different way.
How satisfied are you with size of the development of your digital channels in terms of distribution and lastly of traveler.
Ill.
Very active on the NCS B as you indicated.
I know that on the other side of the dividend from here obviously the.
The payouts continues to improve as well.
Based on the guidance you've given how do you think about balancing those two elements as as you look ahead. Thanks.
Okay.
Hey.
Things are going to give you we'll start with the number one just from B to B just generally on bad debt I would say some of the we're watching closely across the entire business all of our segments, where the consumer wireless or.
Wire line, and then business and frankly, our collections has been extremely strong throughout the entire pandemic, including Q1, we did take an incremental charge in Q1 related to business.
Bad debt, but it was very very small and immaterial. So we're very happy with of the collections history.
The read the you would see in the quarter from a revenue perspective, we are quite happy with the way things bounce back on we were actually up almost 4% of Q1 versus Q4, and 1.4% growth this quarter versus a year ago that being said were cautious on clearly some of the restrictions the additional restrictions have been put.
The in place across some of the provinces.
Your post Q1 into December into January it's going to have some cause of volatility within our BTB.
Operation. So it's something that we're we're really managing closely we're happy with the performance is quite stable, but there clearly are some headwinds coming specifically within the hospitality sector or internet business within BT has been strong but within the video segment in the hospitality segment, it's been the weak there and at some of the watch, but but again.
So first of good and our teams are working very very closely with all of our business customers, making sure that were there form during these uncertain and volatile times and I think it's going to serve us well over the long term.
For the higher of it its Paul and thanks for the question on wireless distribution and digital capability.
When we last met.
I characterized the.
Our digital capabilities on acquisition as a GAAP for us relative to our peers and I couldn't be happier than to tell you that we have materially close that gap over the last 90 days and just made enormous progress.
Our tactical on delivery teams and our sales teams have worked incredibly closely together and.
We have made enormous strides on behalf of our customers flexibility.
The of getting too deep into Q2 disclosure on I'll tell you that in December of more than 20% of our growth wireless adds came through the digital channel.
That number with the close to zero in the prior quarter. So it gives you a sense of how quickly we were able to bring on board.
You did not end consumer loans, not inconsiderable number of wireless gross adds that we did in the last quarter and change that mix. So we're encouraged by that.
A reminder, that even when 20% of it comes from digital that means that 80% of it is still coming from retail so I'm still happy with the investments we've made of of a number of years and still believe the retail has a long and.
The important life with us in the wireless space, you've heard us talk about that before but just enormous credit to the teams for so quickly remedying and closing the gap between us and our peers.
Just on the return of capital to shareholders of into I think we talk of talked a little bit of both this in Q4 certainly.
Certainly, we're we're very happy with the free cash flow growth last year and this year the reforecast our dividend payout ratio is roughly 75% of.
Certainly have the ability to look at our dividend on a go forward basis, but I think this year, we really felt like a more flexible.
Method, and frankly, considering where our share price was in terms of evaluation the more appropriate return of additional capital shareholders was through an inside the programming you've seen us be active in the first two months and considering the performance of the business and again, our conviction in the free cash flow.
Growth rate over company your balance sheet.
Whole bunch of factors you can you can count on us to be continue to be active I think with the rentech would be in the coming months and quarters of considering the performance of the business the dividend of something that we obviously constantly look out with our board. We just felt like for this year and at this moment in time, the more appropriate return of capital was through an inside the as opposed to addition.
The dividend.
Adjustments to our dividend rate.
Great. Thank you.
Thanks sort of in the.
Our next question comes from Tim Casey of BMO. Please go ahead.
Thanks, Good morning to free one proposal the one Trevor.
Charlie can you talk a little bit of both of you.
EBITDA margin performance on the wireline side.
You.
Your comments.
The internet of Bob.
The wedge subs are contributing that I'm, just wondering given all the pluses and minuses with Kobe.
Coburn extra costs and co would cost sharing on incurring.
Just wondering if you could maybe help us understand the sustainability of the of 50% merging or any.
Anything to think of it will flow through the year in terms of timing and for Paul just a little more on your on digital on boarding for wireless I mean it.
