Q1 2021 Shaw Communications Inc Earnings Call
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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 and.
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 and anytime during the call.
Should anyone need assistance during the conference call they may signal and operator by pressing star and zero on their telephone before.
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 and members of our senior management team, including our President Paul Mccleese, Our Chief financial Corporate Development Officer Trevor English.
Considering the environment and ongoing impacts from COVID-19, we continue to have most of our employees work from the safety of their homes our net.
We're continuing 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 low open, albeit at a reduced capacity and we have ensured that we meet or exceed the safety requirements and the various provinces that we operated and.
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.
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.
And for our bundle of 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 and then and tier yet with Fiberplus gig 1.5, gigabits more than doubling the top of the low speed less than a year ago.
Our focus we saw from will allow us to bundle affordable wireless services with our high quality high lifetime value fiber plus internet relationships and this environment is existing internet customers realize tremendous value by adding Shaw move out to their connectivity services often with.
Multiple lines and 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 and 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 and and subscriber growth.
And I am equally pleased with the trends and improved profitability that we have seen of the early days of bundling mobility with our existing wireline customers the.
This positive momentum within our operations and stable business performance combined with the efficient cost management across the entire organization led to strong financial results, including our wireline operating margin exceeding 50% and free cash flow growth of 23% in the.
Quarter from.
For all of the year, we have been successfully managing through the impacts of coal and 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 our mobile and expand our retail.
The network and distribution capabilities in this challenging environment.
As our first quarter results of highlighted the success of our connectivity bundle has us firmly on track to continue scaling our wireless business and delivery of consolidated growth.
I will 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.
Our consolidated financial performance in the quarter includes adjusted EBITDA growth of 3.2% over the prior year and reflects our strategy and focus and profitable customer interactions.
Touching briefly on segmented the results.
Wireline revenue declined approximately 1% however, adjusted EBITDA increased almost 3%, resulting in a strong operating margin that exceeded 50% of the quarter.
As we continue and enhance our internet product whether that is through the introduction faster speeds or broader distribution and focus on bundled the internet with Shaw mobile customer profitability has improved in.
In addition to this positive momentum we continue to closely manage our cost reduction and Opex is primarily are primarily due to lower the related volume related and employee costs and we're benefiting 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 purity classic were unfortunately canceled this year as well as lower travel and other discretionary costs in wireless service revenue grew approximately 10% to 215 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.
Q1 included additional investments to support a record of 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 mobile with your Internet services working benefiting our consumer.
The divisions division and contributing to strong consolidated results.
Q1, adjusted EBITDA growth combined with lower planned capital investments within our wireline segment resulted and keep 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 underwrite and strength of our business significant cash balance of the expected growth and free cash flow of this year, we've been active with or enjoy the program. Since November 2nd following the approval by our board and the TSX to repurchase up to 5% of the extending class B shares in two months since commencement of the program, we have repurchased and.
Cancel the approximately six and a half million shares at a cost of approximately $150 million.
Considering our 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 and 19 pandemic.
We have demonstrated our flexible and nimble approach with our go to market strategies and strong execution cash.
Non 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.
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Our first question comes from Jeff fan of Scotiabank. Please go ahead.
Thanks, Good morning, everybody and happy new year.
I'll start with a couple of questions for Paul and then the more strategic question from Brad Paul regarding the Shaw mobile wireless subscriber.
The all results.
And if you can talk a little bit of of the profile of some of these customers. Whether these are new line the new getting.
From households, and the new wireless lines or the ports the.
This gives us a little bit of GAAP.
Context, there and then regarding the ability of Shaw mobile too.
The list the the.
The internet business or the the wireline cable business wondering if you could give us a little bit of timing on the.
So a little bit of timing on now.
So the Jeff we lost you.
Okay.
Operator, the there.
I am Jeff has disconnected. Our next question comes from Vince Valentini of TD Securities.
Hey, guys you want to jump the ash and 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.
And just a reminder of the question is about the profile of Shaw mobile customers Yeah. We're.
The of very very positive metrics as it was clear and our reporting 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 euro dollar.
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Unlimited talk and text plan I think with the probably a lot of customers testing, our network and making sure that it is right for them and.
