Q4 2020 BCE Inc Earnings Call

All participants please standby your conference is ready to begin.

Good morning, ladies and gentlemen, and welcome to the BCE Q4, 'twenty and 'twenty results Conference call I would now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead. Mr. Fotopoulos. Thank you Valerie and good morning, everybody on the call with me today are Merkle Vivek V six president and CEO, and our CFO and Libya.

We definitely have a lot of material to go through this morning. However, before we begin let me draw your attention to the Safe Harbor statement reminding all of that the slide presentation and remarks made during the call. Today will include forward looking information and therefore are subject to risks and uncertainties results could differ materially we disclaim any obligation to update forward looking statements, except as required by law.

Please refer to the company's publicly filed documents for more details on assumptions and risks with that let me turn the call over to Marco.

Good morning, everyone.

'twenty and 'twenty marked bells and 140 this year and it was unlike any other I could have imagined when I began as CEO of last January.

Our new goal of advancing how Canadians connect with each other and the world unveiled last January could not have been more appropriate and the year that saw extraordinary change and the challenges that have dramatically impacted the economy and of course, how we live and work.

Throughout it all bell has been on the frontline delivering the networks to keep kenyans connected stepping up every day for our customers and communities as we all continue to navigate through the COVID-19 situation and <unk>.

'twenty, one will be a reset year as we transition towards the return to pre pandemic levels of financial performance and operating momentum.

We can't accurately predict the path and pace of economic recovery, but we know that our business is solid and we expect to see progressive improvement through the year much as we did after coming out of Q2 2020 ex as a result, we remain cautiously optimistic about our business outlook as reflected in our financial guidance targets for 2021.

Non.

Our success in 'twenty and 'twenty, one will continue to be anchor to the priorities we set in 2020.

And they center on increased investment on core network infrastructure that will lay the foundation for future broadband Internet and <unk> growth.

Improving the end to end the customer experience the.

Ongoing digital transformation of our operations.

And of continued sharp focus on our cost structure.

We will accelerate capital spending in 'twenty and 'twenty want to forge ahead, even more aggressively on our successful broadband strategy expanding our all fiber connections opening up wireless home internet to even more rural communities and building our wireless five G network faster.

To that and I'm very pleased to announce that we were putting in place of capital investment acceleration program totaling one to $1 $2 billion over the next two years.

This is the right strategic move at the right time for our customers and our company, allowing us to realize the substantial operational benefits of state of the art fiber and low latency mobile networks sooner.

This will put us in an advantageous competitive position and.

And I want us to keep growing broadband market share and internet revenue and to begin monetizing <unk> services, all of which yields very attractive EBITDA and cash flow margins.

And I'm equally pleased to announce this morning that our planned financial performance for 'twenty and 'twenty, one enables us to increase bce's common share dividend by $5 one per cent for 2021.

It's our 13th consecutive year of of 5% of higher dividend increase.

This represents an emphatic commitment to our dividend growth approach and to our broadband expansion strategy.

Because of the accelerated capital investment, we're making this year and ongoing financial impacts during the Covid recovery period, our dividend payout ratio in 2021 will be above our historical free cash flow target range of 65% to 75% or.

Our strong liquidity position and substantial ongoing cash generation support the execution of this capital expansion program and our higher common share dividend for 2021.

So let me unpack the capital acceleration program on slide four.

As I said, we plan to invest and extra one to $1 2 billion over the next two years of which approximately $700 million will be spent in 2021.

To accelerate fiber and wireless home Internet and <unk>.

This is the right time for investments of this magnitude.

First off the $1 billion and net cash proceeds from the sale of our data centers and October will fund this two year incremental capital investment.

And secondly, because of the federal government's capital cost allowance program is in place for another two years, allowing for the accelerated expensing of capital expenditures every dollar of network investment that we make will drive significant cash tax savings that can be reinvested into the business and support future free cash flow growth.

Normalized for the capital advancement of $700 million and 2021, our consolidated capital intensity ratio is expected to be and the range of 15% to 17% consistent with pre COVID-19 levels.

And thirdly for the moment, we have of stable regulatory environment that makes this type of large scale investment possible.

As Covid has shown us over the past year. This is more important than ever now.

And now isn't the time for policymakers and regulators to move away from encouraging network investments now is the time to collaborate and partner with.

With government to connect more and more Canadians, particularly in rural communities.

We're showing that with the right policies in place we are prepared to make significant investments for the long term benefit of our customers and the Canadian economy, which will benefit from $2 billion and new activity and 5300 of direct and indirect jobs as a result of this additional investment.

And that was also the right time to make these investments because of the strategy is undeniably working we see it and our results.

Essentially what we're doing is advancing the wireline and wireless network builds that we have and our long range plan. However.

However by making these investments more quickly not only do we realize the operational benefits sooner, but we also reduce our future capex requirements supporting future free cash flow growth and dividend increases for BCE shareholders.

There's no longer any debate about the power and value of fiber once deployed we begin to see the favorable impact on both subscribers and financial growth as well as on the overall customer experience.

Internet penetration grows much faster as we deploy fiber and wireless home Internet, we can gain anywhere from five to 25 percentage points of penetration and the first 12 months of deploying of market, which has driven steady market share growth and internet revenue acceleration over time and fact, our internet subscriber base has increased 33%.

Since the start of our fiber build of 2010 and annual Internet revenue growth has tripled from 3% to 9% and 2020.

Churn is also lower when customers are and a better network. This is key because retention is such an important factor and the customer lifetime value equation on average the churn rate for fiber and wireless home Internet subscribers is 30 to 35 basis points lower than those on a FTE TN or ATM network.

