Q1 2021 BCE Inc Earnings Call
Yes.
Okay.
Hum.
Thanks.
Okay.
[music].
Okay.
[music].
Oh.
This conference is being recorded so it goes the homes at the old registry.
Yeah.
Please standby your meeting is about to begin.
Good morning, ladies and gentlemen, welcome to the BCE Q1, 2021 results conference call.
I'd like to turn the meeting over to Mr. Faint Fotopoulos. Please go ahead Mr. Fotopoulos. Thank you Donna and good morning to everyone also joining me on the call today are Mark Hood, Vivek V six president and CEO and our CFO Glenn Moore's law before we begin as usual I'll draw your attention to our safe Harbor statement reminding you that todays slide presentation and remarks made during.
The call will include forward looking information and therefore 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 over to you Marco thanks.
Good morning, everyone.
And every successive quarter since the onset of COVID-19.
She has delivered sequential quarterly improvement in our operating results in Q1 was no exception, although the pandemics effects are still present, which is both consolidated revenue and adjusted EBITDA growth for the first time since Q4 of 2019.
This is an important milestone that speaks of the stability and resiliency of our operations our ability to operate effectively under challenging conditions, the strength of our leading broadband networks and services and our management team's focused execution.
The continued to grow broadband market share, adding of leading 108468 total mobile phone mobile connected device retail internet and IP TV net subscribers. This quarter, an increase of 51% over last year and with $940 million of free cash flow generated this quarter, we have the financial flexibility with.
$6 $5 billion of available liquidity liquidity to drive both of our National investment strategy and BCE is higher common share dividend for 2021 now.
Now for a quick update on the progress, we're making in advancing our strategic priorities in 2021 of our broadband investment acceleration program is in full swing with over $1 billion of new capital spend in Q1, we.
We equipped to another 148000 locations with either direct fiber or wireless home Internet technology of this quarter.
And another 370000 are currently under construction keeping us on track to reach $6 9 million total homes and businesses passed by the end of this year.
And as part of our overarching goal to advance how Canadians connect with each other in the World. We've also made several announce announcements recently to expand broadband connectivity to more rural and remote areas of Canada.
Include a partnership with the government of Quebec that will see direct fiber rollouts of 31000 locations in 100 underserved communities.
And in the initiative enabled by the CRT sees Universal broadband fund to bring faster internet to more than 10000 homes in Yukon and the northwest territories, including <unk>, which just became the first of all fiber community in the Arctic Circle.
I will turn out of wireless.
The <unk> network is on course to cover more than 50% of the population by yearend nationally.
However success in <unk> and Iot leadership depends on multiple ingredients beyond the coverage, it's about delivering the fastest speeds the lowest latency and flexibility that can only be achieved through extensive sales take fiber ization and slicing of the network and leveraging network points of presence such of central offices for multi app.
Access edge computing that support the product development that was also the largest provider in Canada of benefiting from deep relationships with the biggest Canadian company that we can service almost anywhere in the country.
So those of the multiple ingredients, ensuring the bell will be the leader in <unk>.
Although the full benefits of <unk> technology won't be realized until mid band spectrum is available and the partnership ecosystem evolves. We're already launching new services that are taking full advantage of the unprecedented speed and capacity of five G. Now. These include the industry's first mobile of five G hotspot and our innovative TSN and Rds.
The <unk> apps that offer new interactive new ways to watch sports.
We're also more generally delivering a better customer experience at every level driving improved satisfaction loyalty and retention and another leading performance in the national carriers for a sixth consecutive year in the most recent report from the Cts, which showed a 17% dropping the number of complaints by bell customers.
We made progress in diversifying our channel mix and expanding digital channel capabilities digital sales in Q1 were up more than 200% versus last year and will grow further over time as we continue to improve online tools of functionality.
This past quarter, we introduced some new self serve features online and via the my belt and Virgin Mobile My account adds which include the dynamic call writing routing the ability to change the right client or upgrade the device as well as in App chat features for Bell Virgin and Lucky wireless customers.
Let me turn now to slide four of our presentation.
Corporate responsibility as an integral part of our six strategic imperatives that informs all of those policies decisions and actions.
Sales ESG commitment supports this purpose driving our unparalleled the investments in broadband network infrastructure and service innovation unmatched environmental leadership investments in our teams and communities and adherence to the highest financial operational and data governance standards all overseen by our board at the corporate governance Committee.
Our networks and services are important enablers of Canada's clean economy with the power of <unk> mobile connections poised to be a major factor in helping multiple sectors reduce emissions Belgium.
<unk> is an acknowledged leader in the Green economy recently, becoming the first communications company in North America to achieve ISO 5001 certification for our energy management system and announcing our objective to achieve carbon neutral operations in 2025 and I'm happy to report. The Bell was again named one of Canada's greenest employers the owner.
