Q1 2021 BCE Inc Earnings Call
And with $6 5 billion of available liquidity and liquidity to drive both our national investment strategy and Bce's higher common share dividend for 2021.
Now for a quick update on the progress, we're making and advancing our strategic priorities in 2021.
And our broadband investment acceleration program is in full swing with over $1 billion and new capital spend in Q1, we.
We equipped and another 148000 locations with either direct fiber or wireless home Internet technology. 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 and the world. We've also made several announced announcements recently to expand broadband connectivity to more rural and remote areas of Canada. These.
These include a partnership with the government and Quebec that we'll see direct fiber rolled out to 31000 locations and 100 underserved communities.
And and initiative enabled by the Crts <unk> Universal broadband fund to bring faster internet to more than 10000 homes, and Yukon and the northwest territories, including <unk>, which just became the first all fiber community and the Arctic circle.
I'll turn now to wireless.
Bell <unk> network is on course to cover more than 50% of the population by year and nationally however.
However, success and five <unk> and Iot leadership depends on multiple ingredients beyond coverage.
It's about delivering the fastest speeds the lowest latency and flexibility that can only be achieved through extensive sales site fiber ization and slicing of the network and leveraging network points of presence such as central offices for multi access edge computing that supports product development.
<unk> is also the largest <unk> provider and Canada benefiting from deep relationships with the biggest Canadian company that we can service almost anywhere in the country.
So those are the multiple ingredients, ensuring that bell will be the leader and <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 <unk> hotspot and our innovative TSM and RV.
<unk> five <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 among national carriers for a sixth consecutive year and the most recent report from the Cts, which showed a 17% drop and a number of complaints by bell customers. We.
We made progress in diversifying our channel mix and expanding digital channel capabilities.
<unk> sales in Q1 were up more than 200% versus last year and will grow further over time as we continue to improve online tools and functionality.
This past quarter, we introduced some new self serve features online and via the my Bell and Virgin Mobile My account apps, which included dynamic call, writing routing and the ability to change the rate plan, our upgraded 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 responsibilities and integral part of our six strategic imperatives that informs all of Bell's policies decisions and actions.
ESG commitment supports this purpose driving our unparalleled investments and broadband network infrastructure and service innovation unmatched environmental leadership investments and 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 and helping multiple sectors reduce emissions.
Bells, and acknowledged leader and 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 and 2025 and I'm happy to report that Bell was again named one of Canada's greenest employers the <unk>.
And the National communications provider to be ranked fifth straight year and.
And of course through Bell, let's talk we're supporting mental health action and 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 and Bell senior management team of 25% by 2025, and 40% of all new graduate and student hires and the same timeframe.
<unk> is also a member of the 30% club and a signatory to the catalyst the core 2022, which aimed to increase the proportion of women serving on Canadian corporate boards to at least 30%.
And 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 and our industry will continue to build on that leadership position.
Okay over to slide five.
And our operating metrics for Q1, and I'll start with wireless.
And 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 <unk>, 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.
<unk>. This change reflects our strategic focus on higher value smartphone loadings, and the associated and margin and economics in terms of lifetime value and EBITDA growth, while also enhancing the transparency of our disclosure.
Wireless customer activity was strong and Q1, despite ongoing COVID-19 restrictions subscriber loading showed good year over year growth postpaid churn remained low at eight and 9% and Abu continue to recover.
We delivered 33000 mobile phone mobile postpaid phone net adds this quarter up 31 over last year.
In terms of connected devices, we realized strong net adds of 74000 or 51% higher year over year, reflecting increased demand for bell 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 a slowdown and 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.
That said, we grab considerable market share over the past couple of years because of Lucky mobile, which has higher than average <unk> and I see prepaid growth resuming in the back half of this year.
Lastly, on wireless and blended at the Pud 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 threshold and 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 and demand as consumers began to work and spend more time at home.
If we look at Internet net adds within our fiber footprint, specifically it paints and even stronger picture. We delivered 37000 retail residential internet net adds and our 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 to a favorable impact on both subscriber growth and internet revenue, which grew a very strong 12% and Q1. It's the reason, we're so confident and our accelerated capital investment plan.
And TV, we added 11000, net new IP TV subscribers 8000 higher than last year, representing our first quarter of year over year growth and two years.
This improvement can be attributed to strong bell <unk>, TV, and Virgin TV performance, and lower customer churn, particularly and our fiber footprint.
