Q1 2022 Rogers Communications Inc Earnings Call
Thank you for standing by this is the conference operator welcome to the Rogers Communications, Inc. First quarter 2022 results Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded following the presentation, we'll conduct a question and answer session.
And the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing star Zero I would now like to turn the conference over to Paul Carpino, Vice President of Investor Relations with Rogers Communications. Please go ahead.
Thank you Ariel and good morning, everyone and thank you for joining us to.
Joining us today I'm here with our President and Chief Executive Officer, Tony Staff theory, our Chief Financial Officer, Glen brand and George Fernandez, Chief Technology, and information Officer. 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 2021 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 Tony to begin.
Thank you Paul and good morning, everyone.
Thanks for joining us on this very busy day as we highlight our strong Q1 results update our positive 2022 outlook and hold our AGM virtually later this morning.
As I discussed back in January the Rogers organization is focused on three priorities better execution across our businesses, increasing our investments in our networks and customer service and continuing our extensive efforts to successfully complete the Shaw transaction in the first half of 2022.
I'm pleased to say, we made progress in each of these areas in the first quarter. So let me provide some comments on each of the items before I turn the call over to Glenn to provide you with a more with more detail on the quarter.
Starting with better execution, each of our businesses delivered better revenue and profitability than expected across the organization. Our teams are focused on targeting or accelerating all efficiencies and process improvement opportunities to deliver results that will meet or even exceed the targets we've set for ourselves.
We're making progress with these efforts and have already started to capture some of those benefits this quarter.
Our wireless service revenue increased by 7% this quarter as the economy continues to grow supporting this growth was significant improvements in quality smartphone loading strong churn performance and continued growth in ARPA.
Postpone postpaid mobile phone net adds were 66000.
More than triple the volume from last year.
Q1, postpaid mobile phone churn improved by 12 basis points to an impressive seven.
Seven 1%.
And finally <unk>.
I'll phone <unk> was a solid $57.25 up 3% from one year ago, reflecting continued improvements in roaming revenue.
In cable, we continue to make progress in improving our execution and delivering better performance revenue was up 2% and adjusted EBITDA up 13%.
Cable adjusted EBITDA increased year on year, primarily as a result of our focus on operating and process efficiency improvements at Rogers ahead of our shock clubs.
While financials are improving nicely here, we still need to deliver better and better results on top line growth and subscriber additions, but we know what we need to do and the team is doing a terrific job on this journey.
Finally in media, we continue to show steady improvements coming out of the pandemic revenue grew 10% primarily as a result of higher sports related advertising and we're targeting positive adjusted EBITDA. This year with a return of in stadium revenues for the Blue Jays at our Roger Center.
In Q1, we continue to make the bold investments needed to ensure that we not only lead in Canada, but to continue to have amongst the best networks in the world.
In the first quarter alone, we invested 34% more than we did last year and.
And this year, we will spend close to $3 billion in infrastructure investment in this country.
In wireless we are leading in <unk> coverage and performance and as this technology brings new solutions for consumers and businesses, we will be ready to offer the world class network that Canadians need and can rely upon.
And in our cable business will continue to lead on having the best Internet and TV experience period.
As you saw yesterday, we announced a major milestone in our 10 G initiative, where we successfully tested eight gigabit symmetrical upload and download speeds on our fiber powered networks impressive by any standard this technology will become available to customers in the not too distant future.
Despite this increased investment our cash flow was strong we generated cash flow from operating activities of more than $800 million up 20% largely as a result of higher adjusted EBITDA.
Overall, our team has a renewed focus on execution and performance is starting to deliver results and puts us in a strong operational and financial position as we come together with Shaw.
Given our confidence in our assets and our execution, we have increased our financial guidance for this year prior to any growth associated with the Shaw transaction.
As we continue to build momentum, we see further opportunity for industry leading revenue.
<unk> ability and cash flow growth in 2022 and beyond.
These improving fundamentals underpin the opportunities we see ahead to drive innovation and competition with the shop business and leverage the quality of these two iconic companies.
On that front, we continue to make good progress towards closing the Shaw transaction.
We received approval of the <unk> in March we.