The national communications provider to be ranked fifth straight year.
And of course through Bell, let's talk we're supporting mental health action in communities throughout Canada, helping over 1100 organization since 2010 with funding commitments now totaling more than $120 million with an ultimate target of at least $155 million by 2025.
We're undertaking meaningful actions to foster a more diverse workplace, including new targets for bypass representation in Bell senior management team of 25% by 2025, and 40% of all new graduate and student hires in the same timeframe.
<unk> is also a member of the 30% club and a signatory to the catalyst the core of 2022, which aimed to increase the proportion of women serving on Canadian corporate ports to at least 30%.
At our annual shareholders meeting later this morning, we expect to exceed that objective.
All of this to say that ESG is an important focus area for us strong environmental social and governance practices contribute to driving better operating results and creating shareholder value and given who we are and the role we play in our industry will continue to build on that leadership position.
Okay over to slide five.
And our operating metrics for Q1, I'll start with wireless.
This quarter, we've modified our subscriber results reporting to align with many of our large north American peers as the Canadian industry evolves towards five G. Specifically, we're now disclosing mobile phone and mobile connected device metrics separately for comparability, we have restated our 2020 quarterly wireless subscriber metrics to reflect these.
Changes this change reflects our strategic focus on higher value smartphone loadings and the associated margin and economics in terms of lifetime value of an EBITDA growth, while also enhancing the transparency of our disclosure.
Wireless customer activity was strong in Q1, despite ongoing COVID-19 restrictions subscriber loading showed good year over year growth postpaid churn remained low at eight 9% and App, who continue to recover.
We delivered 33000 mobile phone mobile postpaid phone net adds this quarter up 31 over last year in.
In terms of connected devices, we realized strong net adds of 74000 or 51% higher year over year reflect the increased demand for bell of Iot solutions, including connected car subscription.
And prepaid despite lower year over year churn, our customer base decreased by 31000 net subscribers lower market activity reflected of slowdown in immigration and international travel to Canada during the pandemic as well as reduced retail store traffic, resulting in 27% fewer gross adds compared to last year.
Set we grab considerable market share over the past couple of years because of Lucky mobile, which has higher than average arco nic's prepaid growth resuming in the back half of this year.
Lastly on wireless blended at the Pud the decreased three 4%.
This of course reflects the industry wide pressure on roaming associated with travel restrictions and lower data overage revenue as customers continue to subscribe to higher data of threshold in unlimited plans.
Notably around 60% of existing customers, who have migrated to unlimited have upgraded to higher rate plans, which sets us up well for the mass commercialization of <unk>.
Let's turn to wireline.
We added 21000 total new net internet customers, which compares well to last year's exceptionally strong results. When we experienced a surge in demand as consumers began to work and spend more time at home.
If we look at the Internet net adds within our fiber footprint, specifically it paints an even stronger picture, we delivered 37000 retail residential internet net adds in the FTE th footprint, that's up an impressive 43% over last year.
As our broadband footprint advantage keeps expanding we begin to see almost immediately the favorable impact on both subscriber growth and Internet revenue, which grew a very strong 12% in Q1.
The reason, we're so confident in our accelerated capital investment plan.
In TV, we added 11000, net new IP TV subscribers 8000 higher than last year, representing our first quarter of year over year growth in two years.
This improvement can be attributed to strong bell <unk>, TV convergent TV performance and lower customer churn, particularly in our fiber footprint.
So thats a very positive result in our mature Canadian TV market and it speaks of the pull through impact and strong symbiosis between the broadband internet content and digital media.
Satellite net customer losses decreased for sixth consecutive quarter, improving more than 7% versus last year.
And we continue to see a reduction in home phone customer the activations, resulting in 17% fewer net losses.
And as I've mentioned in the past anytime the rates of decline slow for these high margin services. It's.
It's accretive to cash flow.
Over the Bell media.
Although total advertising revenue was down year over year due to COVID-19 impacts on radio and out of home TV Advertiser demand continued to recover with a full quarter of major League sports are Super Bowl broadcast which was the third highest in Canadian history continue.
Continued strong specialty news performance and the significant gains in primetime viewership and AD sales at our French language conventional network of Newell.
Taken altogether. This drove a three 5% increase in TV advertising revenue in Q1, that's a very encouraging result that should strengthen as the beginning to lap last year's COVID-19 impacts.
TSN and Rds remain the top English and French language specialty pay TV channels in Q1 and building in our on our celebration of women leaders at Bell TSN made history, just last month with the first of all female broadcast of an NBA game.
Consistent with our digital first strategic focus.
We made progress on growing our streaming distribution platforms and digital advertising markets.
Crave enjoyed standout performance with its best quarter since the final season of game of Thrones, adding 139000, new subscribers in Q1 to surpassed $2 9 million total customers.