And so thats, a very positive result, and a mature Canadian TV market and it speaks to the pull through impact and strong symbiosis between 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 and home phone customer deactivation, resulting and 17% fewer net losses and.
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 to 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 continued strong specialty news performance and the significant gains and primetime viewership and.
Net sales at our French language conventional network and you will take.
Taken altogether this drove a three 5% increase and TV advertising revenue in Q1.
That's a very encouraging result that should strengthen as we are beginning to lap last year's COVID-19 impacts.
TSN and Rds remain the top English and French language specialty pay TV channels, and Q1 and building and are on our celebration of women leaders at Bell TSN and made history, just last month with the first all female broadcast of and NBA game.
Consistent with our digital first strategic focus we.
We made progress on growing our extreme and 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.
That's up 12% over last year.
Digital revenues increased 16% and 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 and 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 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 TV and Virgin TV to Bell streamer to the traditional television channels and the CTV Avon App, all the way potentially to create.
Repatriating digital AD dollars back into Canada is a good thing for our economy consumers and certainly for Canadian broadcasters and.
And in support of this objective yesterday, we announced a 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 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 channel. It's a great addition to bill's strategic asset management suite of data enabled and privacy compliant and tools and offers marketers and advertisers the ability to identify.
Understand and connect with the right audiences.
On that.
And I'll hand, the call over to Glenn for a review of our Q1 financial results.
Yes.
Thank you Marco and good morning, everyone.
May begin on slide seven.
A very positive start to the year as we achieved consolidated revenue and EBIT 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 and 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 and capital assets and accelerated depreciation of four gene network elements as we transition to <unk>.
We invested over $1 billion and Capex this quarter the year over year increase is consistent with our two year plan to accelerate more than 1 billion of investment on wireless and wireline broadband networks and mobile <unk>.
Despite the notable step up and capital expenditures free cash flow increased 54% over last year to $940 million.
The year over year improvement can be attributed to the timing of tax installment payments and 'twenty one as.
And 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 and mobile roaming and 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 and overage revenue EBITDA was right on the costs, but 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 and EBITDA on higher margin of 44, 2%.
This result was driven by both higher service revenues, which grew approximately 1% and a 14% increase and 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 a result of an impressive 12% year over year increase and Internet revenue reduced seasonal service suspensions and and an improved rate of voice decline as fewer customers are disconnecting home phone service during this pandemic.
And at Bell business markets, while overall results continue to reflect reduced telecom spending by large enterprise customers and volume declines and the SME sector because of COVID-19, we saw improvements and 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% and the quarter, reflecting stronger sports and news specialty performance as well as incremental contribution from Nouvel.
Oat 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 a temporary waiving of part one.
Our two feeds by the federal government due to the pandemic.
<unk> with year over year decline and advertising this quarter.
Which is a very high revenue flow through impact EBITDA was down seven 7%.
Let's turn gate adjusted EPS on Slide 11 details key components of adjusted EPS, which was <unk> 78 cents 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.
But we are 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've previously mentioned.
Free cash flow increased 54% to $940 million.
We ended Q1 with six 5% available liquidity and our steady debt leverage ratio, 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 cash flow was exceptionally high exceptionally high this quarter as a result of higher cash from working capital due partly to the slowdown and commercial activity.
And that we began to experience and 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.
Installment payments and 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 course with increased customer activity free cash flow 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 and a surplus position on a 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 a 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 a contribution holiday is imminent.
To wrap up on slide 13, we are extremely pleased by the operational execution delivered by the Bell team and 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 on that I'll turn the call back over to <unk> and the operator to begin the Q&A.
Thanks, Glen So before we do start the Q&A period, I, just want to remind participants that due to time constraints. This morning, because of our annual general meeting 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 in 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 lines and if you have a question and I know you're seeing and speaker phone. Please go ahead, Sir before making your selection.
Have a question. Please press star one on your devices keypad canceled a question. Please press star two.
Darwin at this time, if you have a question there will be a brief pause from participants register.
And you for your patience and.
And the first question is from.
Jeff fan from.
Moshe Bank.
Please go ahead.
Thank you.
Good morning, Michael and good morning, Glenn.
Perhaps.
The big question that we've been getting a lot and the past week is related to the Rogers and Shaw and I guess, the revelation that BCE.
Was involved.