And this extends the duration of the customer relationship with Bell by approximately two years, leading to an improvement and the overall lifetime value of of direct fiber and wireless home internet customer by approximately 50% and 35% respectively.

And of course, our cost to serve of fiber customers lower annual service and support costs per customer are approximately 40% lower on direct fiber links versus copper.

Over time as a greater proportion of our footprint as fiber is we will see even more meaningful change and our overall cost structure.

Let me turn to slide five of our presentation.

The accelerated network build out plan. The one that we have in store for 2021. It gives US 850000 to 900000 more homes and businesses across our wireline footprint that are equipped with either direct fiber or fixed wireless technology.

This represents an incremental increase of up to 400000, new locations covered with broadband service and would have been deployed in 2021 without the capital advancement.

At the end of this year more than 62% of our planned broadband build out program will be completed representing up to $6 9 million total combined fiber and wireless home Internet locations. This is up from approximately 6 million homes and businesses at the end of 2020.

And for wireless our accelerated capital plan will double the reach of our National <unk> network the 50%.

And I'm also very pleased to announce that Nokia and Ericsson and have been selected as the suppliers for our standard alone five G core.

Our fire, our fiber and <unk> investments are working Symbiotically to drive sales continued leadership and next generation Communications technology paving the way for future service innovation.

With the wireline infrastructure that includes high speed fiber already deployed to more than 92% of our cell sites over 2007 hundred central offices that are available for mobile edge computing and of <unk> world of wireline footprint, encompassing 76% of Canadian households, and the broadest retail and <unk> distribution and the country.

No one is structurally better positioned and bell for true wireless wireline convergence and the most capital efficient manner possible and to capitalize on the revenue growth opportunities out of way.

I feel very positive about the power of our business and our ability to execute and 2021 and energized by the accelerated capital program as always we will continue to stay true to our long term strategy and continue to focus on our strengths which include a vertically integrated business. The best networks distribution breadth of deep customer base.

Our powerful brand of growing dividend and the very best people.

And can turn now to slide six for some operational highlights.

And every successive quarter since the pandemic began we've seen quarter over quarter improvement across all our segments. Despite the.

The challenges of Covid, we delivered 96% of 2019 is EBITDA and maintained our consolidated margin stable at 42%.

We generated over $3 $3 billion of free cash flow the ability of BCE to generate this magnitude of free cash flow even during times of extreme uncertainty and economic difficulty is remarkable.

We are well on our way of returning to where we were pre COVID-19 and our results for both Q4 and full year 2020 represent further proof of the continued momentum we are generating from the lows of Q2.

And our consistently strong operational execution was and evidenced once again in Q4 as we delivered 147000 total new net wireless retail internet and IP TV customers.

We also grew broadband internet market share faster than any of our peers. This past year with the leading 149000 retail internet net adds up 10% over 2019.

The broadband footprint advantage that we're building positions us extremely well and both our consumer and business segments over the long term to grow Internet revenue, which increased the strong 12% and Q4.

As for our mobile <unk> network is now operational and over 150 centers covering nearly a quarter of the Canadian population.

On the customer experience front, we've made real progress over the past year and received recognition for the quality of our network and services.

Bell <unk> and <unk> networks were certified as Canada's fastest by PC Mac and its most recent annual study of network performance.

Virgin Mobile also topped every wireless carrier in Canada from of J D power ranking perspective, as the number one and overall customer service and the eyes of consumers for 2020.

While it's account my account was named the best Telecom mobile App of the year.

We boosted our wireless home internet download speeds for more than 50, 350000 rural rural homes, bringing enhanced 50, megabits download and 10 megabit upload speed to candidates underserved communities that are two times faster than before.

Our strategic focus on customer experience was also reflected and the latest report from the Cts, which showed a 35% drop and the number of complaints by Bell customers again, the best performance among national carriers for fifth consecutive year.

We've also made it even easier for customers and Quebec, and Ontario to transfer the residential services when they move with our new move valet Concierge service. This is just one example of initiatives that put customers front and center.

Lastly, the strides, we're making and digital transformation of our evident directly because of investments to improve online functionality and the app based sales experience for consumers, 54% of all customer service transactions now are executed on line.

Let's turn to slide seven.

For an overview of some key operating metrics for Q4, I'm going to start with wireless.

Despite reduced retail store traffic and transaction volumes due to the second wave of Covid, we experienced sequential improvement and postpaid net adds and.

Low churn, which improved 17 basis points over last year to one dot one, 1% and and Abu decline the continued to moderate.

We added 93000 total new net postpaid subscribers. This quarter of this total of 87000, and where mobile phone customers, 27% higher than last year.

It's an impressive result that speaks to our focus on driving service revenue and EBITDA growth through accretive smartphone transactions. This the.

Disciplined approach to subscriber growth was also reflected and our promotional offers we're handset subsidies were on average of 14% lower than they were and the previous year.

And prepaid because of lower overall market activity from reduced immigration and fewer visitors to Canada. During the pandemic combined with greater competitive intensity and discount and mobile market, we incurred a net loss of 12000 customers. This quarter. Nevertheless, prepaid service revenue was up an impressive 14% on the back of strong.

Growth over the past year, let alone led by Lucky mobile, which generate higher than average industry average.

A couple of notable developments on the retail distribution front that are worthy of mention we recently renewed our exclusive national distribution agreement with dollar Rama for all Bell prepaid products.

<unk> Tiger.

And new distribution channel for Us began carrying the lucky mobile and its more than 250 locations across Canada and late last year.

And we renewed our contract with PC mobile and a partnership that has been in place since 2005.

So great great prepaid growth potential ahead.