It's up 12% over last year.
Digital revenues increased 16% in Q1, and now represent 17% of total Bell media revenue and Thats up 14% from last year.
Going forward, we're expanding our digital AD inventory and modernizing our traditional distribution platforms to ensure they have the capabilities to enable dynamic adds on video on demand and ultimately on live television, we want our entire AD inventory, both digital and traditional.
To be more dynamic and addressable.
Offering targeted advertising capabilities and leveraging data insights from across the bell for advertisers will enable us to take a bigger slice of the AD spending pie on any platform. We operate from five TV to all of TV and Virgin TV to Bell streamer to the traditional TV channels in the CTV Avon App, all the way potentially to crave.
Repatriating digital AD dollars back into Canada is a good thing for our economy consumers and certainly for Canadian broadcasters.
And in support of this objective yesterday, we announced the new partnership with AT&T Zehnder to create candidates first self serve omni channel advertising platform for television and digital that will deliver increased automation of functionalities and leverage data to facilitate new and easier media buying capabilities.
The new platform will enable Canadian advertisers to run scaled targeted campaigns using using premium inventory over multiple platforms and channels. It is a great addition to <unk> strategic asset management suite of data enabled and privacy compliant tools and offers marketers and advertisers the ability to identify.
Understand and connect with the right audiences.
On that.
I'll hand, the call over to Glenn for a review of our Q1 financial results.
Yes.
Thank you Marco and good morning, everyone.
We begin on slide seven.
A very positive start to the year as we achieved consolidated revenue and EBITDA growth. Despite ongoing COVID-19 impacts on our business all bell operating segments delivered meaningfully better performance trajectories that drove a one 2% year over year increase in revenue.
This translated into an EBITDA increase of <unk>, 5% as higher margin wireless roaming and media advertising revenues have not yet recovered to pre pandemic levels.
Despite higher EBITDA net earnings were down six 3%. This was due to severance cost recorded in Q1 for workforce reductions undertaken earlier this year, notably at Bell media.
As well as higher depreciation expense driven by growth in capital assets and accelerated depreciation of four gene network elements as we transition to <unk>.
We invested over $1 billion in Capex this quarter the year over year increase is consistent with our two year plan to accelerate more than 1 billion of investment of wireline wireline broadband networks and mobile <unk>.
Despite the notable step up in capital expenditures free cash flow increased 54% over last year, the $940 million the.
The year over year improvement can be attributed to the timing of tax installment payments in 'twenty one as.
As well as temporary favorable change in working capital that is expected to reverse over the remainder of this year.
Let's turn to slide eight.
Q1 marked the return to positive topline growth for Bell wireless total revenue was up three 2%. This was driven by a 20% higher product revenues due to increased sales of premium smartphones that that reflects our strategic focus on higher value mobile phone subscribers as well as strong.
<unk> online consumer electronic sales at the source.
Direct channels drove a significant portion of the year over year volume growth and accounted for one third of total consumer and small business sales in Q1 compared to just 15% a year ago.
Although year over year service revenues declined.
Yes.
Was the decline of two 1% it did improve sequentially this quarter.
Roaming and data overage remain headwinds, which is not a surprise to anyone.
Normalizing for the $62 million COVID-19 driven reduction in mobile roaming in Q1 service revenue was actually up one 9%. So a very positive indicator of when borders reopen and travel resumes.
Despite the loss of the high margin roaming in overage revenue EBITDA was right on the cost of of positive growth this quarter.
Decreasing by only <unk>, 5%, which represents a notable improvement from the 3% decline we reported last quarter.
Moving to slide nine Bell wireline had its best top line performance of the past two years delivering year over year growth of one 5%, which yielded a two 1% increase in EBITDA on higher margin of 44, 2%.
This result was driven by both higher service revenues, which grew approximately 1% and of 14% increase in product revenue driven by higher sales of data equipment to the government sector.
Belo residential had a standout performance in Q1 growing revenue nearly 4%.
This was the result of an impressive 12% year over year increase in Internet revenue.
Reduced seasonal service suspensions and in an improved rate of voice declined as fewer customers are disconnecting home phone service during this pandemic.
At Bell business markets, while overall results continue to reflect reduced telecom spending by large enterprise customers and volume declines in the SME sector because of COVID-19, we saw improvements in the year over year rates of revenue and EBITDA decline.
Let's move over to Bell media on Slide 10.
Further sequential improvement this quarter as revenue declined five 2% compared to 10% in Q4.
Although TV advertising revenue was up three 5% in the quarter, reflecting stronger sports of new specialty performance as well as incremental contribution from Nouvel.
Owed of home and radio advertising have been much slower to recover.
