Q2 2021 Rogers Communications Inc Earnings Call
Thank you for standing by this is the conference operator.
Welcome to the Rogers Communications, Inc. Second quarter 2021 results Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded.
Following the presentation, we will conduct a question and answer session.
To join the question queue. You May Press Star then 1 on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing star and zero I would now like to turn the conference over to Paul Carpino, Vice President of Investor Relations with Rogers Communications. Please go ahead Mr. Carpino.
Great. Thanks, Eric Good morning, everyone and thank you for joining us today I'm here with our President and Chief Executive Officer, Joe Natale, and our Chief Financial Officer, Tony Staffieri.
Today's discussion will include estimates and other forward looking information from which our actual results could differ. Please review the cautionary language in today's earnings report and in our 2020 annual report regarding the various factors assumptions and risks that could cause our actual results to differ with that let me turn it over to Joe to begin.
Thank you Paul and good morning, everyone.
Over the past 16 months successive waves of the pandemic has had a profound impact on all of our lives.
This time last year, our second quarter results reflected the significant societal and economic impacts of the first nationwide lockdown.
As Canada grapple with the challenges of COVID-19, our teams worked tirelessly to adapt all aspects of our company's operations to keep our customers connected and our employees safe.
12 months later.
We have come a long way.
Developed new innovative ways to deliver for our customers, while improving efficiency of managing costs.
I'm incredibly proud of our team's ability to pivot quickly in challenging times to deliver a solid performance across our business.
In Q2.
While some elements of the pandemic will be with us for some time, we are optimistic about the road ahead.
Today more than 79% of eligible Canadians have received their first dose of the vaccine provinces are progressively reopening of economic indicators point to strong growth in the back half of this year.
As Canada steps towards the brighter future, we are well positioned to meet the needs of our customers in support of our country's economic recovery.
Today I'd like to take you through the highlights of our second quarter.
Followed by an overview of how we continue to deliver for our customers while investing in our long term growth after which I'll provide more details on how we are well positioned to deliver continuous improvement throughout this year before turning to Tony for a more detailed commentary.
Despite the third wave of the pandemic in varying degrees of Lockdowns across the provinces. Our total service revenue was up 12% and adjusted EBITDA up 6%.
In wireless our Q2 postpaid net additions were very strong with 99000, new subscribers. This is up 100000 from a year ago and represents 22000 more subscribers than the 77000 postpaid net additions we reported in Q2 of 2019.
And while the travel restrictions continue to impact roaming revenues, our wireless service revenue returned to growth and was up 2%. We maintained the postpaid churn of 0.8 <unk> percent.
As our stores reopen we anticipate seeing the benefits of our exceptional physical distribution network combined with the strong digital capabilities, we've developed over the past year.
Okay.
In our cable business we.
We saw revenue growth of of solid 5% year over year, and adjusted EBITDA up 8% of.
Our ignite TV platform attracted an additional 66000 subscribers in Q2 and ARPA also group.
This growth was driven by the continued investment in our robust ignite platform as well as 1 gigabit internet speeds across our entire footprint and now expanding with the launch of ignite Internet gigabit 1 dock 5.
Finally, and Roger Sports and media, we saw strong growth as audience viewership reached record levels and advertisers enthusiastically returned to her of live professional sports programming revenue grew by 84% from the pandemic lows of Q2.2020.
Overall, we're very encouraged by our performance in Q2 as the business continues to recover.
We remain focused on delivering sequential improvements each quarter as well as making longer term growth investments.
We continue to make strategic capital investments to enhance the performance of our network and meet the future needs of our customers.
We are expanding our G PON based fiber in strategic areas and continue to upgrade and evolve our DOCSIS 3.1 platform as our cable network evolves to DOCSIS 4 pointed out.
We also continued to accelerate the rollout of Canada's largest 5 G network.
A recent report by the economist intelligence unit looking at the <unk> environment in 60 markets globally found that approximately 68% of the country studied are likely to have switched on 5 G. By the end of 'twenty 'twenty 1.
Without a question 5 G is an essential requirement of the country's ongoing productivity fueling growth fueling innovation that Canada needs now more than ever.
Proudly Rogers 1 of the first to bring 5 G to Canada in 2020, the we already connect to more than 700 communities and by the end of the year, we will cover of thousands of communities reaching over 70.
Percentage of the Canadian population.
For the third year in a row.
Our network leadership was recognized in July by <unk>, The global leader in mobile network benchmarking.
Which named Rogers for G and 5 G as best in test and Canada's most reliable network.
Rogers, 1 in BC, Alberta, Ontario, Nova Scotia, New Brunswick and Quebec.
Including Canada's largest cities, Vancouver, Edmonton, and Calgary, Toronto, Ottawa and Montreal.
We were also recently recognized by <unk>, the global leader in fixed broadband and mobile network testing applications as Canada's most consistent national wireless and broadband provide broadband provider with the fastest internet in Ontario, New Brunswick, Newfoundland and Labrador.
These awards reinforce that our investments in our world class networks, not only keeps Canadians connected to what matters. Most today, but provides a strong foundation for us to continue expanding and enhancing our networks to bring them the very best performance in the future.
And while we collect more Canadians to <unk>, we continue to build partnerships across the country to develop use cases and move towards ongoing commercialization of <unk> technology.