I'll remind everybody that also mobile customers need to be Shaw Internet customers and then 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 dollar plan and toward the 25 and.
$45 unlimited plans as content and our network has improved and.
And perhaps a better understanding of the of the 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, and 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 and finished the other part of that question when Jeff comes back and.
Vince do you want to go ahead of the horse right.
Thanks, Paul.
I have a couple of EBIT and one for Trevor just as Ron first working capital what kind of almost a 190 million of of out flow.
Is there anything unusual there and just timing issues of she can help us with that and then Paul.
To follow up with you on.
And on the Internet side first the.
And we 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 and what Jeff was getting up into the if I can just ask and 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 bridge and explain the movement of working capital of you can see from our contract and asset balances on on our balance sheet. Those haven't moved in the significant ways of that really has an impact of working capital and a material amount in the quarter.
Thank you.
Great and.
Right I'm going to give you a slightly longer answer to a short question. The season, the Vince and I give you a slightly longer answer to your short question. So if you'll indulge me for a minute I think it's just worth revisiting the strategy for our Internet business and as Brad.
Headset and the opening remarks.
Businesses very much a work in progress and without even a hint of defensiveness I want to be clear that our team led by me and needs to deliver and more appropriate share of what and modest subscriber gains I think remain available and 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 to 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 total sales net growth and disclose it but.
We do third party sources of and good sense of the contribution that makes there and as you know so other than currently awful ex 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.
It's also while the smaller component of the growth, we all should should remove the kind of the $10 in EPS of goods subscribers.
And 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 or more of helices reported net adds the out of the play, which then gives us the our property grounded baseline and Thats really what informs our growth plans.
With the weakened economy in Western Canada, and and kind of the practical impacts of koby things like students returning home and not having additional lines. Most industry predictions right now suggests kind of little to no organic internet subscriber growth and the west This year again and leased in those markets, where we operate with facilities.
And then obviously from there the math is pretty straightforward. The 15000 subs that we lost last quarter didn't abandon the Internet day likely one across the street the Telx.
And in some of the share the could comes from our customer retention metrics with that are as we understand and weaker than then tell us and this is an area that frankly all of knowledge our competitor excels we operate against of.
A very well run competitor and tell us with a strong legacy of customer service and delivery.
And we are likewise investing considerable energy across all the shots to improve our performance there, but some of those and market share the gate or excuse me losses are attributable to the spread in and.
And retention did and the better the better for the rate the teluss enjoys but our focus here is rapidly changing for the better.
It's important to know we were pulling all of us apart that in analyzing the data we've learned and number of other things one of the customers that are leaving us are inherently more transient they carry of profile debt.
Is one that sort of optimizers and leverages available promotional pricing and accordingly have a lower the lifetime value than our average customer. These are kind of classic promotional hoppers and there's a lot of opportunity to do that still in this country, where you can run between carriers and and optimize your pricing.
It's also clear that in recent quarters tell us the the gains have been more reliance on discounted and then at 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 and treaty bundles and I've spoken before about the wisdom of that and mature market I want the labor.
Further, but I do think it is an important distinction to drive what we're doing on our rate card versus low tell us the deal and our rate card and that distinction is never more clear than when you look at the operating margins of our respective wireline businesses. So you saw it and our reported numbers. This morning events 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 of the threat of 5% up on the last quarter and year were 5% of 5% up year over year right. 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 and the last year to pursue higher value customer relationships and perhaps forego some of the slower value low were lower margin stuff that is out there in the marketplace. So let me give you a little bit of color around how well we've done the that front and some of the things that are underpinning our numbers first and.
This is kind of and and perhaps the new level of disclosure for us So bear with me for a moment our first.
First off we are onboarding, new internet customers at a much higher revenue rate than we ever had and the company's history right.
Right now fully more than 20% of our customers are activating that are coming on board and activating on one and one of the half day 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 these these new speed tiers is being really embraced by cut by customers.
Base migrations, the second plant will raise 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 time someone 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 and 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.
And that.
Customer embrace of our higher speed tiers is clearly creating financial benefit for our shareholders I guess and 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 and broadband complemented by wireless through Shaw mobile bundle and.