We have obtained all of the funds necessary for the deal following a record setting series of debt offerings in the last few months and.
And we continue to make solid progress on our integration planning.
This transaction remains subject to the approvals of two important government bodies, I said and the competition Bureau, and as we have highlighted since announcing the transaction 13 months ago, both the Rogers and Shaw teams believe the strength of this transaction is compelling for all stakeholders, especially Canadians.
As we move forward, our Shaw acquisition will truly allow rogers to accelerate innovation and drive competition nationally.
Importantly, together with sure we will have the necessary scale to meaningfully bridge, the digital divide and do neither of us could do on our own.
2022 is going to be an exciting year for Rogers I want to thank the entire Rogers team, who have reenergized. This re org. This organization by working together to not only drive better execution and improve our financial performance.
But to prepare us for the years ahead, their entrepreneurial spirit and dedication to our customers will enable rogers to reach its full potential and I'm grateful for their positive attitude and unified efforts as we strive to achieve our goals as an organization.
Let me now turn the call over to Glenn who will provide a few more details on the quarter.
Thank you Tony and good morning, everyone. Thank you for joining us.
Our Q1 results reflect solid operational improvements in each of wireless cable and media underpinned.
Underpinned by disciplined execution and accelerating economic growth.
This performance is encouraging and is reflected in us increasing our 2022 outlook.
In wireless we delivered very strong postpaid mobile phone net customer additions of 66000.
200% increase from one year ago.
While typically a very quiet quarter. The net additions were driven by strong base management.
Low postpaid mobile phone churn and an overall increase in market activity.
Wireless service service revenue was up 7% year over year benefiting from higher roaming revenue as global travel continues to recover and from a larger postpaid subscriber base.
Notwithstanding the increased market activity, our churn was exceptional.
We delivered strong customer retention this quarter, achieving postpaid mobile phone churn of 0.71%, which is a 12 basis point improvement year over year.
This is combined to deliver healthy mobile phone ARPA growth of 3%.
For our blended monthly average rate of $57 25 per user.
And there is still room for more as roaming is currently in the 90% range of pre pandemic 2019 levels.
Additionally, we are seeing further migration towards the Rogers' infinite unlimited plans, which is helping to stabilize our base <unk>. In addition to the ongoing recovery in roaming revenue.
Finally wireless adjusted EBITDA was up 7% year over year and adjusted EBITDA service margin remained a strong 63% in the quarter.
The growth in adjusted EBITDA was driven by the flow through of service revenue, which was partially offset by investments in customer care.
And our cable business, we saw strong financial results driven by improved execution with total cable revenue up 2% year over year.
And adjusted EBITDA up 13%.
Cable service revenue benefited from a modest price increase across our Internet base introduced last fall.
Cable adjusted EBITDA increased by 13%, primarily as a result of improved cost efficiencies, including lower content related costs, partially due to negotiation of certain content rates with suppliers and overall lower people related costs.
This gave rise to an adjusted EBITDA margin of 53%.
Importantly, our current cost reduction activities are being implemented in anticipation of the shock close.
We are targeting $1 billion in synergies for the combined organization in the first 24 months following the close of the deal.
On a product basis, we saw a 13000 retail internet net net customer additions in Q1.
Down about 3000 from last year.
In video we saw improvements this quarter on consolidated TV loading to 14000 net customer additions across both our legacy and ignite products compared to 12000 video losses, one year ago.
Total customer relationships increased in the quarter to 2.589 million up.
53000 year over year.
Okay.
Moving to our media business results reflect further growth and recovery.
Revenue grew 10% due to higher sports related revenue, including negotiation of certain content rates.
While adjusted EBITDA fell, 12% driven by higher programming and production costs in the quarter and higher Toronto Blue Jays payroll due to timing of player trades.
Additionally, content costs were higher in Q1 as sports programming shifted from Q4 to Q1 associated with pandemic related schedule changes.
We are excited by their full return to sports and hopeful we have full stadium capacity available for our fans at the Rogers Center for the entire Blue Jays season.
And we are excited by the Blue Jays strong start to the season.
At a consolidated level total revenue for the first quarter was up 4%.
