Q3 2021 BCE Inc Earnings Call
All participants please standby your conference is ready to begin.
Ladies and gentlemen, and welcome to the BCE Q3, 2021 results conference call.
I'd now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead, Sir Thank you and good morning to everybody with me here today are Mark <unk>, President and CEO and Glen Leblanc. Our CFO you can find all of our Q3 disclosure documents on the Investor Relations page of the BCE Web site, which we posted this morning before we.
I'd like to draw your attention to our safe Harbor statement reminding you that todays slide presentation and remarks made by Marco and blend during the call will include forward looking information and therefore are subject to risks and uncertainties results could differ materially we disclaim any obligation to update forward looking statements, except as required by law. Please refer to the company's publicly.
Final documents for more details on assumptions and risks with that I'll hand, it over to Marcos. Thank you and good morning, everyone. Our Q3 results demonstrate another quarter of consistently strong and disciplined execution across all our operating segments is firmly rooted in our strategic roadmap.
Over the past 18 months.
Operationally, our objective was to improve steadily each quarter from the trough experienced in Q2 of 2020, when COVID-19 began to significantly affect our business and that's exactly what we've done Q3 marked a very notable milestone at our recovery is total revenue and adjusted EBITDA are for all intents and purposes back to prepare.
<unk> Q3, 2019 levels with consolidated service revenue up three 6% and EBITDA $4, 2% higher than last year. Despite.
Ongoing COVID-19 related headwinds affecting wireless roaming.
Wireline customer spending and media advertising.
Even as we focused on recovering from those impacts we pushed ahead with our Capex acceleration plan building the best broadband infrastructure and remaining comfortably on track to hit our upsize network expansion targets for 2021.
We invested another $1 2 billion in new capital this quarter, 12% higher than last year on direct fiber and fixed wireless connections as well as further expanding mobile five G coverage and deployed $3 five gigahertz capable radios as we continue to get ready for the launch of true <unk> next year.
We leveraged our accelerated broadband network plan retail channel strength improved direct sales capabilities and multi brand strategy to deliver 266919 total mobile phone mobile connected device retail internet and IP TV net additions in Q3, an increase of 10%.
Over last year.
In wireless our sharp focus on higher value mobile phone loadings continues to pay off.
On peers, who have already reported Q3 results. We led the Canadian industry. Once again this quarter in terms of wireless service revenue and EBITDA growth. These metrics really matter in terms of providing an indication of the health of our underlying business not just today, but also going forward.
Our smartphone customer base grows roaming rebounds, the decline in data Overages overage reaches an equilibrium point and <unk> revenues materialize more meaningfully these leavers should continue to support superior future revenue growth and operating profitability.
I would also add that we achieved these results against the backdrop of lower wireless prices as we continue to make more lower priced options available that deliver significant value to consumers and support the government's public policy objectives.
Turning to the most recent stats can data pricing for wireless services has declined 25% since September 2019 at a time when overall inflation has been growing rapidly while the price Canadians pay for all goods and services combined has actually increased 5%.
For Bell wireline.
Our broadband fiber footprint advantage keeps expanding we see the immediate tangible benefits on residential subscriber growth market share and Internet revenue. In fact, this past quarter, we delivered the highest number of Internet net adds in 15 years and strong residential internet revenue growth of 9%.
Clearly the strategy is working.
It's the reason why we're so confident in our accelerated capital investment plan.
In business wireline as the team continues to carefully manage near term COVID-19 financial impacts, which Glen will detail momentarily. Our organization is also focused on putting the building blocks in place to ensure bell is strategically well positioned to capture an industry leading share of the Iot and next generation solutions revenue enabled by the <unk>.
Convergence of <unk> and fiber.
As you know I have a lot of optimism for the growth potential in this area. There are going to be thousands of applications and they'll need access to our advanced broadband networks edge data centers and Iot platforms.
We're already leading the way in building momentum with innovative new consumer and business applications that leverage the speed and ultra low latency of Bell's leading <unk> network as certified by PC Mag.
And global wireless solutions in their most recent studies of mobile network performance and new Mega alliances with AWS, and Google Cloud, which we discussed last quarter.
<unk> consumer initiatives include the launch of TSN five G view and an augmented reality collaboration with Tic Toc on.
On the enterprise side of things, we're working with Canadian AI startup tiny miles to provide fiber connectivity for its growing fleet food delivery robots in downtown Toronto. We also entered into a partnership with Vmware to offer their advanced cloud software, which builds on bels agreement with AWS to support five G innovation and accelerating.