The last month, we helped achieve another first providing <unk> connectivity.
4 of Canada's first autonomous 5 G shuttle with the University of Waterloo.
We also recently enabled candidates first 5 G drone flight with the University of British Columbia and in drove robotics.
Ongoing investments in networks technology, and innovation are vital for Canada's future.
With recent regulatory decisions, helping bring more certainty to the investment climate for our sector. We will continue investing in our networks, which will in turn help spur job creation.
Economic growth.
And bridge the digital divide that exists in many places across our country.
And in particular in rural and remote areas.
In the last 2 years, we of double the number of rural and remote communities, where we offer reliable internet.
By the end of 2021 we will reach more than 500000 households in rural and underserved areas.
We are proud to be partnering with governments and communities at every level in this very important work.
This quarter, we partnered with the Mississauga of the credit first nation to bring fiber connectivity to homes and businesses across the community. We're also partnering with the government of Canada through the Universal broadband fund to bring high speed Internet to communities of Carlsbad Springs in Simcoe County.
From rural and remote communities to urban centers over the past year in the half we've enabled and enhanced connectivity to more than a thousand communities faster than at anytime before in our company's history.
As Canadian families and businesses relied on our networks to work.
To learn to stay connected we delivered fiber to new neighborhoods brought 5 G. The Canadians for the first time added even more speed and reliability to our home Internet service and built new cell towers in rural and remote parts of our country.
And in the second half of this year, we will accelerate the pace of our infrastructure rollout to reach an additional 750 communities.
Okay.
And together with sure we will be able to deliver next generation connectivity to the communities across the western Canada faster than either company could alone.
Helping to create jobs and attract investment.
As planned we are engaged in working with the regulatory bodies as they review the transaction and we continue to expect the deal to close in the first half of next year.
Before we shift to a more detailed view of our financials I'd like to recognize the tremendous efforts of our team.
Who relentlessly deliver for our customers and our communities every single day.
Despite the challenges of the pandemic our team members' dedication.
Absolute commitment to connect Canadians to of world of possibility in the moments that matter most in their lives has never ever been stronger.
We continue to invest in Canada is the <unk>.
Next generation of leaders.
The next generation of change makers and innovators through our Ted Rogers Scholarship program, which is now in its fifth year.
This year, we awarded more than 375 scholarships to young people across 125 communities.
The scholarship support youth to overcome financial barriers to post secondary education, helping to enable them achieve their highest potential.
And while our passion to give back and support our communities continues to thrive. We're also focused on the opportunity and responsibility we have to help shape a brighter future for all Canadians.
As an organization, we're taking meaningful steps to strengthen our environmental social social and governance performance, we've enhanced our transparency and reporting framework to include our commitments to the UN sustainable development goals, the sustainability accounting standards Board and task force are.
On climate related financial disclosures.
And continued tracking against the global reporting initiative.
Later this month, we will release our of 'twenty, 'twenty, ESG and social impact reports.
For more than 10 years Rogers has published a corporate social responsibility report outlining our commitments to the communities are cross Canada from coast to coast.
With this year's more comprehensive report, we will highlight our commitment to drive progress on a broader range of important issues to Canadians.
And the metrics, we're using to help track our progress.
And with that let me now turn the call over to Tony to share more details about the quarter Tony over the year.
Thank you Joe and good morning, everyone.
Our Q2 results reflect solid improvements Rogers is seeing as the country continues to recover from the pandemic.
In wireless we delivered another quarter of strong postpaid net adds and service revenue returned to growth postpaid.
Postpaid net adds were 99000 compared to a net loss of 1000 last year and we're more than doubled sequentially from the 44000 in Q1 of this year.
Service revenue was up 2%, primarily driven by a growing postpaid subscriber base and our pool of stable on a year over year basis at $49.16.
Roaming revenue was up around 25 million.
Dollars from 1 year ago, but still well below the 115 million seen in Q2.2019 in the pre Covid environment.
Wireless adjusted EBITDA was up 10% and adjusted EBITDA service margin grew 420 basis points to just over 62%.
The year over year improvement, primarily reflects the impact of the incremental bad debt provision taken in the second quarter of last year. However, our efficiency initiatives are also contributing to the year over year improvement and this should further underpins strong revenue flow through and profitability growth.
Rates as revenue recovers.
Our cable business delivered strong financial results revenue increased 5% driven by higher ARPA as a result of disciplined promotional activity service pricing changes implemented in 2020, and an increase in total customer relationships seen over the last year.
<unk>.
We continue to see growth in our Internet and ignite TV subscriber base, where we added 15000 broadband net additions along with 66000 ignite TV net additions in Q2.
Our ignite TV net additions were higher by 48000 compared to last year and our ignite TV subscriber base now stands at 668000.
This base is 54% higher than our subscriber base was in the second quarter last year.
These results are impressive and are being driven by a combination of our fully 1 gig enabled internet footprint.
Bind with the impressive capabilities of the ignite platform.
These 2 drivers are not only delivering healthy subscriber growth, but also delivering significant operating and capex efficiency as well.
Adjusted EBITDA grew a healthy 8% year over year. This gave rise to a margin of 48, 6% in cable in Q2 up of 160 basis points from the second quarter last year of.