And total service revenue was up 6% year over year.
Largely driven by our wireless business.
Adjusted EBITDA increased 11% and adjusted EBITDA margin increased by 260 basis points to 42, 5%.
Capital expenditures in Q1 were $649 million or 34% higher than last year with capital intensity, increasing four percentage points to 17, 9% overall in the quarter.
This increase reflects investments made to upgrade our wireless network to continue to deliver reliable performance for our customers. The continued expansion of our <unk> networks as well as additional cable service expansion and cable upgrades.
Cash income taxes decreased this quarter due to the tax installment in the prior year arising from our transition to a device financing business model.
Which results in earlier recognition of equipment revenue for income tax purposes.
Turning to the balance sheet, we exited the quarter with an adjusted debt leverage ratio of 3.3 times sequentially down from three four times at our 2021 year end.
You would have seen in the quarter our announcement that we will replace the $13 billion committed bond bridge facility.
With our very successful Canadian dollar and U S. Dollar bond issue completed in March.
We issued a combined $13 $3 billion of Canadian dollar equivalent senior notes.
At a weighted average cost of borrowing of four 2% and a weighted average term to maturity of 14 years for net proceeds of $13 1 billion.
Completing all of the permanent financing needed to fund the Shaw transaction and replacing the interim bank commitments arranged to support the transaction in March 2021.
Additionally.
Ali we issued U S $750 million of subordinated notes due 2082 with an initial coupon of 5.25% for the first four or five years in February 2022.
Further strengthening our balance sheet and diversifying our funding ahead of the Shaw transaction.
Our total weighted average cost of borrowings at March 31, 2022, now stands at four 2% and.
And our weighted average term to maturity was 12 four years compared to 395% and 11 six years, respectively. At December 31 21.
Through these offerings and through our multi decade track record of prudently managing our balance sheet and capital priorities.
<unk> markets continue to show their confidence in Rogers and their support for the Shaw transaction.
And finally, let me turn to our guidance, where we announced this morning that we are increasing our consolidated guidance ranges for Rogers on a standalone pre shot basis for the full year 2022.
We are increasing our total service revenue range by two points to an adjusted range of 6% to 8% up from the 4% to 6% range provided in January .
The increase is driven by the positive momentum we are seeing in our business on the back of the reopening and growth of the Canadian economy, and the return to travel.
Next adjusted EBITDA guidance range is increasing two 8% to 10% from the 6% to 8% range announced in January reflective of the better execution, we are starting to see across most parts of our business.
And lastly, free cash flow guidance now sits at $1 9 billion to $2 $1 billion.
An increase of $100 million from our previous guidance range of $1 8 billion to 2.0 billion.
Largely reflecting the flow through of increased EBITDA growth.
Let me also provide some general transparency on the outlook for Q2.
In wireless on a year over year basis, We believe service revenue and adjusted EBITDA will continue at a 7% improvement.
Wireless mobile phone <unk> growth should be in the similar range as Q1 as roaming revenue is expected to continue its recovery.
In cable we are targeting approximately 5% EBITDA growth for Q2.
Additionally, we will continue to focus on improving our execution to drive better revenue growth.
Intimately by improving our revenue profile, while keeping our operating structure relatively flat the additional revenues will flow more effectively to the bottom line.
And lastly in our media business revenue will grow year over year, and adjusted EBITDA is expected to be up year over year as well.
But still remained modestly negative in the quarter.
And finally on cash taxes, and free cash flow, we expect our cash taxes to be approximately $145 million.
Down from Q2 of 2021, when they were $175 million and similar to what we saw in Q1 of 2022.
In closing this is an exciting time for Rogers as we drive improved execution and continue to see the growth opportunities ahead of us.
Exceptional assets, a strong balance sheet and solid financial and operational performance underpinning the company.
We are in excellent shape as we prepare to get together with Shaw.
Let me now turn this back to Ariel to commence with the Q&A.
Thank you we will now begin the question and answer session.
Join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.
Our first question comes from David Barden of Bank of America. Please go ahead.
Hey, guys. Thanks, so much for taking.
Taking the questions I guess first I imagine you don't.
<unk>.
Right on the reports.