It seems like there is a permanent shift in terms of distribution and the.
The industry is going to pursue more of an omni channel.
The strategy.
For for distribution just wondering if.
I think what you've done so far prepares you for that or if you're going to have to kind of double down on those efforts over the next three years and.
Related to that.
Are you still planning to expand your retail footprint in light of that like the.
Just maybe a little more color on that thanks.
Good morning, Tim Thanks for the question just on the EBITDA margin in the performance and sustainability clearly the business mix the pull talked about on talked about earlier in terms of higher value broadband customers.
Bundled with the molded product that frankly from a true perspective is very attractive. It's early days, we only have a clear the four months of a bunch of the bundling initiative, but its very strong from a profitability standpoint, the you're starting to see that in the numbers and just the overall business mix on some of the costs that you mentioned.
It's a bit lumpy, obviously with coated there's some pluses and minuses like you say overall I would say we've been able to take on more discretionary costs in this cold environment versus some of the additional cost of we're incurring because of.
Cold weather as PPD in.
The investments into a retail store of stores across wireless and wireline to ensure that the safe, but there is a little bit of lumpiness in our in our in our.
Quarterly cost structure, Tim and of course, this quarter versus a year ago, we did benefit from roughly $5 million of lower spend and thats related to the some of our sponsorship initiatives Wishart charity Classic don't purchase when we had the cancel and of course, our CFO of partnership that ended last year. So we did incur some of those key.
So a little bit of lumpy Miss but I would say we have strong conviction in the profitability of our wireline business, we continued to post.
Extremely strong margins going forward, there will be those some variability quarter over quarter because of the lumpiness of some of the costs. So hopefully that gives you of the color on.
The thinkable in future quarters.
Hey, Tim it's Paul Thanks for the the question on digital versus tradition of retail.
I think you're right there is going to be a degree of permanent shift here, it's hard to tell kind of where that settles over time, but we're certainly seeing that of hearing that from customers as well in the comfort from.
From then make sort of taking these digital capabilities is something we think that on nice addition to the business certainly from the cost standpoint, I agree the emitter kind of just a few things to fill in some gaps first.
Stock in March we reorganized all of our consumer sales teams under one leadership team reporting into me. So we we do have kind of a holistic view of how we we go to market on the things that we're able to use channel is kind of interchangeably.
And the leadership in that group under patent is fantastic and we have.
Just a really thoughtful approach to go to market now in it with that in mind on.
You know a reminder, as well that very significant portion of Shaw mobile acquisitions of folks on the west from it is b Y O D and were seeing ever larger quantities of that shift which means that we can satisfy a customer frankly were just by shipping them Sim card.
And Thats, a very very efficient low cost acquisition for us so you're starting to you'll start to see that kind of come true more more in time on.
But we expect that to be a permit the capability.
Of the business going forward, we had of we did much of that kind of Sim related activity, Tim because we need a larger ecosystem of phones that had band 66 of them. So while we could have done. This operationally couple of years ago, we chose to hold off until we were confident that the phones. The customers, we're bringing to the scramble to operate on our highest speed LTE event.
So that we they had the right and the optimal customer experience. So again, an area, where we really didnt pursue kind of digital direct capability, because we wanted to make sure we could cure rate the device in a way that we were comfortable with the not typically require to store visit.
We still love the retail on a bunch of fronts, not the least of which is helping with the bundle, which typically is the conversation. So we're doing that either on our call centers today or in our in our retail stores, obviously the pandemic as restricting.
Some of that traffic, but we are still open for business as an essential service and right across Ontario and into the West our stores remain open along with the other carriers under agreed rules, we have a small working consortium with the with the other operators to make sure that we have kind of harmonized approach to how we go at that.
And.
We've been on a kind of the very good corporate citizen on on managing through that so long term definitely a structural change.
I don't know the digital gets the 50% of our volume of at anytime soon too, but certainly if it if it remained in the Twenty's, there's a role for continue.
Continuing to invest in that I would say a lot of that lift is behind us financially. So if you're if the subtext here is do we have a lot of additional expenses ahead of US most of that already is consumed in the prior quarter and the the.
The one before that so our there's no big lift to be able to do this beyond what we've already accomplished.