Good adoption across Canada, notably Bell as the first Canadian communications provider to offer AWS powered <unk> multi access edge computing for business and government customers.
Most recently our business markets unit launched smart supply chain powered by Dell Iot Smart connect a software as a service Iot aggregation solution designed for fleet and supply chain operators and just earlier. This week, we announced our newest collaboration with every Canada, leading geographic information systems provider.
To create smart city Iot solutions for municipal governments across the country.
At Bell media TV advertising continued to strengthen with audiences that remain industry, leading in fact television advertising revenue. This quarter was 10% ahead of pre Covid Q3 2019 levels.
That speaks to the breadth and quality of our programming that differentiates us from domestic broadcasters and foreign content producers alike.
Even though the rate even though the recovery in radio and out of home was suppressed by the pandemic fourth wave results are better than last year, ultimately advertiser demand will come back once normal activity resumes with a broader reopening.
That's the traditional side of our media business than I have tremendous optimism for our digital first strategy.
Goal is to grab a bigger share of the digital AD spend in Canada, where global Internet and social media platforms dominate today, we will grab a bigger share with our asset mix and investments in AD Tech and digital content platforms and by leveraging big data insights. The strategy is working we're seeing continued momentum there digital revenues now represents 20.
2% of total Bell media revenue up from 9% only four years ago. So a lot of potential in the media business going forward.
And we're continuing to make good progress as well on a number of bell for better ESG initiatives, we're already taking concrete actions to reduce greenhouse gas emissions in line with the Paris climate agreement.
In support of World Climate Action day on October 15th we announced that we have saved 71 kilo tons of carbon dioxide equivalent emissions since 2008 and purchased more than 175, new electric vehicles that will be put into service by year end.
<unk> also partnered with an Interstate shelf work to develop solar technology that will help reduce our reliance on diesel generators to power communications towers used to connect remote communities recent.
Recent field tests of the solar optimization technology have achieved have achieved diesel fuel reductions of 75% significantly exceeding our goal of 40%.
I'll now turn to slide five for an overview of some key operating metrics for Q3, and I'm going to start with wireless the.
The back to school period. This year felt more like 2019 with all retail stores reopened and increased consumer activity.
We added 115000, new net postpaid mobile phone subscribers up a strong 46% compared to Q3 of last year, and even 'twenty 2000 higher than Q3 of 2019.
Notably this result reflect significant year over year growth on the Bell brand, so thats very positive.
Positive.
Customers are coming back into stores, so pent up demand helped drive higher transaction volumes were also so much better at direct and digital channel sales and we were a year ago and postpaid churn of <unk>, 93% was our lowest ever Q3 result, and five basis points better than last year, even with the step up in <unk>.
<unk> intensity, that's typical and expected during this time of year.
That said, we were quite measured and more targeted in our competitive approach during Q3.
I've said this before but our objective is not to leaving gross loadings. The goal is to get the right amount of market share and focus on higher value smartphone subscribers to grow service revenue and <unk>.
Wireless service revenue in Q3 was up an industry, leading 5%, yielding two 3% higher ARPA.
<unk> growth was more modest at one 1% due mainly to a higher mix of bring your own device customers in the subscriber base versus last year and more postpaid customers unexpired equipment installment plans.
For mobile connected devices, although we added 71000, new Iot subscriptions up 73% over last year total net adds as Youll see were only 33000 as we continue to move away from unprofitable low ARPA data device transactions.
In prepaid we added 22000, new customers, which is our best quarterly result in the past year.
Solid performance that is expected to improve as immigration and international travel resume more fully.
Turning to wireline.
Really a very strong quarter from an <unk> perspective, with 34000, new net retail customer additions more than two five times higher than last year. This is only the second quarter in the past five years, where we've achieved positive total wireline retail net adds including home phone and satellite TV, which is a test.
Similar to the advantages of our accelerated broadband network investments and TV product leadership.
At Bell Internet, we delivered 66000 retail net customer additions. This is 5% higher than last year. When we saw exceptionally strong demand because of Covid and as I said earlier and it bears repeating this was our best quarterly result in 15 years.
On the TV side of things also a great result, with our best IP TV net adds since the third quarter of 2019 as we benefited from the return of sports and a more typical student inward session. This year.
We added 32000, new subscribers this quarter up a strong 68% versus 2020.
Satellite net customer losses remained more or less stable compared to last year at around 21000, while home phone losses improved 14% to 43000.