Finish up on wireless our blended <unk> decreased three 9% this results and notable improvement over the 6% decline we saw in Q3, despite persistent headwinds from lower COVID-19 induced roaming volume and reduced data overage from ongoing customer adoption of unlimited plans back normalizing for these impacts <unk> growth was slightly.

The positive in the quarter.

Let's turn to Bell wireline.

We saw another strong quarter and wireline, we added 45000, new internet customers, 25% higher than last year, reflecting broad based growth across all brands. We added another 73000 fiber customers this quarter, bringing the total number two.

To close to $1 7 million and that's $1 7 million direct fiber customers and that's up 17% over last year.

On the TV side of things very pleased with 21000, IP TV net adds and that's essentially unchanged versus last year. Despite the impacts of Covid.

Q4 was also of the first full quarter that Virgin TV was available and the market and early results are quite promising both from a customer demand and <unk> generation perspective.

Satellite net customer losses improved for a fifth consecutive quarter and.

Actually down 5% year over year.

And we continue to see improvement and home phone customer losses.

Seven 5% this quarter.

On Bell media advertisers advertiser demand picked up in Q4 with the start of the new fall TV season, and more live major League sports programming and that drove a meaningful sequential quarterly improvement and TV AD spending and in fact total TV advertising in Q4 was down only 2%, so thats down 2% compare.

To last year.

<unk> also continued to deliver with strong direct to consumer growth as total subscribers increased 8% over last year, and we're now of $2 8 million.

As for TSN and Rds, they were the top English and French language sports channels and Q4 and.

And both are having a very strong start to 2021, particularly with world Junior hockey and NFL playoffs.

Lastly, we continue to see great results from our Quebec media strategy with significant gains and primetime viewership for our conventional French language television network, Nouvel, which led all peers with a 6% increase and the audience levels of this quarter.

So to summarize and before turning it over to Glenn.

Great operational execution delivered by the team not just in Q4, but throughout the year with consistent steady improvement that is building momentum back into the business and that sets us up nicely as we enter into 2021, so over and <unk>.

Thank you Marco and good morning, everyone I'm going to begin on slide nine.

Despite the ongoing COVID-19 impacts the year over year decreases in Q4 of service revenue and EBITDA continued to improve sequentially.

Adjusted EBIT was down three 2%. However, we maintained our consolidated margins essentially stable at 39, 4%, even with $10 million of Covid related expenses absorbed and the quarter.

Net earnings were up 29% year over year as a result, and Q4 of last year.

Reflected higher net mark to market losses on our equity derivatives and hedge contracts and a media asset impairment charge.

As we signaled on our results conference in November Capex ramped up considerably and this quarter increasing to nearly $1 5 billion.

This was a planned increase reflecting greater network construction activity of following a slower pace of spending earlier and the year because of the pandemic as well as continued investments to enhance our digital capabilities.

And as for free cash flow it was down $782 million and Q4. This was the result. This result was expected given this quarters increase capital spending.

Higher cash taxes due to the timing of installment payments and a reduction in working capital driven mainly by the growth and accounts receivable that reflected a higher volume of wireless installment sales and the timing of supplier payments.

Turning to Bell wireless on slide 10.

Though the return of Covid restrictions effect of transaction volume and the quarter, our wireless financials improved sequentially.

Product revenue remained relatively stable year over year declining only <unk>, 7%, reflecting a mix shift away from tablets.

Two smartphones as expected roaming and data overage has remained a headwind to service revenues, which declined two 5% this quarter compared to $4 three.

In Q3 and.

And if you normalize for the Covid impacts service revenue growth was in fact of positive increasing by approximately 1% in Q4 and.

As a result of the better service revenue trajectory and disciplined device discounting the year over year decline and EBITDA also continued to moderate improving to 3% from the four 4% we experienced in the previous quarter.

Let's turn to slide 11, now and Bell wireline.

Revenue was down one, 3%, which drove a two 7% year over year decline in EBITDA.

Notwithstanding COVID-19, we faced tough year over year financial comps this quarter as last year, we benefited from a number of nonrecurring items, including the federal election, and bulk sales of international wholesale long distance minutes.

The normalized for these items Q4 represented bells best.

And the Bell wireline the best quarterly revenue performance in 2020.

While the year over year decline and EBITDA was similar to that of Q3.

Clear highlight of the quarter was residential wireline where revenues increased a strong one 5% representing our best performance in two years.

And business wireline and wireless quarter's results continued to reflect the soft customer demand and spending on business service solutions and data of equipment given the current economic environment overall results of held up reasonably well.

Let's turn to slide 12 on Bell media, another quarter of improvement with revenue down 10% year over year.

This result reflected increased advertising demand as Eric Morocco described earlier and continued strong crave subscriber growth Bell.

Bell media EBITDA was down seven 8% this quarter the sequential improvement was even more pronounced than for revenue due to a 11% reduction and operating costs, which encompass lower sports broadcast rights due to the postponement of new major league seasons, as well as television production shutdown and delays.

Well that does it for my overview of quarter really results I'll turn now to our financial outlook for 2021.

Starting with revenue and EBITDA on slide 14.

We are targeting revenue and adjusted EBITDA growth of 2% to 5%, which should yield a relatively stable year over year consolidated margin.

These growth ranges reflect the recovery back to within 2019 financial performance levels and are wider than we typically provide and order to absorb additional COVID-19 turbulence that may arise during the year.

Underpinning this outlook is positive topline and EBITDA growth from all of Bell segments. We expect a strong financial contribution from Bell wireless in 'twenty, and 'twenty, one where and ongoing focus on higher quality smartphone subscriber loadings and disciplined device discounting will drive.

The healthy year over year improvement and operating profitability.

We also anticipate and improving Abu trajectory with a partial recovery and roaming volume is expected in the latter part of 'twenty one as.