Along with our strong cable margin performance capital spending efficiency and ongoing improvements in hardware costs <unk>.
The resulted in capital intensity of 22% down from 25% in Q2 last year.
Cash margins remained at a healthy 26% this quarter.
Moving to our media business, we saw significant revenue growth with the return of professional sports programming.
Revenue was $546 million up 84% from last year, reflecting the healthy recovery of advertising.
Adjusted EBITDA declined to negative $75 million associated with higher sports programming programming fees and additional production costs as well as the additional impact of the Blue Jays player payroll.
All while having significant limitations on game day revenues.
On a consolidated basis total revenue grew by 14% and consolidated adjusted EBITDA increased by 6%.
The COVID-19 impacts in Q2, we're still notable with estimated impacts of $160 million in revenue and $185 million and adjusted EBITDA.
While these results are much improved compared to.
The $725 million and $300 million impact in the same period last year parts of our business are still recovering.
Capital expenditures in Q2 were $719 million up 29% year over year as we play some catch up from a quieter spending environment in Q1.
This reflected the capex intensity of 20%.
Cash income taxes sequentially decreased this quarter to a more normalized level of $175 million.
Reflecting our cash tax rate of 13% as a percentage of adjusted EBITDA.
Free cash flow was $302 million down 35% as a result of increases in cash income taxes and capital expenditures.
As at June 32021, we had $6.9 billion of available liquidity, including $900 million in cash and cash equivalents and a combined 6 billion available under our bank credit facilities and receivables securitization program.
This quarter, we entered into a U S dollar $1.6 billion non revolving credit facility and also increase the limit on our existing revolving credit facility to $4 billion.
Our weighted average cost of borrowings was 4.02% as at June 30, this year and our weighted average term to maturity was 13.4 years.
While we're in our peak investment period, we are making generational investments that are 100% consistent to our core operations and multi decades strategy to grow our networks and connect Canadians.
As we have proven over multiple decades. The investments we've made have created long term value for our customers and our shareholders.
As we expand our networks to bridge the digital divide expand our <unk> network, including the purchasing of the essential spectrum.
And complete the Shaw transaction to drive competition and increased capabilities across the country. We're excited with the value. We expect these investments will create for decades to come.
Let me now turn to our Q3 outlook.
In our wireless business, our traditional retail distribution channels are fully open and we expect the positive loading environment to continue in Q3.
Pent up consumer demand people, becoming mobile again and students returning to school will drive this growth.
We believe service revenue will grow modestly on a sequential basis and anticipate blended ARPA should be back to $50 as roaming starts to recover.
Additionally, we anticipate our strong wireless adjusted EBITDA margin performance to continue and remain at the 63% level and we expect capex intensity to be approximately 19%.
And our cable business, we expect strong results to continue in Q3, although year on year revenue and EBITDA growth will be slightly lower as we have held back on any price adjustments at this time.
Cable adjusted EBITDA margins are expected to be back of approximately 50%.
Additionally, capex intensity is expected to be approximately 23% as we continue to enhance our cable infrastructure and provide connectivity to more communities.
And our sports and media business, we expect revenue to sequentially decline slightly as both the NHL and NBA have completed their seasons.
However, EBITDA will return to profitability in the $30 million range, primarily associated with lower programming fees.
Finally on cash taxes, and free cash flow, we expect our cash taxes to be approximately $175 million in Q3 similar to Q2.
And free cash flow will be down on a year over year basis, driven by higher taxes and capex spending.
Overall, we're very pleased with our execution and results in Q2 as the as the economy continues to recover.
While cable has resumed the more normal operating environment, both our wireless business and sports and media business are still recovering but in excellent shape to benefit from an opening the economy.
Let me now turn the call back to the operator to commence with Q&A.
Thank you we will.
I'll now begin the question and answer session to join the question queue. You May Press Star then 1 on your telephone keypad Youll hear Tom acknowledging your request.
You are using a speakerphone please pick up your handset before pressing any keys to withdraw your question. Please press Star then 2.
We will pause for a moment as callers join the queue.
Our first question comes from drew Mcreynolds of RBC. Please go ahead.
Thanks, very much good morning, everyone.
3 from me.
First.
Tony Thanks, very much for the detailed Q3, maybe more broadly speaking can you talk about.
Your Capex plans I think directionally just given most of the peers are putting in transition of our elevated capex projects.
And continue to do so.
Secondly, I guess all sorts of you Tony just in terms of the full year guidance you talked about a couple of known unknown. The satellites prevented you from providing full year guidance. So presumably that still of the case, but maybe you can provide a little bit of kind of granularity on that lastly, just an update on the migration to.
Unlimited plans.
Where you expect to be exited.
Exiting Q3, thank you.
Yes.
Thanks drew.
Start with.
Start going through the list on Capex in terms of.
Probably the best explain it by way of capital intensity on the wireless side as we've accelerated our fiber rollout.
I think you ought to expect the capital intensity in the wireless to sit somewhere in the 14 of 15% range for the balance of the year and as we look to the early parts of next year.
And I think thats consistent with what we've said said in the past.
And then on the cable side.
We continue aggressive build out of our footprint.
And in particular rural communities together with the government and funding from the government.