Turning to Bell media as I said TV advertising was strong we're back to the content funnel and timing of that content being what it used to be both for live sports and other television programming.
On the heels of our most successful upfront season ever Advertiser demand was robust translating into strong bookings that drove a 25% year over year increase in TV advertising revenue.
This was supported by leading viewership across all Bell media properties.
TSN and Rds were the top ranked sports TV channels for Q3 and for the 2000 22021 broadcast year, while our English language entertainment specialty channels achieved record rankings, claiming the top three spots for CTV comedy discovery and CTV drama.
And Nouveau continued to gain viewership over its French language competitors with audience is up 18% in the current fall TV season.
Insistent with our strategic focus to lean in more aggressively on digital we continue to make good progress in growing our streaming distribution platforms and digital advertising markets in Q3.
Total crave subs increased 5% over last year, while customers on direct streaming platforms grew a strong 33%.
This together with our rapidly expanding CTV Avon product and continued scaling of the Sam television sales tool contributed to excellent digital revenue growth of 32% in Q3.
So in summary.
Our strategic investments in advanced networks and industry leading services.
<unk> improved customer experience and outstanding operational execution by the Bell team delivered a very strong year over year operating results in Q3, and perhaps more importantly, we brought the businesses financial performance back to 2019 levels, despite still facing ongoing COVID-19 headwinds.
Thank you and on that I'll turn the call over to Glenn for a more detailed review of our financial results.
Thank you Marco and good morning, everyone.
I'm going to begin on slide six.
Our consolidated Q3 financials demonstrated another step forward in our Covid recovery as well as continued operational excellence and disciplined execution by the bell team with positive year over year contributions from all Bell operating segments delivered strong service revenue growth.
Three 6% in Q3 total revenue was only up <unk> eight due to the softer wireline data equipment in mobile mobile device sales versus last year. However, this did not affect overall adjusted EBITDA, which increased a healthy four 2% as product revenues are generally.
Low margin.
Net earnings were up nine 9% year over year on the flow through of strong EBITDA growth.
And a noncash net mark to market equity derivative gain resulting from the sharp increase in BCE share price this past quarter.
Despite higher earnings free cash flow was down approximately $460 million this quarter as expected due to the higher capital spending under our two year accelerated broadband network plan higher cash taxes, and a reduction in cash related to the timing of working capital.
Turning to Bell wireless on slide seven another strong quarter with service revenue and EBITDA higher than Q3, 2019, even without a material benefit for enrollment, which improved only marginally this quarter and still remains 55% below pre pandemic levels.
Well again delivered strong service revenue growth, which increased 5% versus last year.
This result is a reflection of strong mobile phone postpaid subscriber base growth over the past year, driven by our disciplined focus on higher value smartphone loadings higher <unk> as customers move to higher tiered unlimited plans and continued strong demand for <unk> Iot solutions.
The decline in data overage revenue improved this quarter, despite a 74% increase in unlimited plan subscribers since last year.
Product revenue was down $13 six year over year due to lower upgrade volumes and a greater mix of bring your own device customers.
The decrease in overall customer transactions can be attributed to the global supply chain handset constraints that were actively managing with our suppliers.
More refurbished premium brand handsets available in the secondary market as well as subscribers keeping their handsets longer which is good for us from both a working capital and our customer lifetime value perspective.
We believe longer device life lifetimes are the positive byproduct of the move to equipment installment plans two years ago, and the lack of new iconic handsets to generate buzz and stimulate the market.
These factors did not hamper our ability to generate higher year over year subscriber activations this quarter.
As for EBITDA, It was up a healthy five 6%.
This was driven by the flow through of the strong service revenue growth and a five 6% reduction in operating costs that yielded a $2 eight.
Two eight point increase in margin to 44%.
Turning over to slide eight on Bell wireline total service revenue growth in Q3 was positive.
This was driven by strong continued residential wireline performance at soft top line growth of 2.3 on the back of 9% year over year increase in Internet revenue.
This together with a one 8% lower operating costs from fiber related operating efficiencies and the non recurrence of certain COVID-19 related costs from last year delivered solid EBIT growth up 1% with a higher year over year margin of $44 two.
In business wireline, we're lapping some pretty tough comps from Q3 of last year when demand for conferencing services and voice connectivity, Pete and data equipment product sales spiked with large enterprise and public sector customers spending on capacity and facilities to connect more employees working remotely.