Subscriber revenue reflected strong crave streaming growth, but overall remained relatively stable year over year. However growth is expected to strengthen during the course of the year due to the flow through of contract renewals with some of the Canadian TV distributors.
Operating costs decreased four 5% driven mainly by lower cost of revenue because of TV production shutdowns and delays as well as labor savings and the temporary waiving of part one part two fees by the federal government due to the pandemic.
Consistent with year over year decline in advertising this quarter.
Which is of very high revenue flow through impact EBITDA was down seven 7%.
Turning to adjusted EPS on Slide 11 details key components of adjusted EPS, which was <unk> 78.
<unk> per share for Q1 is COVID-19 related impacts continue to moderate throughout most of Q1.
Higher EBITDA as well as lower net interest expense and pension financing costs contributed favorably to adjusted EPS.
What we're effectively but were effectively offset by the increased depreciation and amortization expense I mentioned earlier and lower year over year tax adjustments.
Turning to slide 12, despite the ongoing financial impacts of COVID-19 and higher year over year capital spending, which I previously mentioned.
Free cash flow increased 54% to $940 million.
We ended Q1 with six 5% available liquidity and our steady debt leverage ratio of providing us with very good financial flexibility as we continue to execute on our capital acceleration investment strategy and we head into wireless spectrum auction in June free.
Free cash flow was exceptionally high exceptionally high this quarter as a result of higher cash from working capital due partly to the slowdown in commercial activity.
That we began to experience in the latter stages of Q1 2020 as the COVID-19 crisis began.
This quarter's results also reflect an expected decrease in cash taxes due to the profiling.
Of the installment payments in calendar 'twenty one.
That said as the pace of Capex picks up with the increased construction activity during the spring and summer months and as working capital reverses of course with increased customer activity free cash flow of growth will moderate consistent with our guidance target for the year.
Lastly, a quick pension plan status update.
And an important milestone that I wanted to highlight regarding our funded position.
For the first time ever and despite a persistently low interest rate environment all of Bce's major defined benefit pension plans are in the surplus position on the solvency basis with the largest of those plans being bell Canada at over 105%.
More recently, we've been able to take contribution holiday on one of our smaller plans.
This bodes well for the opportunity of taking contribution holidays on our larger defined benefit plans and the <unk>.
Near future.
The thought of the contribution holiday five years ago wasn't even on the horizon.
Fast forward to today with all plans more than fully funded.
It is reasonable to assume debt of contribution holiday is imminent.
To wrap up on slide 13, we are extremely pleased by the operational execution delivered by the Bell team in Q1 with consistent steady improvement that continues to build momentum back into every part of the business, which sets us up very nicely for the balance of the year.
With this promising start to the year and the strengthening financial profile across all operating segments I am Reconfirming all of our guidance targets for 2021 and all.
On that I'll turn the call back over to <unk> and the operator to begin the Q&A. Thanks.
Thanks, Glen So before we do start the Q&A period, I, just want to remind participants that time constraints. This morning, because of our annual general meeting of shareholders meeting, which is taking place. Shortly after this call. Please limit yourselves to one question and a brief follow up so that we can get to as many of the queue as possible. Thank you for that so Donna we're ready to take our first question.
Yeah.
Thank you we will now take questions from the telephone line. If you have a question and you are using a speakerphone. Please pick your handset before making your selection.
You have a question. Please press star one on your devices keypad to answer the question. Please press Star two please press star one at this time. If you have the question there will be a brief pause of participants register thank you for your patience.
And the first question is from.
Jeff fan from.
Moshe Bank.
Please go ahead.
Thank you.
Good morning, Michael Good morning, Glenn.
Perhaps.
The big question that we've been getting a lot in the past week is related to the Rogers and Shaw and I guess, the revelation that BCE was involved.
Well I just wanted to give you maybe an opportunity to address that at the higher level. If you will perhaps the rationale and whether there is the next best option.
And then the very quick follow up perhaps for Glenn.
The Q1 revenue and EBITDA grew year over year, even with the difficult call. Bob I'm. Just wondering if that was ahead of your expectations going into this year and whether there is any color that you can give on guidance. Its a wider range. The unusual and I know you didn't change of guidance, but do you have any color that you can give given the stronger than expected start.
Yes.
Okay. Thanks.
Thanks, Jeff.
Morning, and thanks for the question I'm going to keep it.
I'll keep it high level given the nature of.
Of the issue, let me start by saying I feel and I've said this since I became CEO I feel good about our current asset mix.
And we're well positioned to win in the <unk>.
<unk> talking about fiber and <unk> networks <unk> Iot Mec.
The <unk> use cases, the revenue opportunities that are going to come with that.
Really excited about our digital shifting media in the digital AD spend monetization that will be able to to generate and monetizing big data insights.
So I think that's important to mention I did I have also said consistently.