The success of that you have of course of seen and our high net growth today.
Let me kind of put a bar around this.
We have become rapidly become the preferred provider for higher value Internet customers in Western Canada, we see it and the key metrics, we see it and our research and our customers are seeing it reinforced and 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 and the western marketplace. So.
Our balance scorecard as Brad indicated the onset is always going to be high quality products delivered for 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 onboarding I think theyre chalk and cheese and that's really the something were given to the focus on so and years 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 accounts.
Principally because I think internet overall, and then at gross add activity is off considerably year on year on its difficult to get customers to change the internet provider during the pandemic with everybody hold and doing the things they are doing.
And 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 and we think we have the right strategy recon.
And and then on I've said before it's something that's going to take time to get the for that Numerated to 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 were gaining relative to the quality of what were losing we're comfortable with that trade today, while and certainly love that number to be and 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 and one thing maybe more of a challenge.
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, I can tell you the it's just over $73 in terms of or or or ARPU for internet.
Since the 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 did help bridge and and frankly that mix also with the pull talking much as 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 and we'll continue to look at our disclosure Vince and provide data points to help and.
Investors and the Street bridge of the financial results myriad with and partnered with our strategy.
Excellent. Thank you.
Great. Thanks, guys. Thanks Vince.
Our next question comes from Jeff and of Scotia Bank. 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.
Im wondering if you can talk about sort of level of confidence.
And and the ability to do that as an independent company.
In light of from.
The scale and investments that.
And the industry is talking about related to Fiveg et cetera.
And I guess follow that with your growth opportunity again, your confidence and 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 and I.
It's been and as I look back and the you know when we.
Got rid of media and.
Datacenters and made 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 run. 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 the better execution from a management level and all that.
Bose and.
And 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 I 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 the.
The family is very comfortable with with the trajectory with the strategy with the execution and.
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 and we wish as Paul said, we wish the Internet number was higher and 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 he today our to our and.
That's what it's going to take from from our team to be successful and 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 revenue 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.
And 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 a degree of comfort debt.
These promotional hoppers or perhaps the subscribers that are less worth to you had had been flushed out.
I've got a couple of more went on and stop there of course.
Okay, Hey, drew how good the study.
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 relative to the new use of data we have built and much more sophisticated data team over the course of the last nine months or so and named started the provide real insight 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 I'm. So grateful to is over and in the technical teams for launching really and rapid succession 750 gig and then gig and a half and then vastly improving our upload speeds over the course of low six and nine months. So we've got.
And frankly, a much better product offering now than we have ever had and now we were able to use the data that our teams and put together to go into those hundreds of thousands of.
DSL households that remain for Telx and provide them not only with a product offer of that is unavailable to them. The reminder, that for everyone that we made the decision some years ago to provide good 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 the recover footprint. So our opportunity now is to be more sophisticated and 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 taking advantage of the asymmetry that I spoke of debt on the prior call.
To really drive that point home.
The customer choose and gig speed today.
And that perhaps is converting from tell us and we're seeing a number of those.
Also has the ability to add $25 and limited lines to their to their proposition and I can tell you that that's happening and decent quantities right now so.
When you are adding new revenue of 115 for Internet and then Tim.
Typically when people buy from mobile they buy by the impairs steward of times or adding another 50 and wireline wireless service revenue all of a sudden youve got a $165 plus household and some video and of the things of that and get up around a couple of hundred dollars of ARPU. That's all new money to us through so that is and that's the strategy that you're just starting to see employed reminder.
February we didn't launch are $25 unlimited.
Unlimited plan and to the end of October. So we're only a couple of months into that that the results. So far as you've kind of would expect of and I've been very very strong.
And 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 and 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're 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, it's certainly something we're comfortable with right now and.
I don't know just how big of that bucket is drew but I would suggest there is always going to be an element of that running kind of back and forth. It certainly exists and the wireless business, which I and the little more familiar with and we.
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're.
We're comfortable now that we have a better understanding of who they are and what their profile is and and essentially 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 last call was making sure that our better customers get the get higher quality treatment and 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 cookies and if you are a low revenue were low margin household were starting to align our investments better there than we ever have before and.