As well as the deceleration and the rate of data overage decline.

Our wireline financial growth profile is also expected to strengthen progressively as the year unfolds the.

Broadband footprint advantage that we're building positions us extremely well and both our consumer and business segments. As we continue growing internet market share and revenue faster than our competitors. We will continue to focus on winning the home by delivering the fastest broadband speeds as well as the best.

Wi Fi and TV experience to drive higher Internet and TV net.

Net customer additions.

And business wireline, we anticipate improving year over year rates of revenue and EBITDA declined on the back of higher customer spending as the economy rebounds, and and ongoing focus on cost reduction.

As for Bell media, we see good television advertising momentum going into 'twenty, one, especially as we lap COVID-19 impacts beginning towards the end of Q1, we also expect to benefit from contract renewals with TV distributors and continued crave growth.

However, higher cost of sports rights and the resumption of a full broadcast schedule and the premium content for our crave streaming platforms will moderate bell media as EBIT growth in 2021.

Let's turn now to slide 15.

Despite a decline and discount rates and 2020.

And supported by a strong 14% return on plan assets. The solvency ratio of Bell, Canada DB plan, the largest of the BCE pension plans was 102% at year end.

Given the strong valuation position Bce's regular cash funding for 2021 remains unchanged year over year at $3 $50 million to $375 million.

With respect the total pension expense on the P&L that is expected to moderately lower and 21 at $300 million due to the favorable impact.

Of a lower discount rate on our below EBITDA pension financing costs.

Let's move over to slide 16 on tax outlook, the statutory tax rate for 'twenty, one remains unchanged at 27% our effective tax rate for accounting purposes is also projected to be around 27%, reflecting minimal tax adjustments this year compared to the nine cents per share.

In 2020.

We also expect cash taxes to remain relatively stable year over year at $800 million to $900 million.

As the tax savings enabled by the federal government accelerated CCA program will be largely offset.

By other higher income taxes over to slide 17.

Slide 17 summarizes our adjusted EPS outlook for 2021, which we project to be $3 <unk> to $3 20 per share.

And for 1% to 6% higher year over year the.

This reflects a straw.

Underlying contribution from operations driven by positive EBIT of growth across all three bell segments.

Depreciation expense is expected to be 200 to 250 million higher year over year due to a R accelerated capital investment program that will be putting more capital assets in the service sooner.

And as I just mentioned higher income tax expense also will be moderated will also moderate adjusted EPS growth. This year, excluding the tax adjustments adjusted EPS is projected to grow three.

309% and 21.

Let's turn to slide 18.

As a result of the strong EBIT of growth, we expect the generate 285 to 3.2 billion of free cash flow and 2021.

This is this this is substantial given approximately $400 million and additional capital spending that we are absorbing as well as working capital of pressure from the growth and accounts receivable due to increasing sales activity as we continue to recover from Covid, which includes a higher expected volume of wireless installment plan transactions.

BCE consolidated capital of intensity ratio for 2021 is projected to be and the range of 18% to 20%.

But as Merkle quantified. This includes around $700 million that we're targeting and 21 as part of our two year capital of expansion program.

Normalising for this capital and advancement R capital of intensity ratio and 21 decreases the 15% to 17% free.

Free cash flow of growth improves and the range of six to 16, and the payout ratio of falls within 80% to 90%.

I would also like to point out that our definition of free cash flow includes all elements of working capital.

While some others do not.

Now that the Canadian wireless industry of shifted to installment plans the receivable based on our balance sheet is growing rapidly.

If you normalize for the financing of EAP receivables, which over the course of two years will flat note our dividend payout and 2021 normalized for both the incremental capital spend I, just mentioned and Diva and device financing falls below 80%.

A few brief comments on our balance sheet and cash resources on slide 19, we have access to 3.8 billion of liquidity as we entered of 2021 and of capital structure that is a line with our investment grade ratings of that leverage ratio of remain.

And it's manageable of 2.9 times adjusted EBITDA and is expected to increase and 21 as a result of anticipated wireless spectrum purchases at the auction later this year and the accelerated capital spend.

Our balance sheet as well structured with an average termed the majority on our long term debt of less than 12 years and.

And the historically low after tax cost of debt of just 3%.

More importantly, we have no near term refinancing requirements as our next material public that majority does not occur until Q4 of 22.

And in addition to all of our major DB plans being fully funded are close to $1 billion of annual U S. Dollar spending has been economically hedged well into 2022.

Actively insulating any free cash flow exposure until that time.

To conclude on slide 20.

As we said 2021.

Is the recovery here it is about maintaining operation of momentum as we transition towards the return to pre COVID-19 levels of financial performance.

While the path of the pandemic and the pace of economic recovery are expected to remain uneven potentially excrete constraining revenue and earnings growth and parts of our business and the near term.

The industry fundamentals are sound.

Our competitive position remains strong.

And the bell team's ability to execute is proven.

And on that I'll turn the call back over to feign and the operator to begin the question and answer period. Thanks, Glenn So given the volume of information. We covered this morning I am sensitive to the time, we have left so please limit yourselves to one question and debris follow up a few months. Thanks for your cooperation Valerie we're ready to take our first question.

Thank you and and just fotopoulos, the sprints, Taiwan and this time you can have a question I first question is from Jeff Sandwich Scotiabank. Please go ahead.

Hi, good morning, everybody. So lots of could talk about I guess around the investment plans four of 21 and 22.

My question is if you look beyond has accelerated the plan.

After the two years.

Can we get back to the Catholics intensity around the 15% to 17%.

You know the level of the where you would be without the accelerated plans or.

Do we need to think about kind of additional sources to help fund further expansion of like what you're getting from the data Center and my quick follow up along again with the investment line of these are very strong statement.