However on a positive note as the reopening of the economy takes hold more fully we are seeing the resumption of some customer spending on projects that were delayed because of COVID-19.
And modest growth from new services in the area of cloud computing. This drove close to 4% increase in service solutions revenue, which helped maintain the year over year rate of the business service revenue decline relatively stable when compared to the first two quarters.
Of 21.
Moving to slide nine on Bell media in short a strong set of financial results for Q3 as the recovery to pre Covid levels of performance steadily continues we saw higher year over year advertising spending across all media platforms with TV tracking.
Head of Q3, 2019 levels, while our rebound in radio and out of home remain modest.
Only a partial reopening of the economy.
Total advertising increased 19%, reflecting stronger year over year conventional and specialty TV performance from the timely or start to the new fall TV programming season. This year more live sporting events compared to 2020, and an incremental revenue generated from the federal election.
As a result of the higher year over year advertising and a 12% increase in subscriber revenue, reflecting a growing digital contribution total media revenue was up 14, 5%, which drove a 28% higher EBITDA in the quarter.
However, EBIT is expected to be significantly impacted in Q4 <unk>.
Despite the expectation for continued healthy revenue growth due to an acceleration in programming costs and broadcast rights, reflecting the return to our regular sports schedule. This year at a higher volume of original television productions compared to 2020, when cancellations and delays had a favorable impact on our.
Operating costs last year.
Slide 10 summarizes the main components of adjusted EPS for Q3, which was <unk> 82 per share up three 8% compared to last year.
Our EBITA was the key driver contributing <unk> <unk> per share of earnings growth this quarter.
This was partially offset by an increased depreciation and amortization expense driven by.
By the growth in our capital assets and the accelerated depreciation of <unk> network elements as we transition to <unk> and a higher year over year equity loss pickup from MLC Q3 is typically a seasonally low quarter for MSC. However, last year they benefited from the resumption of majorly.
Exports following the suspension of play.
At the start of Covid.
Let's turn to slide 11 on free cash flow and consistent with our expectations and plan for the year, we generated $571 million of free cash flow in Q3 down $463 million from 2020, although EBITDA effectively returned to pre COVID-19 levels this quarter contributing favorably.
To free cash flow this was more than offset by the planned year over year step up in capital spending as I previously referenced this quarter's results also reflect higher cash taxes due to the return to a normal.
Installment payment schedule this year and higher taxable income as well as a decrease in working capital from the growth in accounts receivable and timing of supplier payments.
Bce's liquidity position remains very strong with $6 1 billion of available cash at the end of September.
This excludes the final 80% payment of approximately $1 65 billion for three five gigahertz wireless spectrum acquired at the recently concluded auction.
Has been pushed into Q4, our balance sheet is well structured with an average term to maturity of just over 13 years on our outstanding MTS historically low after tax cost of public debt of approximately two 8% and a net average debt leverage ratio that is the law.
Luis among Canadian direct peers at approximately two nine times adjusted EBITDA.
We expect this to increase closer to three one times EBITDA pro forma the final spectrum payments.
To wrap up on slide 12, with three quarters of strong consolidated growth already reported we are on track to deliver on the financial guidance targets provided in February even with certain COVID-19 impacts expected to persist in Q4.
As we begin to look out to 2022, bce's cash flow remains strong and reliable.
With growth opportunities ahead for continued Covid recovery.
Our accelerated fiber network investments <unk> and digital media advertising.
But on that I will turn the call back over to thin and the operator to begin the Q&A portion of the call great. Thanks, Glen So before we start the Q&A period I'd like to ask you to limit yourselves to one question and a brief follow up so we can get to everybody in the queue and if we have some additional time, we can circle back afterwards, so thank you for that with that mode.
We're ready to take our first question.
Thank you.
I will take questions from the telephone lines. If you have a question and you are using a speaker phone. Please lift your handset before making your selection.
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You may cancel your question at any time by pressing star two.
Press Star one at this time, if you have a question that will be a brief pause while participants, but just a quick question. We thank you for your patience.
Our first question is from Jeff fan from Scotiabank. Please go ahead.
Good morning, everyone.
Great numbers.
Yeah.
Local I wanted to ask about the Mexican business initiatives that you've highlighted.
Were there any revenue contribution coming from these yet in the quarter, if not can you talk a little bit about.
The timing and perhaps the nature of the revenue streams like how are they structured with these partners.
The related question is with.
With these initiatives, what's what's helping you to get these initiatives in place I'm. Just wondering is that the network is at the hyperscale relationships or is it the BW relationships can you just.