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 and into 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 relative to the.
The national players any any initial thoughts on on that thank you.
Yes. Thank you.
Well I'm pleased to report.
That I'm weightless animated about the competitive dynamic and wireless and it was last time, we all got together so.
It remained fairly chippy really and through Christmas, including some kind of still the one off bounty things and stuff and I feel about those.
And so we saw in the you'll see this in our and what in our freedom.
Sure and number our overall wireless churn of which has been largely reflective of the freedom churn ticking up in the quarter.
And disappointed in that but I know recognizing that there are simply less available subscribers right now for all of us to pursue again with limited organic growth same dynamic that affects internet growth limited migration things like that we are seeing very little organic growth on the wireless side as well so.
And that means people get more aggressive and chase things, particularly towards the end of the of the victories fiscal quarter, which of course was the with December but we saw we started to see a moderation really around boxing day drew and net.
That has continued through.
And the into the first part of January.
I was encouraged by the some of the recent announcements from belt around changes and their price structure.
I may comment.
Unintended the controversial comments on the call around monetization of Fiveg the.
Point being being able to secure a return on those investments of sizable investments on network and the spectrum with something that I was ex.
Expressing caution on and what we're seeing at least from the Alan the or the days of some of the rate changes are looking to make and 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.
And so encouraged by competitive Com 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 Nike 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 and ARPU deficit by cutting price generally so and nice to see some movement there.
And fiveg the.
I said previously we are so excited about the opportunity. This is going to bring and it is really a long term thing I think our peers of signal the as well the AC most of the gains really beyond F. 20 at 21, as we start to bring on I of key excuse me and other similar applications for the regional players.
Hi, and try and get the subtext of your question for the regional players.
I'll go back to the use case for consumers the right I had been.
Speaking on the extensively within the business and our our aspiration and Fiveg is to bring it to market as quickly as we can and to quickly be able to put that badge and our phones in our stores and 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.
And 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 and 150 megabits per second the UK.
They are down to 50 megabit second the you can't do and 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 and require some of the benefits over time, but we're very comfortable that being in the fiveg business.
Prominently and proudly.
And is very similar to ours.
Our being in the LTV or the iPhone business prominently and proudly even if the there may be some speed differences related to some of our.
Deficiencies and 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 join it later and later in March.
And thanks for all the appreciate it thank you. Thank.
Thank you.
Our next question comes from Aravinda Galappatthige day of Canaccord Genuity. Please go ahead.
Good morning, Thanks for taking my question Im happy new year and.
A few from me.
I'll, just switch gears, a little bit to the to the B to B side.
And Paul I'll try, but if you want to sort of maybe discuss how.
GAAP area has trended down in terms of not just in terms of subscribers. So in terms of.
Some of the Bulls and bad debts and that and see anything.
Meaningful debt, but I just wanted to get your thoughts there.
And secondly.
Lots of Paul with respect to the.
Distribution side, and wireless and giving the locked down periods, obviously, the digital channels become more relevant and you're up against and sort of incumbents and a different way.
How satisfied are you with size of the development of the digital channels in terms of distribution.
And lastly of traveler.
Ill.
Very active on the and 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.
And.
Things are going to give you we'll start with the number one just on the TV, just general and that debt I would say some of the we're watching closely across the entire business all of our segments, where the consumer wireless or.
Wireline and then business and frankly, our collections has been extremely strong throughout the entire pandemic, including Q1, we did take and incremental charge in Q1 related to business.
Bad debt, but it was very very small and immaterial. So we're very happy with the collections history.
The really you would see in the quarter from a revenue perspective, we are quite happy with the way things bounce back and we were actually up almost 4% Q1 versus Q4, and 1.4% growth this quarter versus a year ago that being said were cautious 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 and volatility within our BTB.
Operation. So it's something that we're we're really managing closely we're happy with the performance of quite stable, but there clearly are some headwinds coming specifically within the hospitality sector or internet business within BT abused and strong but within the video segment and the hospitality segment of its been a bit weak there and some of the watch, but but again.