[noise] statements imply and supporting network investment, but we do have a couple of regulatory and.

Decisions coming and plus spectrum auctions.

How could those events and maybe the walls and park your investment plans for the next couple of years. Thanks.

Thanks, Thanks, Jeff So.

Look briefly what we're doing here with the 121 $2 billion over two years is advancing capital that we otherwise of would've spent over a longer period of time range. If you think about our broadband footprint program, we got and we want.

One of them.

Roughly 10 million households, and are operating footprint with fiber or wireless home Internet and.

60 per cent of the way there so that means there's 40 per cent to go so.

That $10 million.

Is the the denominators so by forging ahead and more quickly that means on the on the back end of the journey of there's a lot more flexibility for us and in terms of of Capex in terms of the the technologies and what might wanted the ploy overtime. So the answers short answer to your question with that.

The preamble is yeah expect us to get back to normal capex capital of intensity ratios.

On the the data centers and we.

We did get those that billion dollars and proceeds last year. There is no better place the deploy that capital then and our footprint expansion strategy, because and I'm not gonna repeat what I said and my opening comments the strategies clearly working so for shareholders. This is the best place to put that the $1 billion on on regulatory.

And that that that it's still significant issues, we have the the wholesale internet rates decision pending and the M. Vietnam decision pending I think we've got some very.

Good signals from.

The federal government last year, particularly and August when you know of that decision came out of the order of council came out regarding the the wholesale internet rates and and administer beans at the time had said that he was concerned that the rates of Crt's you had put in place would undermine investment and high quality networks, particularly and rural and that we need Paul.

<unk> is that encourage investments think that's a pretty important signal thinking of 2020 move all experience, it's pretty tangible now the importance of these networks, we can't risk, making more investment. So now I'm forging ahead with this bold investment program and I had all of its the biggest one and our history.

Because I have confidence that policymakers and regulators right now we're going to appreciate the importance of of stable regulatory environment, if the decisions come out and they're materially negative and of course, it's our job as the management team to stare that down and adjust that is required.

And the only.

The only thing I'll add to that Jeff is one of your questions regarding spectrum the capital investment decision we made today.

Two two of find the additional $1 million to $1.2 million was funded by the datacenter divestiture and it plays no role and our intention around the participation and spectrum auctions.

Thank you both.

Actually I think.

Thank you Alright, and next question is spend and spend and teeny with T. The security. Please go ahead and yeah.

Yes. Thank you very much of a couple of and the same topic.

Glen Your slide show 700 million of extra Capex for this accelerated program and 2021.

And make sure I didn't see that anywhere else. So I want to make sure I'm, sorry, and that of the one to 1.2 billion. Most of it is actually 2021, and there would only be between 300 and $500 million left and 2022, so call that a clarification fain and and a bigger picture question would be.

In terms of the fiber to the home incremental spending can you give us any color on geography's here, I mean, and I know Toronto and Montreal or are largely done does this mean.

And a bit of and accelerated rollout into the 905 areas and then maybe some of the the smaller cities you cover thanks, and you're all set.

Glen and I'll I'll I'll pick it off and you can.

The line so Vince just think about the billions of the the one to 1.2 billion like this Ah roughly two thirds of 21, one third and 2022, roughly two thirds and wireline one third and wireless kind of I would say that we'd be of kind of high level.

Mm benchmarks for Ya.

And on fiber, it's going to be pretty much.

Across are operating footprint, we're going to get the job done finished and Montreal, Toronto is largely done and Marshalls of well well on its way, but we're gonna finish that Winnipeg, which we announce Hamilton and we're going to kind of extend and the suburban areas and on wireless home Internet as well, it's going to be continuing and Atlantic continuing and Quebec the.

Launching wireless home Internet, and Manitoba, and and of course, continuing the pace and Ontario in rural areas Glen and I think there was a clarification you want and yeah, just just to clarify events and good morning, and and get you to turn to slide floor of our deck and you'll notice that the one point.

And 1.0, the 1.2 billion as we stayed there and his merkle said about a third 60, 70% is our intention. So you are correct and proximately your number of 700, but that's over baseline as we note and the and the footnotes so baseline normalized capital spending not the.

The higher spending.

The level of you.

<unk> seen and 2020 so.

That's the clarity.

Thank you thank you Vince.

Thank you.

Alright, and next question and David and I didn't get the Bank of America. Please go ahead and.

Hey, guys. Thanks, so much for taking the the question I guess my question is related to the guidance Glen a lot of companies are highlighting the kind of transformation on the cost structure around digital channel adoption.

Remote work et cetera.

And how the revenue leverage.

My might lead to higher margins and you also called out.

I think of 14 per cent reduction and enhance it subsidies and the quarter and it looks like and your expectations on the go forward basis that there's gonna be lower subsidies. So could you talk about kind of why we aren't gonna see better margin improvement over the course of 21 versus 20. Thanks.

Good morning, David well first of all many organizations, whether it be in our industry or any industry have chosen not to provide guidance due to the tumultuous environment, we're operating and.

We have decided today the demonstrate the confidence we have looking forward that we believe the guidance. We show here today gives us the.

A range that we can absolutely accomplishing and and it includes all of the things you alluded to yes, we're going to see digital transformation and <unk> and ideally continue to focus on and adding high value. The wireless subscribers continue to focus on and reduction on the handset subsidies, but all of that is factored into the guidance. We we.

Right here today I think the challenge we face is that we're we're not through this pandemic, yet and we continue to see Chad.

Challenge is and retail and and curfews remaining and many places and our market. So I think the guidance. We provide here today speaks to Ah two of healthy Oh look and a healthy performance we have the <unk>.