<unk> I just wanted to give you maybe an opportunity to address that at a higher level. If you will perhaps the rationale and whether there is a mixed bag.
<unk> option and.
And then a very quick follow up perhaps for Glenn.
And Q1 revenue and EBITDA grew year over year, even with a 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 than usual and I know you didn't change your guidance, but do you have any color that you can give given the stronger than expected start.
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.
The issue, let me start by saying I feel and I've said this and since I became CEO I feel good about our current asset mix.
And we are well positioned to win and.
And on a converged era and talking about fiber and <unk> networks <unk> Iot met.
And <unk> use cases, and the revenue opportunities that are going to comp with that.
And really excited about our digital shift and media and 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.
And 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.
And the transaction that you referred to and your question Geoff It came up we looked at it and we decided not to proceed and.
And that can add really anything beyond what's already and the public domain.
Some other 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 a 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 formidable competitors.
Leave it at that Jeff.
Thanks, Good morning, Jeff, It's Glenn and your question on Q1 revenue and EBIT performance and any color I can provide look.
We're very very pleased.
And <unk>.
To have had growth in both revenue and EBITDA and if we remember back we are really lapping a quarter, where there was.
Minimal COVID-19 impact in Q1 of 2020, it was really Q2, and we started to feel.
Yes.
The extreme impacts of this pandemic so to be able to deliver positive topline revenue growth and and earnings growth. Yes, we're extremely pleased and I wouldn't say.
It changes our outlook, we look to the and the next one.
Three quarters for the remainder of 2021, and we know we're going to face uncertainty and volatility during this pandemic and <unk>.
I hope that each and every quarter, our country begins to heal and and our economy starts to perform better.
And with that I think the confidence and and our operations and the and our performance of our company is underpinned by the fact that we actually provided guidance this year.
Others may not have but we were very.
Very confident and our ability to continue to see sequential improvement and operational excellence and I think thats underpinned by firstly, providing guidance, but more importantly, reconfirming and today so.
And I think Jeff we're extraordinarily pleased with.
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 COVID-19.
Can you from TD Securities. Please go ahead.
Yes, thanks very much.
And Glenn first can you confirm the 12% Internet growth that would all be service revenue correct, none of the product revenue would be and that.
Yes, correct, yes that is correct Vince I'm, just double checking but yes, no you're right. It is all service, okay and that kind.
Amazing number I mean, we can see what the subscriber growth is and internet. So clearly there is a pretty healthy <unk> gain there can you break that down a bit for us and is there any particular SKU by any region.
Or any particular SKU.
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's a little bit less promotional activity I think we're truly seeing consumers realize the value of our product now in this pandemic and how important it is to have world class Internet speeds and.
And upgrading to better performance products it is happening across our entire footprint.
Wherever we're offering service and so yes, we're extremely pleased with the 12%.
But it is I can't give you any more granularity and then.
And the areas that you hit on but it's all of the above.
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 and love to get your thoughts on the outcome of the wireless review, while we have you here and maybe as a follow up completely different the digital transformation at Bell media, yet alluded to 17 percentage of revenue now digital is there some kind of road map or you don't.
Forward looking.
Digital contribution to revenue that youre willing to share.
If not just maybe talk to.
Some of the key leaders and driving that digital contribution higher thank you.
Thanks drew so on the.
On the regulatory decision.
Everyone knows what our position has been quite consistently over time and including throughout this kind of the last proceeding.
And we evidenced in the facts on the ground easily would have supported a decision to stay the course with <unk> Bank.
<unk>, So I think it's important to say that but.
That said and.
Given the range of potential and <unk> approaches that had been considered.
CRT and <unk> did at least layout and the decision and approach that is yes.
And our sense consistent with our traditional facilities based policies.
And 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 implications of the decision and.
Like we said the first day.
Right out of the Gateway and the decision came out and 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, but delivering a wide variety of plans and continuing to deliver better customer experience. So we can continue to to generate the results debt that we're seeing.
And on.
On media and I'm really really pleased with.
And with how well we're pivoting towards a digital first approach to the business.
And.
Really.
Ken really unpack at this at this stage for you through too much of the key drivers there it's early stages, but I think.
Really it's about.
Buttressing.
The suite of digital AD inventory that we can make available to advertisers and providing and easy to use one stop platform for advertisers to engage with adds they're developing their campaigns and we talk a lot of ups and strategic asset management I think I think that would be key driver right now of the success.