Since I became CEO because I've been asked this.
That we will always look at opportunities that come up and capitalize on the opportunities that makes sense for our shareholders. So.
The transaction that you referred to in your question, Jeff. It came up we looked at it and we decided not to proceed.
Not going to add really anything beyond what's already in the public domain.
Some of the reasons.
We are therefore some of the reasons why we didn't proceed have been reported on.
And at this point, it's not our deal.
The merging parties have of regulatory process to go through the first instance, and while they're doing that like I've. Also said, we will continue to build and we will continue to position ourselves to be a formidable competitor.
Leave it at that Jeff.
Thanks, Good morning, Jeff It's Glenn on your question on Q1 revenue and EBITDA performance and any color I can provide look.
We're very very pleased.
Two.
To have had growth in both revenue and EBITDA. If we remember back we are really lapping of quarter, where there was.
Minimal COVID-19 impact in Q1 of 2020, it was really Q2, and we started to feel.
The.
The extreme impacts of this pandemic so to be able to deliver positive topline revenue growth and in earnings growth. Yes, we're extremely pleased and I wouldn't say.
It changes our outlook, we look to the the next one.
Three quarters of the remainder of 2021, and we know we're going to face uncertainty and volatility during this pandemic.
I hope that each and every quarter, our country begins to heal and in our economy starts to perform better.
And with that I think the confidence in our operations and the performance of our company is underpinned by the fact that we actually provided guidance this year.
Others may not have but we were very confident in our ability to continue to see sequential improvement and operational excellence and I think thats underpinned by firstly, providing guidance, but more importantly, reconfirming of today. So.
I think Jeff we're extraordinarily pleased with the.
With the first quarter and how we came out of the gate and the momentum we can carry into the rest of the year.
Great. Thank you.
Thank you. The next question is from Vince Valentini from TD Securities. Please go ahead.
Yes, thanks very much.
Glenn first can you confirm the 12% Internet growth that would all be service revenue correct. None of the product revenue would be in that.
Yes, correct, yes, yes that is correct Vince I'm, just double checking but yes, no you're right. It is all service, okay and thats one of them.
<unk> number I mean, we can see what the subscriber growth as an internet. So clearly there is a pretty healthy <unk> gain there can you break that down a bit for us is there any particular SKU by any region or any particular SKU.
Net of pricing gains versus people cheering up versus maybe just less promotional discounting thats flowing through that revenue number.
You did a pretty darn good job there Vince that's exactly it hits all of the above it is a little bit less promotional activity I think we're truly seeing consumers realize the value of our products now in this pandemic and how important it is to have world class Internet speeds.
And upgrading to better performance products it is happening across our entire footprint.
Wherever we're offering services. So yes, we are extremely pleased with the 12%.
But it is I can't give you any more granularity than the.
The areas that you hit on but it's all of the above.
Good enough. Thank you.
Vince.
Thank you. The next question is from drew Mcreynolds from RBC capital markets. Please go ahead.
Yeah. Thanks, Thanks, good morning.
Merkel I'd love to get your thoughts on the outcome of the wireless review, while we have the here and maybe as a follow up completely different the digital transformation at Bell media, yet alluded to 17% of revenue now digital is there some kind of road map or.
Kind of forward looking.
Digital contribution to revenue that youre willing to share.
If not just maybe talk to.
Some of the key levers in driving that digital contribution higher thank you.
Thanks true so on the.
On the regulatory decision.
Everyone knows what our position has been quite consistently over time of including throughout this kind of of the last proceeding.
The evidence in the facts on the ground easily would've supported the decision of the state of course with nowhere.
<unk>, So I think it's important to say that but.
That said gives.
Given the range of potential <unk> approaches that had been considered.
The crts did at least layout and the decision of an approach that is yes.
In a sense consistent with our traditional facilities based policies.
There's a lot of details to work through though drew so we'll do that of course over time, and we're going to continue to assess the implications of the decision.
Like we said the first day.
Right out of the gateway of the decision came out of as we do the regulatory work that we need to do.
First and foremost we're going to continue to be focused on our customers and that's about delivering the highest quality networks by delivering a wide variety of the plans and continuing to deliver better customer experience. So we can continue to to generate the results of that that we're seeing.
On.
On media I'm really really pleased with.
With how well we are pivoting towards a digital first approach to two of the business.
<unk>.
Really.
Ken really unpack at this at this stage for your true too much of of the key drivers there. It's early stages, but I think kind of.
Really it's about.
The buttressing, our the suite of digital AD inventory that we can make available to the advertisers and providing an easy to use one stop platform for advertisers to engage with as they're developing their campaigns and we talk a lot about the sand strategic asset management I think I think that would be key driver right now.
Of the success in the in the early days of our strategic pivot.
Okay. Thank you.