And so expect our cable capex to sit in the 22% to 24% range.
Over the course of the balance of this year.
As well as into.
Early parts of next year.
And then we will provide appropriate guy.
Guidance at the right time with respect of 2022.
So I think no surprises there and a continuation of healthy investment in our networks.
In terms of full year guidance.
As we.
Look to the fourth quarter, what are the issues that.
<unk>.
We're looking at that are still in the category of uncertainty.
We had always outline sports media as being 1.
And the <unk> in particular.
I would say the certainty around that.
<unk> has been helped with the announcement that the <unk> are back in Toronto gives us a little bit of a better feel for what that's going to look like.
But the attendance in the stand as cat in the us or in the stance is capped.
And therefore, theres, probably a little variability there more importantly, though in terms of roaming that won't still of difficult 1 to predict you saw in Q2.
Debt, we were running at about 20% of where we used to be.
2 years ago, and so that 1 is going to have a lot of volatility depending on international travel the status of border openings and closings.
And so much more difficult to predict.
And then along those lines in.
In terms of.
Demand.
New subscribers, we're seeing much like we saw in Q2, good healthy demand in Q3.
Against the difficult to predict how that's going to play in Q4.
With any variant and related closures that that might have and so.
That's probably the second biggest in terms of wireless volumes having.
Having said that we are fairly optimistic about the pent up demand we're seeing in wireless.
And the number of things that we expect to come on board, including immigration.
Healthy GDP backdrop, so we're feeling bullish about volumes, but again still a touch of uncertainty there.
And then finally on unlimited plans, we ended the quarter at over $2.7 million. We're really pleased with that we have seen the migration slightly slowed down from past trends in <unk>.
Frankly, we expected that as consumers.
Continue to be at home and working off of in home Wi Fi the need for unlimited is just less compelling, but what we do see as soon as things open up if you look at stats for the last week for example.
Data usage on mobile just bounces up to 50% plus.
In terms of growth and so we fully expect.
We fully expect that that demand will resume on what is already the largest unlimited basin in the country.
So we're very pleased with where we sit and the future prospects for the unlimited plans.
That's great. Thank you Tom.
Thanks to the next question area.
Our next question comes from Jeff Fan of Scotiabank. Please go ahead.
Thank you good morning.
Postpaid churn was <unk>.
Was really encouraging.
Didn't think you would come close to the loss of your churn number when everything was shut down. So can you talk a little bit about the maybe the factors that led into it.
And perhaps help us think about the.
The competitive environment, because last year when things reopen we saw some pretty aggressive promotions that were in the market.
As everyone was chasing.
The reopening the.
A man wondering if you have any early indications of how the competitive environment looks like currently since the.
I know, it's only it's pretty early but just wondering if you of any thoughts about the competitive environment and what you're seeing now.
And then the second perhaps some a little bit related is the <unk>.
Really nice to see that stability for the first time in a couple of years.
No roaming is still unclear. So we leave that aside for a moment because that's hard to predict.
Could we still see that off the trend continue to improve going through the second half without roaming.
Hey, Jeff It's Joe why don't I talk about the competitive environment and also churn and then I'll ask Tony to unpack, our <unk> ex roaming for Ya.
Sure.
Yeah.
In Q2, we saw a very.
Healthy volume in the marketplace.
Yes.
We fully expect that we will see overall industry growth in terms of Q2, when everyone finishes reporting industry growth that might be similar to.
The Q2 of 2019 sort of in the 4% overall subscriber growth range across across all of the peers.
And we fully expect that to continue into Q3.
As volumes of their their consistent it certainly.
Is helped by the fact that stores are pretty much opened up across the country with some limited.
Volume restrictions in terms of people in the store et cetera, but there is there is robust demand we.
Believe all across.
The wireless business.
And it's just fueled by.
The sense of freedom and people getting out there and using the devices and just feeling that mobility is an important part of their lives.
If you look at all of the surveys that have been done around the so called Covid revenge spending for lack of a better way of describing it.
Where will you spend some money.
Adding into the latter part of this year.
Our new wireless device sits in the top 5 category when you consider the fact that.
That.
The consumer has never had sort of a.
A higher level of savings credit card debt is low.
Of that immigration is resuming.
Immigration pre COVID-19 was around 300000 of year and our government of saying 420 years or so is the new sort of annual number and starting to happen and.
And then the overall GDP outlook, so we think the.
It bodes well for the overall health of the industry in terms of the competitive intensity around it.
Back to school will be the telling sign.
No.
It's hard to really say, what's going to happen overall, but right now what we're seeing is strong competition in the marketplace in terms of why are we doing well.
Really the fact that we're now firing.
On both cylinders we've got.
Very strong physical distribution network with over 5000 points of presence and we've worked very hard on the digital and omni channel capability. So even in the throes of Q2, when we were essentially locked down we were doing very well because of that newfound newly developed capability.
Everything from pro on the go to curbside pickup to really the intermingling of physical and digital channels as a whole.
And some of that same capability factored into.
Churn management.
The term management based management has become a data analytics game.
The more than anything else and that is really mining our understanding of our customer base too.
Try to predict who is vulnerable and thinking of leaving.
Then in setting that discussion with an outreach.