Talk a little bit about that thanks.
Thanks, Jeff Thanks for the question so on the on the enterprise side in particular like what we're doing our approach is obviously managing managing the puts and takes of Covid in the near term as we as we continue to drive forward with our kind of customary business for lack of a better word but at the.
Same time as you know because ive been talking about it for the last few quarters I'm really focused on making sure. This organization puts in place the building blocks are.
For industry leader for industry leadership as the.
The new wave of revenues come our way. So that's you know Iot scaling that's five G converged <unk> in fiber and that's a multi access edge compute so revenues and then moving up kind of the.
Getting getting revenue further up the stack beyond mere connectivity. So that that's what we're trying to do putting in place those building blocks and I think the reason we're seeing a lot of early success in terms of securing deals.
Our partnerships is really because of the asset mix we have we.
We have kind of other expanding fiber footprint, we have a leading <unk> network we have the.
The largest presence in terms of kind of a multi access edge centers that we can we can deploy with our hyperscale.
Taylor partners, we have the most fiberize cell sites and we have distribution leadership in the enterprise space. So we're an attractive partner either for the hyper scaler or for application developers and Youre seeing youre seeing that manifest itself in terms of some of these announcements now you asked about.
The contribution from from these partnerships, they're just beginning right. So.
It's early days, what we're doing here again is putting in place the building blocks, creating customer awareness.
As well.
[noise], Okay, I'm, hoping you can unpack the the wireless market for me because.
A big confused Quebec or reward this morning, and they said they took 37% share of the gross adds in Quebec. This quarter, we've seen shall report, which seems to suggest child mobile still adding a healthy amount of customers in western Canada and of course, we saw $175000.
Postpaid adds bye bye Rogers a couple of weeks ago, So, whereas in your results were very strong as well so where's all the strength coming from are you.
Are you gaining chair are doing very well and sort of some other pockets of the country other than the western in Quebec. If there's any color you can provide on that or just more overall color on how the market is so strong for for everybody it would be much appreciated.
I think the.
The market has.
Has it been pent up demand essentially was I'd say Vince.
And we're all benefiting.
From it a little bit of a rising tide lifts all boats kind of approach to this but.
In our case I'm quite pleased with our performance in pretty much every geography.
Vince and.
Focus, particularly on what we're doing I think our results are are.
A function of.
This strategy that we put in place in our strong execution against that strategy. So again, and then repeating myself, but obviously quality smartphone loadings and in our case, particularly significant growth on the Bell brand.
We've managed data overage really well like I'm really continue to be very pleased with the team's performance on managing the data over to decline prepaid is starting to come back so maybe a little bit of.
Frothiness there because.
There was some competitive activity in the flanker and the flanker segment, which had an impact on prepaid, but nevertheless it.
Quite well and.
Stores coming back helped in terms of capturing that pent up demand and as I said in my opening remarks were so so much better.
It did to direct sales and we were a year ago and finally churn is helping those numbers like we our customer experience improvements are manifesting themselves in that wreck.
The record low churn and that's obviously in helping our underlying results.
Thanks for that just a follow up but also relates to wireless market conditions going forward do you have any update on how long it's going to be before we get any sort of final rules and rates surrounding the <unk> regime.
I don't have I don't have a good guess on edmunds.
Thank you.
Thank you I'm. Following question is from your home to play some digital day. Please go ahead.
Yes, thanks for for taking my question good morning, everyone.
You made a comment on.
Media EBITDA in the fourth quarter, possibly being let's hope they can be affected.
<unk> commanded on that previously, but now you might seem to put a bit more emphasis on this so I'm wondering if you can please quantify this.
Oh good.
Good morning, I, certainly am not going to be able to.
Provide.
Q for outlook.
Details, but let me just explain and unpack what I said.
Generally year over year in our media business.
The the sports schedules and the television programming schedules line up such that you don't have a large differential and the recognition of your of your programming costs will obviously with the pandemic, we added material shipped and programming cancellation of programming and live sports that was delayed and their start.
So the.
The recognition of the broadcast revenues moved into Q3 so.
The.
For the sports so what we're having happen here is that when we look at this year or if she excused nurses queue through Q4, when we look at this year, what's going to happen is that we are going to have a much higher recognition of the cogs related to the broadcast revenue recognition. So.