Thank you. The next question is from David Barden from Bank of America. Please go ahead.
Of course.
Oh, Hi, good morning, guys, it's Matt sitting in for Dave. Thanks for taking the question just two if I could.
I was wondering if you could talk about some of the underlying trends in the.
Are you seeing the wireless service revenue and if we should expect going forward the leaving aside the bromine obviously, everyone can make an assumption of bell and that will come back and how strong but should we assume that service revenue growth is going to be driven both by subscriber growth and by underlying RP.
And just secondly.
On the comment Glenn about the contribution of holiday on the.
The pension being imminent is that.
Are you referring.
Leading us to believe that this is the 2021 event and is a holiday contemplated in the guidance range that you provided for free cash flow.
Okay Glen I'll start first on the on the wireless question you could supplement as you wish on that and then go into the pension question. So on the wireless side. You can you can see the that our focus on smartphone loadings is bearing fruit and you could see it in the.
And the results there with 33000 postpaid net adds and up 31000 year over year and as we deemphasize tablets, we haven't walked away completely from tablets, but we're focused on profitable tablets and the profitability of our tablet sales has gone up 90% year over year. So that's a that's an impressive number the digital transformation.
As of working while store traffic continues to be down pretty appreciably, given the restrictions or you've seen the gross add numbers of thereof.
Other factors speaking to the.
The growth there in the wireless promotes promotional intensities been fairly rational in Q1.
January and February were especially stable the handset discounting.
Acceptable.
So positive trajectory there that's a good sign.
And.
Where I see growth going forward, obviously, you know roaming will will come back.
Immigration and population growth will continue when we get.
Through this there is pent up demand and with that comes penetration growth I mentioned, the mobile phone strategy <unk> monetization on the on the horizon and.
In prepaid as well as I mentioned in my opening remarks prepaid will come back.
Some of these other factors that I've mentioned.
Improve as we get through through COVID-19.
Anything to add and then pension.
Good morning, Matt Yeah, I'll touch on the on the pension contribution holiday that I alluded to earlier.
Look.
As many on this call will know it's been probably 15 or 16 years of been coming on these calls talking about the state of our pension.
Uh huh.
Deficit, whether that'd be at Bell Alliant are here at BCE and all of our plans and to reach this historic milestone where theyre all fully funded with something that I wondered if I'd ever seen in my career, when I say imminent I do not I am not referring to 2021, it will not be this year.
It is not in the targets of the guidance we provided but.
I see it now in our planning horizon, meaning in the next 12 to 24 months of post 2021. This is now real and that it's gone from being a sizable cash flow burden of having to make special contributions into our pension plan for well over more than a decade.
Two an opportunity that is going to present itself in our planning horizon. So not this year, Matt but.
It's pretty exciting after all of these years to see it.
Literally on the horizon.
Alright, great. Thanks, so much.
Thank you.
The next question is from Arab Linda the Gala package from Canaccord Genuity. Please go ahead.
Good morning, Thanks for taking my question I wanted to go back to the international revenue growth number obviously very impressive.
And you alluded to sort of the upgrade cycle that the trend of subscribers tearing tiers.
Peering up in terms of the debt.
The highest speed products just as the.
Help us understand how much more running room, there is with respect of that trend.
Eat them co of Glenn I was wondering if you can talk about sort of the <unk>.
A portion of subscribers that.
And the perhaps of taking that up still taking speeds of 50 Megabits of 25 Megabits in particular your fiber customers that can obviously use of the sort of tier up to its 100, even up to 500 wanted to get a sense of sort of that upside. Thank you.
Okay.
I'm not going to break I'm not going to breakdown the the.
Of the tearing of our fiber customers on.
Of the various plans but.
Let me leave it at that this urban there is there is definitely upside and having customers tear up.
From from the plans. They currently are on two plans all of the way up to one $1 five gigabits per second and.
That would come with quite clearly.
And our pool of bump and so there we are focused on that.
On.
90% of our of our Internet subscribers are on unlimited plan, so really the the.
The move is to encourage subscribers who are on plans below of gig, let's say the tier up to higher rate plans and therefore drive higher ARPA.
Yes, Linda its Glenn just to build on what the Merkle said.
Of our fiber strategy is clear and that is it.
Advancing our network and our fiber to the home footprint faster and $1 7 million total bell of fiber to the home Internet subscribers at the end of Q1.
That's up 17% year over year, and so as we continue to make the necessary investment in rolling fiber route and to bringing world class connectivity to our customers naturally they're going to migrate to a better.
A better speed tier and that's where our big opportunity still remains for US is to continue the rollout fiber.
And offer world class Internet speeds so.
There's a significant runway in front of us and wireless fiber infrastructure investment is so critical.
The factors there.