Expectations, we have for 2021, but they include all of that we are striving towards higher margin, but frankly roaming is going to take time to recover and you know that's sort of an extra stored nearly high margin revenue and it's going to be the back half of 2020 before I was wondering if anyone.

And I'll leave it at that and less merkle wants to add anything.

Thank you yes. Thank you.

Thank you and next question and Scream and you make Reynolds with the arm B C. Please go ahead.

Yeah. Thanks, very much good morning, maybe merkur of Glen and just to elaborate a little bit longer term when you're talking about fiberize and the cost structure and and Glenn you just alluded to.

<unk> wanted to kind of push margin over that medium and long term.

Perhaps just update us on.

How you see a lot of that cost structure of five rising of the cost structure unfolding through that medium term I and and and is there any updated timing on you know and ability to the the commission copper and and as a follow up.

I guess merkle, let's start with you on a lot of kind of news flow on satellite broadband continues to.

Tech to come into the narrative of global telecom with with the.

It's increased investment.

Just one of your latest thoughts on where that type of competitor kind of fits within the Canadian landscape. Thank you.

Thanks true. So we have we've always very mindful of the competitive dynamics and and the industry and and you know and that's what we do every day adjusting to to shifts and technology, and the marketplace and and and pricing et cetera. So there's no different with.

Potential satellite launches, but I feel pretty good with regard to where we stand and where we had a million household footprint plan for wireless home Internet, we're pretty much halfway there now we're accelerating even more so we've got kind of the early lead in terms of.

In terms of product availability.

Our speeds are 50, 50, $10 50 download 10 10 up.

That the.

Those are very fast speed and it's a robust service that we offer.

And the customers gonna get those speed and not to be not to be underestimated ever is when you subscribe to wireless home Internet with Bell you get a bell technician will drives to your place installs. It for you and if there's a problem there's somebody to call and will come and fix it and that's not the case with some of the early versions of Lee.

That we've seen out in the marketplace and that's not evident.

Coming up on the roof and installing the equipment and then if something goes wrong, what do you do.

So I know and continued continued focus on customer experience. So I feel really good about the competitive positioning of that product and it's only going to get better as we get $3 five more three dot five gigahertz spectrum and are able to transform that service and to five G and.

On.

On furniture and.

And the cost structure I look on on fiber Ization and.

Tried to unpack into my opening remarks, and the remarks and drew I mean, there's the churn benefits are clearly there. The top line benefits are there the churn benefits are there fewer truck rolls with fiber fewer calls I mean, there's a whole lot of goodness and as we push fiber out even more.

They're those cost benefits are going to be particularly significant and then not to mention and we've talked about it already but just to reiterate the the capex flexibility. We're gonna be we're gonna have and the out of the year outer years of our expansion program. So so you mean the cost side is clearly there.

And the medium to longer term and it's there right now like and turn your back to Glens.

Question answer a little bit earlier on and we're managing cost of very tightly the fiber ization and and it W. H I and the wireless home and and expansion strategy as part of that controlling handset costs and subsidies as part of that of course always looking at a total cost of labor is part of that.

The digital acceleration is is a part of that cost control as well and the margins are going to increase as as broadband expansion continues.

Yeah.

Thank you.

[laughter].

Thank you. My next question is the best Channel Petty the T. P. Morgan. Please go ahead and.

Hi, Thanks for taking the question.

Wondering if you could unpack, perhaps the fiber build out and I think we talked about five to 25 per cent of penetration within the first of all the months of kind of new vintages, a new expansion, but just looking at the 1.7 older. Your your current five of patterns and pies penetration of about <unk>.

30 per cent.

And so I'm not sure of them getting that incorrect, but just thinking about.

The opportunities for additional penetration games within your existing footprint above and beyond you know the new kind of home bills and that acceleration and uhm are you. If you could perhaps comment on the level of competition within yeah. Both of the fiber markets as well as you know and your some of your traditional broadband non fiber markets as well.

Thank you.

Okay. So I mean, if you.

Take if you take wireless start with wireless home interest so when we when we enter when we enter of market. You know, it's it's and market. These are markets, where we either have not had any service at all to offer the customers or it's been very low speed DSL, So where we've either had no service or frankly.

The service not a competitive enough so penetration gains and those markets can be very high in fiber market. It's a combination of building in areas, where we had DSL, which is not at this stage of 2021 is and competitive with alternative services, So and you don't <unk>.

The fight TB gigabit five is the most competitive internet service in the in the country. So when we enter of DSL market with speed of fiber speed of one to one got five gave a gigabit per second it's and extremely competitive marketplace and that explains a product and that explains the growth in and penetration and F T T and mark.

That's what we're talking about here and we may have a customer we move that customer from ft T and over the F. T th, there's a lot of goodness there too in terms of increased our <unk> for that same customer and then and they were the lower costs of of service. So across the board. It just leads to growth and as the as a percentage of of retail and.

And at the one seven.

Million subs, and I referred to as actually 50% penetration not 30.

Yeah I missed the <unk>.

Best you and how it goes without saying I've set of many many times before wherever we construct fiber to the home we take a disproportionate share of net adds and that ultimately is going to lead to.

And I was having.

A significant increase and our existing internet market share and.

And that that just bodes well for the future and and speaks volumes to why we want to accelerate the investment today fiber works and the debates over.

The value of that it brings to our customers and to our shareholders.

Okay. Thank you next question and with Ya.

Thank you and our next question and Chairman, that's yeah and design with a U B S. Please go ahead and.

Great. Thank you can you provide maybe some more color on the wireless transfers of the beginning of the year and have the volume slow tomorrow, given the extended Lockdowns and if there was any change and competitive intensity and one just quick follow up you'll comments about the relatively stable my items for the year does that hold true for both of <unk>.