On outreach that looks to figure out what is the best way the best offer the best approach and a very customized bespoke way for that particular customer of conversation and that capability. We've been spending a lot of time developing at the precision marketing capability over the last year, and a half or so and youre starting to see it show up.
In our consistent churn performance and I would lay of completely out of the door step of that capability.
With respect to your question on <unk>, Jeff might.
It might help to sort of break down the the key components of it and what we see.
If you look at.
Underlying <unk> of the <unk>.
Recurring revenue side. So in other words of subscription revenue today were seeing somewhat flattish.
The type of <unk> growth and so while some customers are upgrading to unlimited as we talked about earlier that pace has slowed and so that <unk> growth catalyst has also slowed and so for the remainder of the year. If we think about the drivers of <unk>. They are really going to be tight.
To the opening up and continued opening up of the economy.
And all of the growth drivers on demand and so continued data growth usage.
We'll increase the propensity to move to unlimited the.
The second piece is for those that are on capped plans we.
We see much less overage revenues and as that usage increases.
Then we expect some of the overage fees 2 to increase as well.
And then there are the volume related fees and net.
As we outlined we expect a pretty robust.
Q3 in terms of volumes and that should help.
In terms of the <unk>, and we'll need to see where it moves into in Q4.
And then finally as an offset.
Late payment fees have been at record lows.
As consumers have been paying their bills and you see it in other sectors as well.
And credit card industry. For example, so those are sort of the variables that are impacting the up and down and so if we had to summarize it we sort of think somewhat flattish with mild.
<unk> growth in the back half if you exclude roaming revenue to be clear.
<unk>.
And perhaps we're being touch conservative.
Just on just the unknown variables around the Covid enclosures.
But I hope that color on the variables helps.
Yes that helps total just maybe a quick quick 1 you said upwards bladders in the underlying how does that compare to save a lots of few quarters has that been flattish as well or has that been slightly negative.
If you were to go back several quarters, it's been in the height of the pandemic where movement to unlimited really slowed.
Consumers are inside and what you saw us frankly.
Some aggressive promos on the bottom end flanker brands.
And I would say those gained some popularity, but that sort of dissipated and that had a modest negative impact on underlying our poop.
And we're seeing that sort of.
Move away from that trend and and.
And moved to flattish so the trend is in the right direction great. Thanks, Tony.
Thanks, Jeff next question Arrow.
Our next question comes from David Barden of Bank of America. Please go ahead.
Hi, guys. Thanks for taking the question, it's not sitting in for Dave I just wanted to add.
I ask of the pent up demand that youre expecting.
We see from other carriers.
Pushing aggressively on increasing the proportion of higher end 5 devices to increase the customer experience within the base.
Do you think that the upcoming pent up demand is going to kind of free.
The 8 that environment for you where should we expect some elevated.
Promotional activity around.
Getting those devices in People's hands to partner with the network extension K you.
You guys have talked about accounting of <unk> front.
Hey, Matt its Joe.
There's no question as people come out.
<unk>.
The reenter the malls start looking at 1 of the new smartphones out there there's always some excitement around the latest and greatest in the best devices, especially with <unk> devices, becoming even more prominent across all of the brands. So that will certainly attract attention in the stores.
We launched our equipment installment plans in June of 2019, and that was really in an attempt to be a lot more transparent with customers around the this is the price of the plan and this is the financing of the phone and we fully expect.
That there will be of continued discipline on that front will be promotions around back to school sure Theyre always our back to school promotions of what will they be like we don't know it all depends on how the market the plays out as a whole, but even if customers come in looking for that.
Iconic.
High end device and the affordability isn't there we have got a range of other devices available.
<unk> are very compelling in terms of the feature set and we continue to have real refurbished devices at our disposal et cetera et cetera. So the goal is to get our customers in the right device based on features that they want and the affordability of behalf.
And then to use the the ability of our equipment installment plans to kind of layout, just what that affordability looks like.
And that's sort of the game.
And that is how we kind of conduct ourselves in the marketplace put our customers in the right device that they can afford.
But there is pent up demand there is excitement that we're seeing.
The stronger stronger focus on the iconic devices.
As sort of a as I said before is the sort of a for those who can afford it a way of coming out of the pandemic and treating themselves the something special.
Okay, Great and maybe 1 follow up too.
Tony mentioned, how the late payments are at I think.
Historic lows or at least we.
Lower the I'm not sure, which exactly you said.
I'm wondering what that implies for the bad debt provision of a year ago, and when that or whether that's going to be reversed I didn't see anything in the release that maybe I missed it if you could just maybe address that.
Sure Matt in terms of the provision we can.
Continue to have the vast majority of that provision on our balance sheet.
Probably continue to hold onto it.
For a few more quarters, yet to see how things play out in the fall.
But we'll be very transparent.
With the with you in the investment community if there are changes to it.
And included in our results.
Alright, Thanks, a lot.
Thanks, Matt next question area.
Our next question comes from Arlinda.
Of Canaccord. Please go ahead.
Good morning, Thanks for taking my questions 2 from the.
As you look at the kind of maintain costs.
On the control, even as we think about restock cost and re openings, how we should think of that trajectory beyond EBIT in Q3.
And then perhaps connected to that.