So far so 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 and its Paul and thanks for the question on wireless distribution and digital capability.
When we last met I characterize 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 technical and delivery teams and our sales teams have worked incredibly closely together and.
We have made enormous strides on behalf of our customers flexibility.
The getting too deep into Q2 disclosure I will 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.
And you did not inconceivable and 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 it means that 80% of its 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 and the wireless space, you've heard us talk of it that before but just enormous credit to the teams force so quickly remedying and closing the gap between us and our peers.
And just a return of capital to shareholders of and 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% and we saw.
And 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.
And.
Method, and and frankly, considering where our share price was in terms of the valuation the more appropriate return of additional capital shareholders through and NCR deprogramming, 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.
The growth rate over company, the our balance sheet of.
Whole bunch of factors you can you know you can count on us to be continue to be active I think with the rensi I'd and the coming months and quarters and considering the performance of the business the dividend and 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 and as the idea as opposed to additional.
The dividend.
Adjustments to our dividend rate.
Great. Thank you.
Thanks her of and the.
Our next question comes from Tim Casey of BMO. Please go ahead.
Thanks, Good morning to from me, one proposal and one Trevor.
Total can you talk a little bit of both of the.
EBITDA margin performance on the water line side.
You.
Your comments.
The internet of value add subs are contributing that I'm, just wondering given all the pluses and minuses with.
Coburn extra costs and co wood costs are not encouraging just wondering if you could maybe help us understand the sustainability of the of 50% merging or anything.
And you seem to think of it will flow through the year and trends and timing and for Paul just a little more on your on digital Onboarding for wireless I mean.
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 you 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 through the years and 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 the thanks.
Good morning, Tim Thanks for the question just on the EBITDA margin and the performance and sustainability clearly the business mix the pull talked about and I talked about earlier in terms of higher value broadband customers.
Bundled with the mobile product that frankly from a true perspective is very attractive. The it's early days, we only have a clear the four months of of bunch of the bundling initiative, but its very strong from a profitability standpoint, you are starting to see that and 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 out more discretionary costs in this cold environment versus some of the additional cost of we're incurring because of.
Cold weather as Peter the India.
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 and 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 imports and 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 and this but I would say we have strong conviction in the profitability of our wireline business who continues 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.
The thinkable in future quarters.
Hey, Tim it's Paul Thanks for the the question on digital of versus traditional 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 and and the comfort from.
From them and sort of taking these digital capabilities is something we think that a 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.
Back in March we reorganized all of our consumer sales teams under one leadership team reporting and to 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 and with that in mind and.
You know were reminder, as well that very significant portion of Shaw mobile acquisitions of folks on the west from and it is b Y O D and were seeing ever larger quantities of that shift which means that we can satisfy a customer frankly, just by shipping and Sim card.
And Thats, a very very efficient low cost acquisition for us. So you started the you'll start to see that kind of come true more more and time.
But we expect that to be a perm and the capability of the business going forward. We had avoided much of that kind of same related activity, Tim because we need a larger ecosystem of phones that had band 66, and 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 were bringing to us.
We are able to operate on our highest speed LTE events of 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 and that we were comfortable with and that typically require to store visit.
And 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 in 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 and 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 I think we've been at kind of the very good corporate citizen and on managing through that so long term definitely a structural change.
I don't know the digital gets the 50% of our volume and anytime soon too, but certainly if it if it remained in the Twenty's, there's a role for.
Continuing to invest and 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 one before that so our there's no big lift to be able to do this beyond what we've already accomplished.
And 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 had before so and credit to the team for having done Thats and quickly.
Thank you thank.
Thank you.
Our next question comes from David Mcfadgen of Cormark Securities. Please go ahead.
Okay. Thank you and couple of questions on some of our.
So as you noted in your release the majority of the year Shaw mobile customers and new customers, our existing Shaw Internet customers. So I'm just wondering.
How important do you think it is to have third party distribution and shine and Thats, because obviously and tier.
New customer to shy and you want to come to some of the you have to get China, and and as well and so obviously.
Retail points of presence matter for wireless.
And so I'm just wondering.
Right, you satire and that and can you give us an update on exactly how many.