Segments, assuming maybe boming comes back into back Hassled the year for both of my line and the wireless. Thank you. Okay I'll take the first one Glen and and over to you for the second one.

And.

The the the Lockdowns and then the new Lockdowns that hit US and November December and are continuing today clearly they of had an impact on the volume of transactions that is that is certainly the case there is.

Sort of churn benefit just in terms of of improved customer service and just the nature of of buying patterns given the lockdown. So there's there's been a benefit there as well our our approach.

Is the following though and where are.

Focusing on high quality high quality loading so I mean, you see it and the results while the transaction volumes may be down. The fact that we're focusing on high quality loadings is actually providing a lot of goodness in terms of service revenue growth or if you want kind of the the improvement and the service revenue decline and like.

As I mentioned at the beginning of you normalize for the overage impacts and the roaming impacts our our App, who would of would have actually been positive. So.

And we take the approach and we're always going to be competitive we're going to be very disciplined on discounting and on promotions again, while being competitive and responding and a competitive marketplace, but we're going to focus on those high quality smartphone and loadings, we're gonna deemphasize.

Tablets, and other connected devices, except where they're accretive and and the and it's paying off and you see it and in the queue for results.

Glen and thanks for calling and I'll <unk> I'll tackle the the question on margins and the short answer is yes. We we believe we will have stable margins and both are wireline and wireless business headed into and heading into 2021 here.

The the cost of discipline. The actions, we're taking will protect our emergence what I can't predict is the the pace of recovery on thing high emerge and things like roaming obviously like everyone. On this call I am optimistic and hopeful had coming through the the back half of 2021, and we're going to see the the vaccine taking hold and allowing Canadians to travel once again.

And should.

Should that happen obviously, those roaming revenues are extremely high margin, but our focus in the meantime, we'll be insuring the cost of that we take the necessary cost actions to protect and ensure stable margins and and both of those lines you alluded too. Thanks for your question.

Thank you.

Thank you.

My next question Eastern and can can you see with female. Please go ahead and.

Yeah, a couple of for me could you.

I guess Glen for you what how should we think about.

Media for the year I know you <unk> you gave some some comments on the guy, but just how are you thinking about.

The pace of media you did mention you know you the program and costs are Gonna go up. So just wondering if you can provide any more color there and the second for you <unk> <unk> could you talk a little bit of boat competitive intensity regionally.

Oh, Oh or if there's any differences between you know the important, Ontario, and Quebec markets on the wireless intensity competitive intensity. So thanks.

Well I'll jump and first as of as Murko thinks of of the second part of him.

As I said and my opening remarks of I expect the all of our of business units to provide positive contribution to both the the both revenue and EBITDA in 2021 media and.

Is as part of that I expect it to return deposit of what I said is that it could be moderated and will most likely be moderated because if the year plays out the way we envision we will return.

To all live major sports, returning which will increase programming costs.

We expect to see an increase and advertising revenue is and if people start moving around and you think about our out of home business that's been so high.

Have all the impacted as there's people not moving through airports and in downtown the foot and car traffic is down so much Billboard advertising is down and I expect all of that the recover but I also expect the program and costs to increase so it will be of positive contribution to EBITDA. It's it's one of our most volatile.

Business units when you think about how this pandemic effects it but I also want to remind you of it represents eight per cent of our EBITDA, so feeling confident and will return positive and <unk>.

And will be of contributor to the overall the guidance that we've provided today.

And thanks, Bye and so.

So the question, Tim I've, and if you've heard me say quarter after quarter of that as.

And industry, we really do need to keep a check on escalating what we're escalating handset subsidies, particularly as I mentioned before when you separate the right plan from handset costs and you kind of offer handsets. The catered all of affordability levels. There's really no reason to be subsidizing Ah handsets to the same levels as in the past you know and so.

That's one aspect of it of course on either that or just general promotional intensity. It does even flow depending on the time of year and I would say the good news is that progress was made and Q4.

Discount handset discounting approved 14 per cent year over year, we saw some.

And we saw product margins that were positive and improving year over year again, that's the focus or a byproduct of our focus on higher quality smartphone loads.

Q the the the.

The the holiday season, and I think was was and.

Encouraging in terms of the level of promotional intensity generally we did see it get pretty hot of times on the flanker brands and particular, so that had an impact on the on a prepaid segment as I mentioned earlier, but I think all and all where where good progress on that front generally less intense year over year.

Less intense and Q3 2020 and.

And the exception being the flanker brands and and I think we're we're kind of heading the headed and the right direction at starting to properly monetize the massive investments, we're making and wireless, particularly with the kind of the spike and investment. We're we're all going to make and our five G networks and spectrum and we're gonna need to monetize of that reflect and.

The way, that's really reflective of the tremendous value of provide the consumers while at the same time, we are being very mindful of the affordability because prices are going down can even see the latest kind of.

Statscan launched.

The launched the digital portal and you can see that the wireless prices have decreased quite significantly from 19 to 20, and we all know that that and and the important segments of they've also decreased and 2020, particularly the segment that the customer of that the king and governments asked us to to reduce the prices and so I think we're doing a good job of theirs the the.

The discipline seems to be there.

We're certainly intent on monetizing the investments and we are going to deliver on on the commitment to the government and offering just generally more value at the right prices the customers.

Thanks next quite a day.

Thank you and the next question and spent R. As in there and get it <unk> Kenacort Genuity. These go ahead and.

Good morning, a couple of quick clarification number one perhaps of line.

You talked about the service revenue growth of 1%, excluding the COVID-19 impact compared to the two and 5% decline and reported can you are you able to give us a little bit of of breakdown in terms of of roaming.