With respect to handset cost and subsidies I know that with the launching of the IP plans and youre in the half ago, maybe 2 years ago.
Sort of bringing down debt Coa from call. It 452 words, maybe even $2.50.
I'm sorry from 452% 50 was the focus I was wondering if.
You can kind of provide the kind of an update at least at the industrial level as to what kind of progress has been made there and then a quick question on cable on the Internet net adds.
I know it was up year over year of nicely.
Perhaps and in line with the strength was expecting.
Are you able to do sort of 20000 in Q2.
Any color on that on that results. Thank you.
Sure. Thanks for the questions Arlinda I'll start with.
The first 1 is on wireless costs.
Yeah as you said.
You exclude cost of equipment.
Very pleased with the reduction we saw year on year of 11% on our other operating expenses and so good progress bad debt was part of it and so keep in mind.
We've disclosed last year that the total provision was $90 million only a portion of that related to wireless and the rest of related to cable.
<unk>.
So keep that in mind. So we do have true operating efficiencies and they fall into the categories you would expect the.
The improvements of our digital.
Panels, and the cost efficiency that thats created sort of stands out as first and foremost.
And so thats been.
Extremely helpful productivity tool.
For us and frankly, a better customer experience in terms of being able to complete.
The most if not all of their transactions online.
And then that sort of relates to some of the self help and reduction in call center called.
The call volumes.
1 of the things, we did say as we move to unlimited as we expected.
Some other benefits on 1 of them was certainty on the bill.
And so when you look at the cohort of customers on unlimited plans co.
Coal volumes are way way down.
That's reflected in a much lower churn profile as well so all of the benefits we were expecting of customers moving to unlimited, we're actually seeing that.
And then.
Keep in mind the stores were partially closed.
For a good part of Q2 and.
And so therefore, there of store savings and as we are.
As the stores open up and you look to Q3, we do expect costs to move up.
And in some cases for some stores ahead of the volume.
We expect.
But having said that that's why I clarified in the notes that you should expect to continue to see wireless cable margins in the 63% range the sort of help with that certainty. So in any particular quarter as things open up and we invest.
And our channels then.
You may see some of that cost savings being reinvested.
But on balance we.
Chasing what we think is a pretty healthy margin in wireless.
Okay.
Your second question on handset costs and how the industry has done I think if you were to look at and it's unfortunately, all of disclosure isn't as clear as it could be across the industry, but if you were to look at our numbers are very clear on what equipment revenue is and what the cost of equipment is and if you were to look at.
What that trended like over the last 2 years since the introduction of installment plans.
I think what Youll see is a very healthy migration of that net margin moving to flat and in some quarters actually positive.
As we benefit from <unk>.
Small margins on the handset and that includes by the way of Ben OEM rebates.
In there and so.
This quarter.
Youll see that we had $448 million of equipment revenue with the cost of $4.55. So at a net loss. If you will our investment in the customer of $7 million in terms of subsidy.
And then previous quarters, it was positive and so.
I think that is most telling of the industry.
In terms of being <unk>.
Very careful about as Joe said earlier separating what our fears for service revenue compared to what the cost of the handset is and so I think as an industry and for our results. We're very pleased with the direction that that's moved in.
And the last question was on the Internet nuts overhaul.
Say for.
The vast majority of the quarter we were.
In a lockdown or series of restrictions in our key cable footprint territories.
And bear in mind our of into the.
We've got a number of different channels that operate effectively for us.
In that space and 1 of them is field sales of door to door sales people that.
Through different communities and tried to create excitement around the ignite platform around our capability et cetera.
That was pretty much all curtailed through that period.
No.
Home Internet is not.
Not a sharper category from you said before it's not people don't wake up and say, Hey, I should think about changing my home range of it it really is.
The sales driven exercise.
And with our sales channels kind of effectively truncated, whether it's field sales or store sales et cetera.
We didn't get the full benefit of the channel capability, that's now come back.
You add to that some other elements of what's happening.
In the marketplace.
1 is in terms of back to school, we fully expect that postsecondary students will be for the most part back in the classroom.
And therefore, requiring housing near campus for those that are away at school, and therefore, requiring an internet connection, which again is <unk>.
Part of the opportunity for us as well and then we're seeing a bit of the.
Ill return to urban in some parts of especially the Toronto.
And a lot of young people left the condos weather rented or owned and kind of consolidated with their families outside of the urban center they are coming back.
A lot of condos or vacated that were dedicated to airbnb et cetera, and they are starting to come back. So we will see that.
Macro conditions start to prevail.
And then as we kind of get out there with the latest and greatest in terms of ignite.
I think there's even.
They are even more reasons to come.
Enjoying.
Rogers as the customer you would have seen recently some of our announcements around the capabilities.
Of ignite TV with Spotify, and Disney plus around the corner et cetera. So.
We fully expect that will be another reason to buy.
As a whole so we'll start to see that go in an even better direction over the course of the next few quarters.
Yes.
That's excellent. Thank you so much.
Thank you Arvind the next question Ariel.
Our next question comes from Simon Flannery of Morgan Stanley. Please go ahead.
Hi, Good morning. This is diego filling in for Simon just a couple of questions on the Shaw transaction can you provide any more color on the timing of maybe public hearings or any updates that we should be on the lookout for th progress. There and then just second in terms of deleveraging post deal close can you kind of.