And 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.
Yes.
Hi, good morning guidance I'm not sitting in for Dave. Thanks for taking the questions and just two if I could.
And I was wondering if you could talk about some of the underlying trends in and.
And you're seeing from wireless service revenue and if we should expect going forward and are leaving aside building, obviously, everyone can make an assumption about and that will come back and how strong but should we assume that service revenue growth is going to be driven going forward, both by subscriber growth and by underlying RP.
And secondly.
On the comment Glenn about the contribution holiday.
Pension being imminent is that.
Are you referring.
Leading us to believe that this is a 2021 event and is a holiday contemplated in the guidance range that you provided for free cash flow.
Okay, Glenn and 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 that our focus on smartphone loadings is bearing fruit and you could see.
And and the results there with 33000 postpaid net adds and up 31000 year over year and as we and deemphasize tablets, we have and 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 digi.
<unk> transformation is working and while store traffic continues to be down pretty appreciably, given the restrictions and you've seen the gross add numbers thereof.
Other factors speaking to the.
The growth in wireless and promotes promotional intensities been fairly rational and Q1.
January and February were especially stable and handset discounting.
Acceptable.
So positive trajectory there that's a good sign.
And.
And where I see growth going forward, obviously 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 and mobile phone strategy <unk> monetization on there on the horizon and and.
And 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.
And then anything to add and then pension.
Good morning, Matt and I'll touch on the pension contribution holiday that I alluded to earlier.
Look.
And as many on this call will know it's been probably 15 or 16 years I've been coming on these calls talking about the state of our pension.
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.
See it now and our planning horizon, meaning and then.
Next 12 to 24 months. So 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 and opportunity that is going to present itself and our planning horizon. So not this year, Matt but.
It's pretty exciting after all of these years to see it.
And literally on the horizon.
Okay, great. Thanks, so much.
Thank you.
The next question is from Aaron Linda Galipeau, each 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 that subscribers peering.
Now in terms of the highest speed product.
Help us understand how much more running room, there is with respect to that trend.
And my co Glenn and I was wondering if you can talk about sort of the proportion of subscribers that.
And Ah, perhaps of taking debt up still taking speeds and 50 Megabits of 25, Megabits and particular youll fibre customers that can obviously user needs and a tier up to its 100, even up to 500 and wanted to get a sense of sort of.
That upside and thank you.
Okay.
And I'm not going to break I'm not going to breakdown.
The tearing of our fiber customers on.
And the various plans but.
Let me leave it at that this urban and there is there is definitely upside and having customers tear up.
From from the plans. They currently are on two plans all the way up to one $1 five gigabits per second and.
And that would come with quite clearly.
And our <unk> bump and so there we are focused on that.
On.
90% of our of our Internet subscribers are on unlimited plan. So really the move is to encourage subscribers who are on plan and below a gig, let's say debt to tier up to higher rate plans and therefore drive higher ARPA.
Yes, Linda its Glenn just to build on what <unk> said.
And 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 fibre to the home Internet subscribers at the end of Q1.
It's up 17% year over year, and so as we continue to make the necessary investment and 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.
And that's where our big opportunity still remains for US is to continue to 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.
And factors.
Three components to it right, there's one that Glenn Glenn just mentioned as we roll out more fiber just natural growth opportunity there for our current fiber subscribers and encouraging them to migrate up to higher rate plans and of course, and there's a cost side and just the customer experience churn and cost benefits that come that we've talked about before with 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 diego bra and filling in for Simon. Thank you for taking the questions.
Just to follow up on that fiber point can you just speak to what penetration levels youre seeing and the fiber markets and year, one and how you see that trending over time.
And then on wireless you spoke to.
Capex being down materially in the stores, but still had solid postpaid gross and net adds and you also spoke to the direct.
Channel can you just speak to.
How you expect that direct channel or online sales.
What percentage and you see that making up over time and maybe any cost benefits there. Thank you.
Okay. Thanks.
On 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 FTP and 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 unpack that but you can see you can see kind 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 so clearly a fiber strategy is working we're taking strong revenue share, we're taking strong net add share quarter after quarter.
And where we have fiber I mean, it's the right thing to do to accelerate that plan and what we now 75% February and I was confident than I am more confident than ever that this is the right strategy.
<unk>.
On the wireless side and digital and we have.