Over age and other in particular, given and some of the given the fact that really the Rogers kind of talked about and most significant other impact I wanted to make sure that.

Is bell seen that sort of.

Hit in terms of activation fees et cetera, and then as of follow up on the on the handset costs and.

And you referred to of 40% decline do.

Do you expect with the IP enrolling how do you expect to see sort of of more.

Perhaps even of old material gain on that front as you step into 2021.

Okay I'm on service revenues, Yeah, I'll give you a little bit of insight, what we've experienced and roaming has been extremely consistent since Q2, I told you and Q2 that the implications to to the pandemic resulted and almost the 70% reduction and roaming and and that quarter. It was around 60 million.

I reported that that the same dollar value roughly identical continued through Q3 and in the queue for so that is the the biggest driver on what's what's challenging service revenues I'd say challenging service revenues.

But I will take of victory lap that we're very pleased with the performance that we had on service revenues and the quarter compared to our peers short answer no I don't have anything to unpack on other because there isn't another and as Merkle said and his opening remarks.

There we continue to manage the data overage declines that's happening it's something that we've done a very good job you've heard of speak of vote historically managing that so the the trend continues it is declining as as overage and and people move to unlimited plans, but our focus is ensuring that.

That's a managed approach and it's not of race to the bottom and.

And I don't recall the second part of the question.

It's with respect to the subsidies you talked about 10, SEC discounts of fall and 14 and.

Look the we're extremely pleased with the with the handset discounting that we're seeing the the move to installments is accomplishing exactly what we had hoped it would at times I think there are there is lack of discipline and the market and we hope that the that cleans up but we think about what what the installment program does it give it give.

Customers the choice they can migrate to the handset the best meets their needs and.

And they can finance it over over of term that allows it to be affordable what it allows the the industry to do is be more cash constant cost conscious on how expensive. These handsets of are becoming and manage the discount and the back pocket offers that would go with them. So.

Early signs are encouraging and I expect and hope it will continue and it's a big part of our strategy on managing margin. So.

We will focus on it and and and try to bring the discipline to that we.

And we have time for one more quick question.

Thank you and next question is from Simon and Splintery with Morgan Stanley. Please go ahead and.

Right Uhm, good morning, and thanks for taking the question of I'm plan quick one for you could you just talk about how you're thinking of medium term about the payout ratio and and the leverage target obviously nice to see the dividend increase here, but given the capex sky and it sounds like on the the auctions and maybe see about and beyond the $3 five.

Never just gonna and you'll probably not gonna be generate substantial free cash off the dividends until maybe 2023 and I'm I'm beyond and so how should we think about you know what what are you comfortable going to say the low threes for it and while and then try and get it back to current levels and the and the three to five year view, so that the right way to think about it.

Yeah, I think so sign of that I as I unpacked for you today first of all we're and unprecedented of times and no one ever envisioned we would find herself and Ah and of global pandemic of this nature so to expect.

US to force our organization and a short timeframe back into the historical target of payout ratio would would be detrimental and damage the business. When we know longterm. This industry is.

Is the stable and we will return to historical earning level. So right now we decided and the low interest rate environment. The best thing. We should we could do is to use the use the proceeds of the data center to invest in the network by investing and the network. We know that's going to bring growth and internet and television subscribers that growth is going to bring.

And growth and future cash flow at future cash flow is going to manage the payout ratio and the ability to fund dividend go forward. So look and the short term, yes, we're outside of the payout raise the ratio done is wide open we know that and the medium term as you alluded to post twenty-two when this investment is behind us and let's all hope the pandemic is behind US we will return.

More normalised levels.

And the case of leverage yeah, we're above our state of objectives for leverage, but again and extraordinary low interest rate environment, We think the leverages manageable and the free cash flow generation of this company and the and the medium to long term will absolutely allow us to manage leverage and it's the right thing to do at the right time.

Right.

Thank you and give everybody for your participation. This morning, and I am available throughout the day for any follow up question of the clarification. So I'll have a great rest of the day take care of and stay safe.

Thank you.

Thank you everyone the conference now and.

And easy Phoenix and the lines of this time and we thank you for your participation.

Yeah.

Yeah.

The conference has now and it pleases connect the lines of this time and we thank you for your participation.

[music].

This is no longer being recorded no visits per month as it goes the homes the tent the heartbeat.

[music].

Please note that this conference call has ended and please disconnect. Your line at this time. Thank you.

And you're not because of that.

They tell me and me.

Okay.

Let's see.

[music] okay.

Please note that this conference call has ended please disk.

Connect your line at this time thank you.

And you're not because of that person said tell me the.

And of course, what pending the thing.

[music].

And it sounds like part of fifth people.

Please note that this conference call has ended and please disconnect. Your line at this time. Thank you.

Okay opinion, not because of the pellicle and fiance, telling me and the seafood per cause she about finding nothing.

[music] and massage of office people.

Please note that this conference call has ended please disconnect your lines at this time. Thank you.

And you're not because of the political channels the tell me more.

The seafood pick that question about the billing let's see.

[music].

And have a fever pitch.

Of note that this conference call has ended.

Disconnect. Your line at this time thank you.

She's the Pip opinion, not because of the pencil down and say tell me.

A question about training.

[music] massage on process people.

Please note that this conference call has ended and please disconnect your lines at this time. Thank you.

And you're not because of the pellicle and fiance tell me knee share.

We pay out because she was tightening.

[music] massage of office people.

Please note that this conference call has ended please disconnect. Your line at this time. Thank you.

Seafood pet opinion, not kiss the type of vehicles and also tell me the seafood pick up because she was failing let's see.

[music] and they.

Such off of our fifth fever. Please note that this conference call has ended.