Then, we'll just leave it in the hands of the consumer and they'll have the ability to choose what's best for them and it will be able to meet it in a way the we never have before so again credit to the team for having done that's of quickly.
Thank you thank.
Thank you.
Our next question comes from David Mcfadgen of Cormark Securities. Please go ahead.
Okay. Thank you on a couple of questions on some mobile.
So as you noted in your release the majority of the year Shaw mobile customers new customers, our existing Shaw Internet customers. So I'm just wondering.
How important do you think it is to have third party distribution on Shaw Internet because obviously it's here.
New customer to shy on you want to come to some of the you have to catch on internet as well and so obviously.
Retail points of presence matter for wireless.
So I'm just wondering.
[music].
Right you thoughts on that and can you give us an update on exactly how many.
Retail points of presence exist the shot in the not including any third party distribution and then secondly on screen from.
On the churn I'm, just wondering is it driven more by on what's happening in Ontario and environments outliers debt.
The scene Albert as shown on the amounts having a bit of of negative impact on the on freedom, causing our true. Thank you okay.
Okay. Thanks, very much David.
[music].
So in order on the Shaw mobile in relationship to Shaw Internet.
We're really fortunate that if the customer choose.
Chooses to kind of come to us net new net new on both the Internet and wireless we actually have a really good solve the doesn't require retail for both of those things as.
As we've discussed previously more well more than half of our.
Internet connections are done by self connect on numbers than in the Seventys of late.
That may moderate up and down over time as we as we kind of better cure rate some of those interactions, but certainly the the vast majority of our of our new Activations for Internet company, the self connect and thanks to the great work.
Of our operations and logistics teams, we can do some of that self connect as quickly as same day and certainly within within next day from where the vast majority of our geography, so a customer wanting to get that prequalifying of end of I need to be in a shining on customer can do it very quickly on now much more quickly than they could have done six or nine months ago.
On then recognizing that again, the vast majority of those customers coming on to show on mobile our B.Y. of D on that.
That can be accomplished with on the.
The delivery of the Sim card right to their home again in a similar timing kind of next day. So net new net new typically wouldn't have to wait more than the day or two to make the whole thing happen and wouldn't require a truck roll or a retail store visit so I think we've got a good solution. There we are great.
Great partners with.
On people like level of hearing in Western Canada for Internet, we love, having that distribution available, but we are not reliant on third party distribution for either internet or or wireless in that context does.
Did that answer the first part of that okay from.
Yep that thinking okay, great and then on the freedom side.
Yes, it's a tough quarter on churn higher than we've been in quite some time, but I kind of I think characterize some of the reasons for that earlier on the call on.
There is not really a specific geographic.
Elements of sort of bias, one way or the other on where those that incremental turn is coming from.
If you if you put this all kind of in the mix, it's not hard to understand why the freedom brand came under a little more of salt than it has historically done.
No.
When you're reporting over 100000, net adds and you're seeing the kind of.
Porting activity coming to Shaw mobile that we've seen in the last 90 days.
It has probably stirring the pot of a little bit on the on the other side and freedom. Unfortunately is the target of some of that so we're okay with that mixed we obviously are working hard to try and.
Bring the bring that number down but for the first and most part of this last quarter freedom with on a pretty heavy attack kind of in response to show on will those people who are looking to keep the numbers and keep the number the.
Okay. All right. Thank you thank the.
Our next question comes from Simon Flannery of Morgan Stanley. Please go ahead.
All right. Thank you very much of just following up on shore mobile I know, it's early days, but can you talk a little bit about the demographics of the customer versus the freedom mobile in terms of credit quality on how that might flow through to churn over time on them.
On the new customers on the the broadband product what percentage of those are taking show on mobile. Thanks.
Hi, Simon as Paul.
The demographics, we're very pleased with the demographics on on on Sean mobile, so far and on credit quality one of the things we have been able to do over the last 90 days that didnt exist previous to that we'd be able to better cure rate the existing shaw relationships on existing Shaw.
Longstanding sort of.
Kind of credit histories with acquisition. So is I can characterize the last time as the as a GAAP our finance team the turn.