Three components to it right. There's the one that Glenn Glenn just mentioned as we roll out more fiber just the natural growth opportunity there for our current fiber subscribers encouraging them to migrate up to higher rate plans and of course of there is the cost side and just the customer experience churn in cost benefits that come that we've talked about before with the with a broader fiber footprint.
Thank you.
Thank you. The next question is from Simon Flannery from Morgan Stanley. Please go ahead.
Hi, Good morning. This is <unk> filling in for Simon. Thank you for taking the questions.
Just a follow up on that fiber point can you just speak to what penetration levels Youre of.
Seeing in the fiber markets in year, one and how you see that trending over time.
And then on wireless you spoke to true.
<unk> being down materially in the stores, but still had solid postpaid gross and net adds and you also spoke to the direct.
The channel can you just speak to.
How you expect that direct channel or online sales.
What percentage do you see that making up over time and maybe any cost benefits there. Thank you.
Okay. Thanks on the.
On the the <unk>.
Fiber question again.
When we enter when we enter a market and overly fiber, where we didn't have fiber before so it might've had FTE TN or ATM lower speed DSL technology and by the way. The same thing goes with wireless home Internet, we're seeing we're seeing rapid penetration gains.
I'm not going to impact that but you can see you can see kind of of the topline numbers.
The sub gains that Glen shared with you the topline revenue gains that we're seeing that Vince asked us about.
Clearly the fiber strategy is working we're taking strong revenue share, we're taking strong net adds share quarter after quarter.
Where we have fiber I mean, it's the right thing to do to accelerate that plan of where we now satisfied. The February I was confident then I'm more confident than ever that this is the right strategy of.
<unk>.
On the wireless side and digital.
We're a lot better than we were a year ago at direct channel sales, so that will be online in the apps and through our call centers and again I pointed to the gross add increase year over year in my in my opening remarks, that's going to continue the I mean, those direct sales are going to.
Continue to be a.
A growing portion of our overall sales and therefore.
Our overall channel mix and it definitely comes with lower Coa.
It allows us to be more competitive it does provide a better customer experience in the sense that those customers who want to deal with us in those channels can now do it easily intuitively.
And that's the happier they're happier customer at the end of it and then of course, the customers who want to continue to deal with us the retail stores will continue to.
Have that benefit because we're going to continue to lead in traditional retail store distribution and the omni channel journey is going to be important adds seamless transitioning between between channels is going to be top of mind for us and we.
I will give you an exact number but I will say diego of that year over year of total cash channel cost has gone down and that's largely a function of.
Of direct sales and the mix now as retail stores reopen and the mix is going to rebalance a bit but direct sales are going to continue to be a meaningful component of that and growth.
Just to build on Merkle said the AGL just one one brief comment I've said, it before and I continue to remind everyone again, where we build fiber we take a disproportionate share of net new adds it is that simple. It's in every footprint, where we build fiber we have the opportunity to take share in that.
That continues so although I won't share with you specifically what the penetration rate is in the first six to 12 months as it is different by region. What is important as we continue to take a disproportionate share of net new.
Okay.
Okay. Thank you.
Thank you as a reminder, please press star one if you have a question and the next question is from Chevron day plenty from day to all day. Please go ahead.
Yes, thanks for taking my questions two questions on the <unk> growth.
We saw we saw a slight change in methodology.
Our reporting subscribers.
It's easier to see the impact on the subscriber front, but maybe if you can quantify the impact on the absolute growth.
The possibly end and also the transition to unlimited.
What are where are you in your plans to the transition in terms of where we want to be.
So Glenn you want to start first on absolute.
Sure. So the app the Apple growth that we've shown now has changed due to a reporting change in removing.
The.
The connected devices or items like tablets from the.
From the <unk> calculation you would've seen historically, if you look back we restated all of calendar 2021, so that it is comparable so that the growth rates, we're not skewed by that you'll notice that the Abu jumped I think thing that is in the roughly five or $6 on an app.
It's about <unk> of $1 excuse me, but all of that was restated so as to give you clear comparability yes.
Your AUM if you go to last year's supplementary versus this year as you can see the differences.
And on.
On overage.
<unk>.
We continue to manage that nicely.
Hi.
Like I've said before I am base management is something we're particularly good at we're not force migrating customers if customer with the unlimited plans are available. They are there for those who want them.
Yes.
There with <unk> you have to get into the you have to take an unlimited plan, we see 60% of those as I mentioned, who migrate to unlimited plans are migrating up which is good and we're well positioned for <unk> I think I think really for us the spike in transitions from capped plans to unlimited plans will happen.
When there is.
Spike and adoption of <unk> handsets.
And as I said in my opening remarks, when we look at <unk>.
The fact that if you normalize for the sizable impact of roaming continues to have in that number or service revenue number is positive and therefore big impact on our <unk> as the as the impacts of roaming.