Retail points of presence exist the shot and the not including any third party distribution and then second the on screen.
On the churn I'm, just wondering is it driven more by and what's happening and Ontario and environments outliers and.
BC and Alberta last year, and some amount of having a bit of of negative impact on the on freedom, causing our true. Thank you okay.
Okay. Thanks, very much David.
So in order, all and Michelle and mobile and 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 weve disclosed previously more well more than half of our.
Internet connections are done by self connect the numbers been and the Seventys of late and.
Now the 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 come with the self connect and thanks to the great work.
Of our operations and logistics teams, we can do some of that's help connect as quickly as same day and certainly within within next day from where the vast majority of our geography. So the customer wanting to get that prequalifying of end of I need to be in a shining and customer can do it very quickly now much more quickly than they could have done six and nine months ago.
And then recognizing that again, the vast majority of those customers coming understood on mobile our B.Y. of D and that.
That can be accomplished with 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 and 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 partners with.
And people like level of here and 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.
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 and it could characterize some of the reasons for that earlier in the call.
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 and the mix, it's not hard to understand why the freedom brand came under a little more so than it has historically done.
You know 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.
And 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 and are pretty heavy attack kind of in response to Sean will those people who are looking to keep the numbers and keep the numbers up.
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 and how that might flow through to churn overtime and then.
Of new customers on the the broadband product what percentage of those are taking show and mobile thanks.
Hi, Simon as Paul.
The demographics, we're very pleased with the demographics on on onshore mobile so far and on credit quality one of the things we have been able to do over the last 90 days the didnt exists previous to that we'd be able to better cure rate the existing shaw relationships and existing Shaw.
Longstanding sort of.
And the credit histories with acquisition. So I was I think I characterize the last time, there is a GAAP our finance team the turn.
Turner and Linda Thomas and the team had been done the great job of bringing that customer that longstanding I've been a shaw customer for 10 years, why do I need to go through all of this just to get the wire to get a wireless line, we've now and much more of the history loaded into our systems on the you know we kind of brought Sean 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 shut its a good catch on mobile service. So I think I'd characterize this is probably a premium or a higher value.
The customer than freedom and typically pursue more.
The or acquire.
And I won't go much broader than other than to say that 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 and we have I'll, just say that things like the $25 Unlimited plan are certainly changing that dynamic but.
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 and certainly being able to have that credit qualify and now is it is a big improvement there.
And not the discipline to sign and but we're not going to disclose at this time of the number of Shaw mobile customers that are also shine and other customers or vice versa.
But that 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 just one broad question, if I could broaden revenue.
Right now you seem to the optimizing of proper profitability.
And white line and it makes sense, but in the midst of a highly competitive environment.
Thats and Thats also increase the cost in the future of potentially higher sac.
And also the attention.
Over the over the impact of cycle of of customers lifetime.
And ultimately and lose.
These items on the wireline side. It ended at the like the open increases the cost of the wireless entry and so how do you balance this map of between the lifetime value and subscriber acquisition cost. Thanks.
And so we have and it's just a little trouble hearing and some of that some of my apologies its Paul.
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.
Yes. 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 I'm certainly no indication we have on that front. So far. So we think the strategy is sound and it hasn't had any.
And the EBIT in challenges as we kind of go up the into the speed tiers, we're not seeing different characteristics from someone on gig wish on mobile than we are with someone on a lower speeds here on Shaw mobile, it's pretty pretty pretty uniform, yes, and I would just say the we don't feel like were starving the business from investments and.
The investments and the scaling our business appropriate I mean, I think Paul mentioned, it, but just a little bit more color, we and 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 and 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 the investments with the with the goal of maximizing near term profitability and the we're going to have significant investments go forward are the we've got a right the right balance in place and 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, but we're really looking at consolidated EBITDA growth. Some of the things we're doing in wireless we show 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.
The energy and the financial results that were delivering.
Got it. Thank you so much thank you.
This concludes the question and answer session and we'd like to hand, the call back over to Mr. Shaw for any closing remarks.
Thank you operator and.
Again, happy new year to everyone and stay safe and we'll talk to you 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.
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