Touch again on.
Some of the additional options you have to de lever such as the sale of noncore assets and if theres any change in view there. Thank you.
Hi, Diego I'll take the first 1 then I'll ask Tony.
The comment on the second question. So in terms of the regulatory process just to remind people that.
Totality of <unk>.
Approvals on the Shaw.
The transaction 1 is shareholder approval, which is completed second as the Alberta courts, which is completed and so we have 3 to go of the CRT C around the transfer of the broadcast distribution of licenses.
I said in terms of spectrum transfer and the competition Bureau in terms of overall approval of the deal or timeline Hasnt changed from the last time I talked about it.
We think it will happen in the first half of 2022.
Somewhere in that timeframe.
And generally speaking so far so good as sort of our mindset.
There's been a lot of information exchange of lot of discussion as a whole.
We're going through a thoughtful set of submissions.
Economic analysis and otherwise.
More than ever we believe this is a great idea.
Great transaction for consumers and for the ability to invest in rural and remote communities and bringing jobs to western Canada.
And really driving the capability of.
Networks and affordability overall.
We've got a very overwhelmingly positive shareholder approval, which was nice to see.
And we.
It will just make our way through the discussions in the coming months and as I said, we expect to get.
And the answer in the first half of next year.
We feel we are of very strong fact base, we've got a very good set of of.
The thoughtful economic arguments.
The Canadian landscape is an intensely competitive ones that will persist even after the completion of this deal and we are still very bullish on the completion of the deal.
With respect to the second part of your question Diego on deleveraging post close.
As outlined before that we have a very robust plan in terms of synergies.
And as we continue to work the file our confidence level on those synergies.
Continues to grow.
We had put a number of previously of $1 billion in.
We continue to reiterate that we have very.
Good clear line of sight to.
To those synergy level. So as we think about the leerink, it's really going to come from.
EBITDA growth and the cost synergy savings there.
There are additional revenue synergy opportunities that we see.
But we are.
The cautious in forecasting the upside in that growth.
And tend towards numbers that we have high confidence in and so.
That's going to be the biggest catalyst to deliver very quickly within the first 24 months of the transaction close.
Alright, thank you.
Thanks Diego next question area.
Our next question comes from Sebastiano Petti of Jpmorgan. Please go ahead.
Good morning, Thanks for taking the question just wanted to see if perhaps you can update us on the <unk>.
The state of conversations that Youre, having perhaps with enterprises businesses as it pertains to the <unk> opportunity obviously.
Staying away from the spectrum angle.
What are you hearing.
Obviously, the lots of noise in the mark of about mobile edge compute.
Network slicing of how have things evolved from IAC.
Enterprises moving into <unk>, we still in early days here.
Thanks for the channel.
So theres a lot of discussion with enterprise customers around <unk> and what it means and we're conducting a lot of.
Yes.
A lot of analysis for them in doing pilots around different ideas.
So the interest level is there.
I think part of your question I'm sure is 1 of the most readily available commercial applications that might start to generate material economic benefit.
As a whole I would say it kind of falls into a couple of categories in the.
From the very short term.
The short term applications has really to do with Iot sensing capability, especially in sectors.
Of that.
We're familiar with whether it's the transportation or the resource sector anywhere where there are.
The expenses expensive pieces of equipment or things to manage that of sensor can benefit immediately.
B traffic management, it could be of public safety and we're doing work exactly in those areas and a number of different organizations across the country. So that's 1 and bear in mind, we are already of the Iot leader in <unk>. So it's very natural for us too.
And the conversation as to what's different in <unk> and what new areas are available in those sectors.
The next thing we're seeing is I would call of the precursor to network slicing and that is the ability of organizations to have a bespoke network.
So leveraging the capabilities around <unk>.
2.
<unk> the their factory of recover.
Their mining site and provide capabilities rather than build their own network.
By a portion of our network very bespoke characteristics.
The around everything from speed to latency to different signaling et cetera. So that's a very real application thats happening right now the 1.
Non everybody talks about as mobile edge computing and there I would say it's more in the medium term, but we're busy building relationships and partnerships to provide mobile edge computing capability across our 9000 wireless sites.
And there there's a lot of I would say analysis and showcasing type work going on.
But not really of sort of the key.
Material economic level than you would have seen some of that in.
My comments earlier like the.
The shuttle on the University of Waterloo campus as a demonstration project of showcase project, that's real the shuttle diversity of the campus that is.
Run by our <unk> network and the mobile edge capability that it has.
The work that we've been doing with into robotics around using the <unk> network for drone delivery. These are all great showcase.
Exercises and really prove the concept.
And we believe in the years to come these will be large material applications that will start to take hold.
And certainly in terms of managing the infrastructure and managing ideas across the 1 of the largest landscape some of the world.
It will be very very important consideration set of bringing computing power to every corner of Canada, you think about.
If you get your head around mobile edge computing in an urban setting it's pretty straightforward and you think about a country of the size of Canada <unk> needs to cover every corner of this country and provide the consistent mobile edge capability.
If we're really going to deliver on the value in some of these applications and ideas and we're dead set on doing exactly that we've expanded to 2.7.
700 committees or so.