Last year, we didn't have that Cogs recognition. So it propped up the earnings. So this year is going to be a headwind on that it's it's really nothing more than timing and it has nothing to do with trends are and it's there's nothing to be alarmed by it. It's just the year over year differential on the recognition of the cost.
You'd think that's helpful. Maybe a follow up you were you were confident earlier in the year regarding possible pension contributions pauses probably next year.
Given the the increased interest rates do you still have the zoo.
Yeah, Great question all of our major defined benefit plans are in great shape and they are in a solvency surplus position matter of fact, our largest DB plan is at 190% funded position at the end of Q3.
So I would say we've gained more and more confidence on contribution holidays and now we're at a point that contribution holidays are emitted it's no longer and if it's just a win.
He'll provide more insight on that in February as I, see where year and rates and <unk>.
December 31, but.
Contribution holidays are imminent and could start as early as 22.
Thank you you're welcome thanks for the question.
Thank you I'm. Following question you some Simon finally for Morgan Stanley. Please go ahead.
Thank you good morning, I wanted to touch on the broadband business, if I could another strong quarter and it was really nice to see the broadband momentum given what we saw in the U S. With some of the cable companies reporting ads down 50% year over year, So perhaps you could.
Just give us a little bit of color, how you see the momentum on broadband what's driving that it would be really great. If you could give us more color on the fiber opportunity given usually first past penetration is going to kick in.
A low level, but ramp over time, so presumably you've got a bit of a tailwind from that so any color around sustainability would be great. Thank you.
Well. Thanks for the question I look to start with with the point that are fiber strategy is working.
And we're on track on the.
Capital acceleration program, which a lot of which is you know it was going into fiber. So there's.
Basically that's to kind of convey that there still is runaway here.
We've done a tremendous job over the last few years in particular are the last two three years to ramp up our fiber coverage across our footprint.
But there's still a ways to go.
And I view that only <expletive>.
As an optimistic scenario because the more fiber relay.
The more.
Penetration, we will we will deliver.
Some against some of our cable competitors were about 50% fiber overlap and we're doing extremely well. So we've got 50% more to go and so we will continue to do very well for for quite a while and really the.
The underlying trends as theirs cut.
Customer shift to quality, that's the bottom line.
And it's not a one time coven impacted you need connectivity in your home unique connectivity in your home you're not going to disconnect. Once Corbett subsides. So it's the it's the shift of quality and in terms of kind of financial performance that comes with it we all know like the.
We've got 10 years of experience now with fiber churn is significantly lower we have fiber lifetime value can be up to upwards of 50% better our our <unk> growth as strong where we have fiber you mentioned the penetration growth and and then on the cost side.
Annual support and service costs are materially lower where we have fiber. So think there's the momentum ought to continue both on the subscriber loadings in on the on the financial performance associated with with that asset.
Right just one follow up to what extent are the the gross adds some broadband coming when people move or is this happening.
Wow, well without a move.
I think our results are results, particularly on the financial side reflect a pretty healthy balance between volume tier mix in price.
Don't know if that directly answers your question, but I think basically what we're doing is we're getting.
We're getting.
A nice balance between new bell customer additions, an existing bell customers, even migrating from legacy foot.
Technology to new technology, and customers migrating up to higher speeds.
Great. Thanks, a lot.
Thank you following question something Casey some BMO. Please go ahead.
Thanks, Good morning America <unk> two for me when you talk to <unk> B Y O D being a bigger mix is that something that you're stimulating from your from your call centers and your promotional activity or is that you know driven by the market in terms of supply chain issues.
Or do you think that is driven by.
Changing customer preferences away from subsidized devices and second question just to follow up on an earlier one related to the timing on clarity with respect to empty you know rates and whatnot could you.
Realize you don't have a a timetable but could you tell us how that dynamic evolves is it a like are there negotiations going on or is it just kind of a black box and the regulator within the regulator in and they let you know at some point down the road any color you can provide there would be helpful. Thank you.
Well in the second one first Tim Good morning on the second question first and the model is the model is designed to encourage negotiations first and in the absence of successful negotiations then it moves over to the regulator. So it isn't.
No it doesn't kind of first sit with the regulator in that black box as you as you said.
And I'll leave it at that on the first question in terms of the B Y O D.
<unk> I think it's a it's a mix of all the factors that you actually laid out so that you mean, you leave that out quite nicely.
[noise] thank thee.
Apply chain issues are definitely a part of the growing mix of bring your own device customers.
Tim but on the other hand, what you're seeing what.
What we're seeing with.