We're a lot better than we were a year ago at direct channel sales, so that would be online and the apps and through our call centers and again I pointed to the gross add increase year over year and my in my opening remarks, that's going to continue them and those direct sales are going to <unk>.
Continue to be.
A growing portion of our overall sales and therefore, our overall channel mix and it definitely comes with lower Coa.
And allows us to be more competitive it does provide a better customer experience and the sense that those customers, who want to deal with us and those channels can now do and easily intuitively.
And to happier and happier customer at the end of it and then of course, the customers who want to continue to deal with us through retail stores will continue to have.
Have that benefit because we're going to continue to lead and traditional retail store distribution and the omni channel journey is going to be important that seamless transitioning between between channels is going to be top of mind for us and.
And we'll give you an exact number but I will say diego that debt year over year total cash channel cost has gone down and that's largely a function of.
And of direct sales and the mix now as retail stores reopen and that mix is going to rebalance a bit but direct sales are going to continue to be a meaningful component of that and growing.
Just to build on and Ortho said Diego 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.
Is that simple, it's and every footprint, where we build fiber we have the opportunity to take share and that continues so although I won't share with you specifically what the penetration rate is and the first six months 12 months is and it's different by region. What is important as we continue to take a disproportionate share of net new.
Okay.
Hey, Nick 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 shall day. Please go ahead.
Yes, thanks for taking my questions two questions on <unk> growth. We saw we saw a slight change in methodology for 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.
Possibly and and also on the transition to unlimited.
And what are where are you and your plans to transition in terms of where we wanted to be.
So Glenn you want to start first on that flow.
Sure. So the App the Apple <unk> and shown now has changed due to a reporting change and removing the.
Connected devices or items like tablets from.
From the <unk> calculation you would have 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 Youll notice that the app, who jumped I think zane, it's and the roughly five or $6 on and App.
It's about $7 excuse me, but all of that was restated so as to give you clear comparability, yes Euro and if you go to last year's supplementary versus this year as you can see the differences.
And on.
And on overage.
We.
We continue to manage that nicely.
And like I've said before I and base management is something we're particularly good at and we're not force migrating customers if customer with the unlimited plans are available. They are there for those who want them.
Yes.
Its there with <unk> you have to get into this 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 are well positioned for <unk> I think I think really for us the <unk>.
Bike and transitions from capped plans to unlimited plans will happen when there is.
Spike and adoption of <unk> handsets.
And as I, Thanks, Ed and my opening remarks, when we look at Abu and.
The fact that if you normalize for the sizable impact of roaming continues to have and that number and our 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 and I was just wondering.
And then got.
Got it and higher rate plan. So I was just wondering where do you stand on novel journey and getting your postpaid customers over and unlimited plans and I was just wondering if you can give us some ideas too.
50% migrated over and unlimited plans and just sort of.
Some idea there and then secondly on the pension plan hiatus, when you're talking about.
And a hiatus and funding and 12 to 24 months I was just wondering could this be something material and and really help your free cash flow and to help you didn't emerge faster. Thank you.
And the first on the first question again with unlimited plans very similar to the answer I gave to Joe and 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 portfolio of services, we're providing now of course.
We do have to provide unlimited plans. It is it is.
And good consumer initiative and positions us well from <unk>.
So so that migration and.
In terms of the Bell subscriber base that migration will evolve naturally as COO.
Customers migrate over to <unk> I did I did say that it is positive that when a customer migrates to unlimited 60% of those are on higher and higher rate plans, but there is that's parking for our second data overage impacts of really trying to manage the data overage decline and I think it's the right thing to do for our shareholders.
And that data Overages and high flow through revenue and other.
Other than other than providing the suite of plans and handset that customers want no set target it'll it'll come when it comes and it will come when <unk> per wheel.
Thank you for calling and I'll take the pension plan funding question.
The size of the price is your annual current service cost and if you look at what it it tends to be for us of all plants.
$200 million to $250 million annually now if theres, a monthly test and each each plan has to be tested individually. So one plan could be and a contribution holiday state where another may not be but the size of the prize is absolutely material. If we if we consider that if you were able to have all.
Plans and a state of a contribution holiday it could be upwards of $200 million to $250 million and 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 opportunity and the future is pretty exciting.
Okay. Thank you.
Thank you there are no further questions registered at this time I would 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 and not have a great rest of the day and take care and stay safe. Thank you. Thanks, everyone. Thank you.
Thank you.
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