On track to cover 70% of Canada, and we're going to keep going in terms of the coverage of <unk>. It is our future and important part of where we're going.
Hope that helps.
No that was great and if I can just quickly follow up I believe on <unk> question, just regarding just the internet.
Loadings in the quarter is.
Is it it sounds as though the.
The slowdown in <unk>, perhaps related to just limited growth ads or.
Jump balls in the market is that fair.
How would you categorize the competitive environment.
Should we assume that is there any relate the correlation between the 2 there of the slowdown in just the.
Overall more competitive the our fiber expansion from some of your competitors. Thank you.
Yes, the best generate I would very much related to the market dynamics as Joe said it was a relatively slow quarter.
With the Lockdowns and we didn't have the usual catalysts.
That you would see in that space don't mistake that for as things open up where we sit from a product standpoint, our competitive advantage of 1 gig, which has now moved to $1.5 gigs.
We have 1 gig across our entire footprint.
And 1.5 gig.
As of today across the majority of our footprint quickly moving to our entire footprint as well.
So.
Yeah.
That's on top of as Joe talked about some of the recent tests and third party validation of the best Internet. So.
I think we're feeling very good from a product standpoint, and then you layer on top of that the ignite TV.
Or <unk>.
Non cash the Xfinity product that you'd be familiar with on top of that and so from a home perspective.
Our advantage.
On.
The product set is clear and.
<unk> seen it play out we continue to see of play out and expect to play out you then layer on top of that our distribution channels.
And sales and that's been on sort of quiet mode.
As a result of the Lockdowns and as that opens up we expect that too to open up as well and then we continue to do well in Greenfield. So that's always been our strong suit.
For a number of different reasons.
So we have led and continue to increase the internet penetration.
Consistently and as things grow we expect to get Dom.
Dominant share of that growth.
And then in terms of cable, let's not forget the performance of our business our furby.
Within that we continue to.
Do well in that space, there's been a bit of a slowdown.
As you would expect as restaurants slowdown and things like that.
So as they come out of closure, we're seeing good demand pickup there and that will contribute to.
Cable subscriber improvements.
That youll see in Q3.
Great. Thanks, guys.
Thanks for that channel area, we have time for 2 more questions.
Certainly our next question comes from Jerome Gabriel of Day Jordan. Please go ahead.
Well thanks for taking my question just going back to the increase in the wireless capex the acceleration.
1 of the reason behind this acceleration we've seen it with the peers as well.
But the true <unk> impact on the P&L of I don't take as expected in the near term. So that you can go through the rationale.
Exploration please.
Sure Jerome.
I think.
At the end of the day.
The investment in <unk> is happening now.
Across our footprint, we're also increasing.
The capacity and coverage in the major corridors.
You would've seen us go through.
And cover.
By the end of the year of 70% of Canada with <unk>.
And it's important that you know.
We get.
We get.
Of that going for all of the reasons.
And getting ready for the future as a whole.
And bear in mind that the very first.
Application the killer App of 5 G is really about spectrum efficiency. So it is really important.
<unk>.
We.
Continue to make those investments as a whole and bear in mind, it's a very efficient spend.
It's we.
We were very.
Capable in terms of moving in with <unk> LTE advanced capability of couple of years ago. We made the commitment to go all of Ericsson.
As of resolved and now we're just lining up the cell site. So as we've said before you can.
I expect us to have.
Capex in that range of 12% to 14% on of just overall average basis and theyre going to be peaks and valleys. In the course of time are around that but thats a good run rate for our business in wireless.
Great. Thank you.
Thanks to all of my last question area of fleet.
Our final question comes from David Mcfadden of Carmack. Please go ahead.
Hi, yes, thanks for squeezing me in science of your questions.
Just following up on the bad debt expense in the wireless I was just wondering if you could give us the delta year over year I'm, just wondering how much of the EBITDA improvement was just day to that and then secondly, you mentioned.
The release about an increase in roaming revenue.
The expected roaming revenue really picked up yet just given in Q2, the travel restrictions from still fairly much. There. So I was just wondering.
Sure.
What that impact of lines as lots of the thank you see in all of you picked up as I think of a lot of people believe that as the travel restrictions loosen roaming revenue could rally pickups for Rogers.
Thanks, David for the <unk>.
Questions 2 things in terms of bad debt year on year, it's $90 million.
So in Q2 of last year, we took the provision of $90 million.
And this quarter, we didn't release any.
Provision and so think about the delta is $90 million.
Roughly I don't think we disclose the split between wireless and cable.
Sure.
But so I'll leave it at a consolidated level and then in terms of roaming keep in mind last year we.
Credited customers for all of roaming. So we essentially had no roaming revenue may remember as the goodwill gesture for customers that were stuck outside of Canada had trouble coming back into Canada with the border closures.
We gave them free roaming for a period of time.
Which was.
Of which ended at the end of June.
And so when I say, we have $25 million of revenue this quarter, we didn't have that last year.
At all so while the volume is about the same a little bit higher.
Actually getting paid for it this interest.
Uh huh.
I hope that helps David Okay. Thanks, so much.
Okay.
Thanks, everyone for joining us today, and if there's any follow ups. Please reach out to the IR team. Thank.
Thank you.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Okay.
[music].
Okay.