That one of the.
Pillars of the of the short transaction it would be a sale of freedom mobile to explore that but maybe you could.
Give us a little bit of a framework for how to think about.
What the wireless landscape might look like.
Post transaction.
For Rogers in.
In terms of potential wholesale relationships are competitive landscape in that sort of thing.
And then I guess the second question, if I could blend and I think you mentioned you've gotten back to maybe 90% of your of your roaming revenue run rate if I remember correctly.
When this all began you you've kind of talked about it being a $500 million.
Kind of hole that was created by the pandemic and then you've been slowly you feeling I know that theres been some some rate changes there's there's been some.
Advancement in travel activity I'm wondering if the $500 million number.
Which which used to be the bogey might might be a bigger number now.
We think about the trajectory for <unk> looking for the balance of 2022.
Sure.
My.
Thank you David for the questions. Let me start with the second one on roaming and then.
And then turn it over to Tony to comment on.
On the first in terms of roaming.
Yes, there have been some rate rate changes, Dave we're not being that precise in terms of where the recovery and the growth is coming from I think where we are excited to see the return to travel.
We're seeing masking and travel restrictions.
Freeing up around the world, while we continue to deal with.
With Covid and with the with waves.
And I'm excited to see the travel coming back both consumer as well as business travel I think consumer has been earliest and first to recover but certainly we're seeing business travel will come back.
Both the volume as well as those rate increases will.
We will help to see further recovery over time, you would expect to see.
Growth in that category.
And are mindful of the fact that we're looking to get back to levels that we saw three years ago, and so I would anticipate that with the with the volume of flying as well as with the rates, we will see further recovery going forward.
Tony maybe on the second part of your question David as you would expect there's not a lot we can say and given.
Given the transaction is front of in front of the government bodies.
We're not going to comment on any rumors that are out there.
As you would expect in terms of competitive landscape.
Very similar what I.
Can reiterate our the Minister's comments that he expects to see a solution that continues to have a fourth robust wireless operator in this country.
And he said what he said and so we continue to work with the government to.
Closed the transaction and that's all I could really say at this time, we continue to be confident we'll close this in the second quarter.
And that's it on that topic.
Yes.
Okay, well, thank you and for what it's worth I'm, a blue Jays convert so I'm looking forward to the rest of the season.
Welcome aboard.
Thanks, David next question area.
Our next question comes from Jeff Fan of Scotiabank. Please go ahead.
Hi, good morning, everyone.
Couple of questions on the cable side, if I may on the operating costs.
Glenn are you able to help us quantify some of the buckets that contributed to the.
The margins this quarter I think.
You talked about some renegotiation of content costs.
Can you quantify that and talk about whether that's a recurring item or whether that's more retroactive and then also sounds like you are executing on some of the cost synergies on your side on the deal I'm wondering if he can help us think about whether you are actually taking some.
Are those cost synergies.
Even as we speak right now before the deal closes.
It sounds like you're running into the deal closing, which is great. But wondering if you can help us understand how much of that is being taken versus how much is lost post deal and then the other the final.
Question is just on the video positive net adds.
We haven't seen a positive net adds in any quarter in many many years. So I'm wondering if you can just elaborate a little bit on what's helping you there.
And what about <unk>.
Likely to continue.
Thank you Jeff and.
In terms of.
<unk> the buckets.
And the nature of recurring and otherwise I think there is there is a mix across.
New categories in there.
Which we've touched on in my comments in the release around.
Youre right content.
Content rates as well as.
Some of the people costs.
<unk>.
The people costs, absolutely will be recurring the content rates to the extent.
Some of those roll forward, obviously will be.
We will be recurring we're not I'm not going to put any precision around all of that.
Jeff but.
Some will some will certainly carry forward you can see not all of it where we talk about a 5% growth rate in Q2, and so that will give you some level of.
Of awareness around what portion is carrying forward.
In terms of our synergies where we're leaning in on a number of different categories. We are in its early days, but we are starting we are starting to look at.
Preparing with our vendors.
And getting ready to lean in.
On day, one or earlier, where we.
Can work with suppliers, who are understand the size of this company when we come together with shop, particularly on wireline and so early days, but we're starting to lean in on that exercise hard.