This phenomenon right now as you are starting to actually see the structural benefits of installment plans as our first cohort of installment customers are reaching the end of their first two year contracts.
They are actually hanging onto their devices longer because they paid for them and combine that with.
Kind of the supply chain issues. There are also motivated to to hang onto their devices longer and as Glenn mentioned.
In his opening remarks, and that's good for the economics of our business and the overall lifetime value and what's particularly interesting here or a particular benefit here as they are not turning away and.
And and that's due to the vast improvements we've made in our customer experience. So financially speaking right now kind of that structural shifts certainly has been a benefit.
Thank you.
Thank you I'm. Following question you some <unk> some I B C comes on markets. Please go ahead.
Yes. Thank you very much good morning falling upon.
10 question, but brought it you need out murko to wireless EBITDA margins just in general.
It looks as if there.
There should be certainly some some expansion looking for because obviously operating leverage that you have to roaming coming back.
Yeah, It seems like equipment margins and the IP and Pumpkins and pausing to men you know, we're seeing lower churn you got digital initiatives and B Y O D. Just love your thoughts on the scene all looking for specific guidance going for them, but just kind of a structural tailwind chair for wireless margins for for for Bell specifically.
Good morning drew its glands. Thank you for your question look we're extremely pleased with our wireless performance on our wireless margins.
Would agree with all of your comments as we look forward that we have some great opportunity for margin expansion, but we also have pressures on the business as we as we manage the the government's desire to insured affordable wireless pricing in this country. So we're managing that but all of that said I think we have we have some somehow.
The upside for margin management I think this past quarter is is really demonstrative of what we can do when we focus on the high value customer.
And what we can do to drive 5% service revenue growth and a healthy $5, 6% EBIT by focusing on the right customer segment. You are right that roaming has been slower to return then and we would have forecast it and we expect that.
And I would even say early indicators in October telling me that recovery is is starting to happen. So we will expect that to give us a little bit of a tailwind.
For for calendar 22, so I would say, yes look healthy margins remain in that business, we have to manage the the pricing private pressures on the competitive landscape, but we have <unk>.
All kinds of opportunity and as you alluded to an enrollment will be Ah.
A tailwind to help us with that so.
Positive.
Two for shorter.
[noise]. Thank you Glenn and just just while you're there congrats on the 109%.
Solvency surplus just put those on the line that is linked to your pension questions for a decade quite amazing a follow up.
Just on the Internet side again just.
<unk>.
Stunning kind of momentum on residential Internet wondering if she can talk a little bit in terms of what the fixed wireless contribution is to to the overall trend there that'd be great. Thank you. Yeah. We've had we've had good growth on the fixed wireless of course.
And you would understand why and when we come into.
A community that has had very poor internet service or no Internet service and we come in with quite.
Quite a robust fixed wireless.
Bell branded solution.
The uptake of strong so there's been.
The numbers that you see here are really a reflection of extremely strong growth on the fiber side good growth on the W. H I or fixed wireless side and.
Losses on the legacy copper side.
[noise] got it thank you.
Thank you I'm. Following question you some Arab <unk> got up I did some kind of continuity. Please go ahead.
Good morning, Thanks for taking my questions like that congrats on that I could assist in adults.
I wanted to start with the Internet I know you've discussed the the drive is at the at 90% grilled number.
Wanted to set up to go back to one element there I know that one of the items that may.
May have helped you said at the somewhat tepid promotional activity to most of 20 and.
Perhaps even in the early part of 21 I was wondering if you can kind of give me an update as to where things stand on that front <unk> starting to see some of those discounting some of that promotional activity to come back and then a quick follow up on the media side, you know 22% of a drink I shall definitely encouraging I know that.
A big a part of that is still crave any kind of insight you can give access to whack craves profitability of that at this point would be helpful as well. Thanks.
Thanks.
Yes, so on the Glen once you take the crave yeah.
Obviously, you're not going to give specifics, but crave continues to be a a.
A profitable provider.
Provider profitable part of our media business and overall profits to <unk> as a whole each each quarter as we expand our subscriber base.
Not only gets better and as we mentioned when we had a 5% subscriber base increase we're able to move further and further to direct to consumer with our customer base is merkle mentioned earlier growing 33% and that is a that is a very simple delivery mechanism for us so that even provides a greater off.
Opportunity for margin improvement, but crave has been a positive contributor and.
For <unk> for some time now and I only see that expanding as we continue to grow the subscriber base.
And.