Turn Linda Thomas from the team has been done the great job of bringing that customer that longstanding I did a shaw customer for 10 years why do I need to go through all of this just to get the wire to get the wireless line. We've now on much more of the history loaded into our systems on the as you know we kind of brought shown on mobile to market very very quickly and this.
This is one of the follow up areas. So we now have.
Very good insight into people that are applying.
Applying to to bring show it to get you on mobile service. So I think I'd characterize this is probably a premium or a higher value.
The customer than freedom with typically pursue on.
On or acquire.
I won't go much broader than other than to say that the.
The early days of some of the success had been largely against our existing base and I know from many of you that's probably a little frustrating that we have been able to grow more new relationships than we have I'll, just say that things like the $25 Unlimited plan are certainly changing that dynamic but we.
Certainly the history since the July launch has been largely against our existing base, but know that we are also skimming the better part of our base in doing so and sort of being able to have that credit qualifying now is is the big improvement there.
Not the disappoint just on them, but we're not going to disclose at this time of the number of Sean the local customers that are also shine and of customers or vice versa.
Bad debt will become more clear over the coming quarters as we as we start to give the little more disclosure on that front.
Great. Thank you.
Thank you.
Our next question comes from Cayman, then cut share of Barclays. Please go ahead.
Thank you.
One broad question, if I could broadly the new right now you seem to be optimizing on profit profitability.
In White line and it makes sense, but in the midst of the highly competitive environment.
Nothing Thats also increase the cost in the future of potentially higher sac.
And the ultimate attention.
Over the over the impact of cycle of of customers lifetime.
And ultimately lose.
These items on the wireline side it indirectly like the also increases the cost of the wireless entry and so how do you balance this map the queen the lifetime value and subscriber acquisition cost. Thanks.
So we're just a little trouble hearing on some of that some of my apologies its Paul on.
I'll take a stab at this the the pursuit of the higher value of higher speed tier internet customers really doesn't come at any incremental costs through acquiring anybody on lower speed tiers with lower value. So we're encouraged by the fact that thats a relatively flat acquisition expenses.
Force they are all on existing facilities. So that there is a considerable margin gain on that sort of next dollar of service revenue that we are able to to pull through and Thats. What we what you are seeing dry food of EBITDA.
I don't think likewise, it's driving any.
Further challenges are incremental challenges on being able to convert those customers to of wireless customer on certainly no indication we have on that front. So far. So we think the strategy is sound and it hasn't had any.
The EBIT in challenges as we kind of go up into the speed tiers, we're not seeing different characteristics from someone on gig wish on mobile than we are with someone on on a lower speeds here on Shaw mobile, it's pretty pretty pretty uniform, but I would just say the we don't feel like were starving the business from investments.
The investments in the scaling our business appropriate I mean, I think Paul mentioned, it but just a little bit more color I mean, our overall growth sales activity volume on wireline is down about 40% year over year and thats not because we're not investing in our in our initiatives. It's just that customers are less likely to change their wireline provider.
In this environment. So I don't think we're we're holding back investments with the with the goal of maximizing near term profitability and the we're going to have significant investments go forward. The we've got a right the right balance in place in the strategy, we're very comfortable with the strategy of the you can see the in our consolidated numbers and that's where I would encourage investors.
Customers continue to focus on as oppose the just segmented results. The we're really look you debt consolidated EBITDA growth some of the things we're doing in wireless which on mobile are benefiting wire line and vice versa. So we consolidated EBIT growth of 3.2% and again free cash flow growth of 23%. This quarter, we're really pleased with the store.
Energy on the financial results that were delivering.
Got it. Thank you so much thank you.
This concludes the question and answer session I would like to hand, the call back over to Mr. Shaw for any closing remarks.
Thank you operator and the.
Again, happy new year to everyone and stay safe and level of talk to the next quarter. Thank you.
This concludes the time allocated for today's conference call. You may disconnect. Your line. Thank you for participating and have a pleasant day.
[music].
<unk> <unk>.
Uh huh.
The <unk>.
[music].
Uh huh.
The <unk>.
[music].
Uh huh.
[music].
We'll move on.
[music].
No.
[music].
Well.