Thank you.
Youre welcome.
Thank you. The next question is from David Mcfadden from Cormack Securities. Please go ahead.
Oh, great. Thank you.
So you talked earlier about 60% of your customers have migrated to unlimited data plans I was just wondering.
The higher rate plans. So I was just wondering where do you stand on the whole journey of getting your postpaid customers over the unlimited plans I was just wondering if you can give us some idea as to.
The 50% migrated over non mining plans and just sort of.
Some idea of there and then secondly on the pension plan hiatus, when you talk about.
A hiatus in funding part of the 24 months I was just wondering could this be something material and really help your free cash flow on the help you didn't even faster. Thank you.
The first on the first question again with unlimited plans very similar to the answer I gave to <unk> home I have no set target in terms of the pace of migration to unlimited that we're seeking and I'm actually trying to to manage the data overage decline and the entire kind of portfolio of services, we're providing now of course.
We do have to provide unlimited plans. It is it is.
Good consumer initiatives positions us well for five G.
So that migration.
In terms of the Bell subscriber base that migration will evolve naturally as <unk>.
Customers migrate over to five G. I did I did say that it is positive that when the customer migrates to unlimited 60% of those are on higher kind of higher rate plans, but there is that's parking for a second the data overage impacts of really trying to manage the data overage decline I think it's the right thing to do for our shareholders.
<unk>.
That data overages of high flow through revenue.
And.
Other than other than providing the suite of plans and handsets that customers want no set target it'll it'll come when it comes and it will come with <unk>.
Thanks, Mark I'll take the pension plan funding question.
The size of the prize is your annual current service cost and if you look at what it tends to be for us of all plants.
$200 million to $250 million annually.
Now if there is a monthly test in each of each plan has to be tested individually. So one plan could be in.
A contribution holiday state, where another may not be but the size of the price is absolutely material. If we if we consider that if you were able to have all plans in the state of the contribution holiday it could be upwards of $200 million to $250 million in any one calendar year.
So fingers.
Fingers crossed but for now we're just we're extremely pleased that it's no longer requiring cash to be put into the plan and two to think about that size of opportunity in the future is pretty exciting.
Okay. Thank you.
Thank you there are no further questions registered at this time I'd like to turn the call back over to Mr. Fotopoulos. Thank you Donna so thanks again to everybody for their participation on the call. This morning as usual I'll be available throughout the day for any follow ups or clarifications. So on that have a great rest of the day and take care of stay safe. Thank you. Thanks, everyone. Thank you.
Thank you the <unk>.
Conference has now ended please disconnect your lines at this time and thank you for your participation.
This conference is no longer being recorded since the <unk>.
Hosting the Blue III.
Yeah, all of the VITAS soup the level of pre.
The day of wellhead, Donald with Ken Zaslow of new voluminous till the vessel day.
[music].
All participants please continue to standby the conference will begin momentarily. Once again. Please continue to standby we thank you for your patience.
Some of the view of we lapped the silty duckenfield the VITAS soup the level.
The <unk> will then assume the vessel day.
[music].
Okay.
Yes.
Okay.
Okay.
Sure.
Okay.
[music].
Okay.
All participants please continue to standby the conference will begin momentarily. Once again. Please continue to standby we thank you for your patience.
Now some of the view of we.
We left the CMT duckenfield, the VITAS soup the level.
The BUNAVAIL ahead, Donald with Ken Zaslow of Nouvel.
Some of the vessel day.
[music].
All participants please continue to standby the conference will begin momentarily. Once again. Please continue to standby we thank you for your patience.
Some of the view of we lapped the silty duckenfield the VITAS soup the novelty.
We will have somewhat of a Ken zaslow of new voluminous soon the vessel day.
[music].
Okay.
Okay.
Okay.
[music].
Thanks.
Okay.
Yes.
Okay.
Okay.
[music].
All participants please continue to standby the conference will begin momentarily. Once again. Please continue to standby we thank you for your patience.
Now some of the view of we want the CMT duckenfield the VITAS soup the level of pre.
The Bureau of wellhead, Donald with Ken Zaslow of Windmill handling of the vessel day.
[music].
[music].
The.
Some of the beyond we lapped the CMT duckenfield the VITAS soup the level.
<unk> had somewhat of a Ken zaslow of new voluminous soon the vessel day.
[music].
Okay.
Okay.
[music].
Okay.
Sure.
Okay.
Okay.
[music].
Okay.
All participants please continue to standby the conference will begin momentarily. Once again. Please continue to standby we thank you for your patience.
I know some of the view of we want the CMT duckenfield the VITAS soup the level.
Pre owned at the end of <unk>, Donald with Ken Zaslow of New voluminous.
Some of the vessel day.
[music].