Thank you Glenn and on the first question I think you see our financial performance on the on the Internet side, which continues to be strong and that's that's strong in gangs pretty.
Strong showing last year in other words were lapping a pretty strong Q3, 2020, and we're still delivering some some good growth and but.
I would I would say that <unk>.
Promotional.
Intensity has come back a little bit in Q3 and into the queue for especially compared to last year.
So we're managing through that it is a competitive environment.
But we are still able to deliver the results you see despite some of that promotion intensity coming back.
Thank you.
Thank you I'm. Following question you some sebastiano penny from J P. Morgan. Please go ahead.
Great. Thanks for taking the question just following up on the B Y O D and the elongated.
Device upgrade cycle I mean, the the dynamics that we have seen in the U S is that this will ultimately lead lead to a lower switching pool overtime and could therefore create challenges on the loading crunch.
Could you, perhaps update us on where you are with the IP penetration today, and maybe any color around the transition to unlimited.
And to that point just following up.
There remains a question in the U S. As you check the five G do consumers understand the importance are the benefits of five G and will that'd be a tailwind to.
Not only loading but service revenue growth has you walk cokes at the rate ladder. So you could just comment on those two things that would be great. Thank you.
So thank you I look I won't comment or give particular disclosure on our unlimited.
[noise] penetration or IP.
Penetration either I would say that customers continue to move over to unlimited as I mentioned in my opening remarks, and I'm quite happy with how we're managing that whole shift.
When consumers move to unlimited like 60% are migrating up to a higher rate plans, which is positive course on parking the the old Virgin packs for when I say that but then you know that way if I reintroduce the overage impacts as you know we've managed that quite well to the point, where it's actually no longer headwind or a tailwind and I think we will reach an equilibrium.
Pretty soon.
On on data overage decline on the installment plan.
As I mentioned earlier I think you've seen the structural benefits with the elongated device upgrade cycle that that you mentioned I think on the five G upgrade cycle I do believe it will come I mean, we're seeing we're seeing scaling a five G subscriber ship right now and it's continuing with double the data usage on five G.
Compared to <unk>. So that trend continues five G customers continue to spend more than four G customer. So thats trend is continuing as well and I mean.
We'll see I mean, there there may be some.
Headwinds as we go through this and they may be the ones that you identified but on the other hand think about all the five.
Five G I O T mech revenues that we'll be able to generate because we have five G networks.
An edge centers and fiber.
Five Bryce cell sites, and low latency solutions et cetera et cetera.
A ton of opportunity on the enterprise side as well.
Great and in one quick follow up Glen is there any color, perhaps you could get on the lower opex in the corner.
Underlying drivers on that on the one I'm sorry on the wireless side.
The biggest driver on the wireless side is the fact that that product sales were down so much. So we had as I mentioned in my opening remarks significant softness and product sales related to the supply chain issues. So obviously the associated product causes the main driver of that.
Thanks.
Thank you I'm. Following question you some <unk> some U B S. Please go ahead.
Great. Thank you can you talk a little bit about the tens of pain in the enterprise segment aside from the impact of nonrecurring COVID-19 related sounds, but what you've seen turns out maybe any change in demand for type of service within the final tender pricing environment and just a quick follow up on what six one.
<unk> can you share any maybe eight performance metrics and usage that to see from subscribers. Thank you.
On the second one you'll have to follow up with with saying to the extent that.
That information there that we can provide on the first one look I think we're seeing some I T spending coming back.
There's modest growth that's encouraging in the cloud computing space.
And so we are seeing some growth in business service solutions. So that some of that spending is coming back again and encouraging.
Trend in the service revenue performance essentially been quite consistent with with previous quarter. So there's not much more to add than what I have said in the past and who you actually in your question asked me not to kind of really Park park, the kind of Covid related bump in spending last year. So I would just basically answer to say.
It's more or less what we've seen the last two or three quarters and with some delays and spending in some categories and some spending coming back, particularly in some of the solution businesses resolution.
And anything in the pricing environment, you could call out.
No I mean, it's the.
The enterprise based continues to be to be to be pretty competitive and it all depends on which category of service you're talking about.
Alright, thank you.
Thank you we have no further questions. So they just come at this time I would not like to turn the meeting back over to Mr. Photo place I think Q mode. So thanks again to everybody for your participation on the call. This morning as usual will be available for follow ups and clarification throughout the day. So have a good rest of the day everybody. Thank you. Thank you.
Thank you to conference have ally Linda.
Disconnect your lines at this time and we thank you for your participation.