On people costs, it's two fold one is.
Just looking at some of our operations and functions and making sure that we are focused on the right activities and that we are properly sized for that it's also creating headroom for <unk>.
Coming together Wishaw and starting the exercise of.
I've, just making making preparations for when we do close on the shock.
<unk> that we're able to come together with the with our combined.
Find entity that excuse me that that has leadership coming from both sides.
And so that exercise we've leaned in on hard.
Again more to come ahead of the transaction and following it.
But youre seeing the benefits of that.
Also in the <unk> and the cost reductions.
On our video net adds that really is coming from.
Just.
Our focus on execution and better execution around customer service around the sales function and focused on closing the sales still much more work to be done there.
ROE there has been a tremendous addition to the company in terms of bringing a strong sales culture into the organization and helping us.
Just redirect some of those efforts.
All of it is underpinned by what we believe is the very best Internet and TV experience available to customers and so.
Focus on customer service and sales execution around that where you have the best service, we should be doing better than we had been and then we are now so more to come on that.
A good topic.
Particularly pleased on the cable margin performance as Glen talked about a number of.
Process and efficiency improvements.
That yielded the upside in margin notwithstanding the additional investments we put into areas like our call centers customer service and a few others.
So in terms of sustainability, Glenn talked about our outlook for the second quarter and I think that captures it.
On the video side as Glenn talked about it really is a culture reoriented reoriented back to the Rogers premium brand and so what we saw in the cable business is a very good mix shift from our Fido brand Internet to our full suite of in home.
Internet and entertainment.
So that's coming in very nicely, we've talked about it being a focus for us in terms of brand migration and we're starting to see some strong early signs.
Thank you both and congrats on the quarter.
Thank you Jeff Thanks, Joe Thanks, Jeff next question Ariel.
Our next question comes from Vince Valentini of TD Securities. Please go ahead.
Thanks, very much let me first off congrats great quarter, Let me start a couple of little clarifications. When you say content costs and cable I just want to make sure I'm clear you're talking just television programming or would you consider like technology licensing fees to be a version of content as well.
Think of it.
Think of it along the lines of programming content costs.
Yeah.
And also Glenn on your you're 5% referenced for Q2 relative to 13%. We just saw in the first quarter.
Thank you guys.
Generally try to set a bar in your guidance at a level that you know you can hit and hopefully you can deliver a positive surprise like like you've done today.
So I want to make sure we don't read too much into that because we can all do quick math.
If the difference between 13 and five is an <unk>.
<unk> to be nonrecurring items that would be about a $40 million benefit to opex I think in this quarter I don't think youre trying to imply that are you.
I am trying to sort of set expectations that don't anticipate 13% Vince.
And so inside that and so we're saying 5% over to us to continue to focus on execution.
And we have a lot of head we are leaning in on customer service, we're leaning in on other things and I anticipate those will drive revenues, but they are also going to impact expenses and so.
That's all sort of rolled into that number of events.
But yes, we.
We are we are absolutely focused on delivering results and on performance. So.
Im not cable one I just want to make sure I don't read too much into the the eight gig trial, you've you've been talking about and moving to all fiber in a few places.
Is it your intention to shift gears from DOCSIS didn't go all fiber everywhere on an accelerated basis is it.
You seem to be talking a lot about fiber performance as opposed to your.
Youre DOCSIS speeds lately. So just wanted to make sure I don't misinterpret any.
Vince I'll start off and then George can provide some color but in terms of strategy.
We are certainly not abandoning DOCSIS four <unk> this is going to be a terrific.
Enhancement to what I would describe in places we have mixed fiber and coax.
And so that initiative is working well and.
George will talk about that in a moment, but there are many areas.
Where we have complete fiber and in those areas, we take advantage of G PON and the capabilities of our fiber and so think about them.
As working in tandem and we're just practical depending on the area, where we have.
That type of cable or fiber.
Thanks for the question Oh, well, that's exactly right. So what Tony said, we have multiple tools in the toolbox that we use depending on where.
It makes sense of geography age of the cable infrastructure and so on.
As we as you know we've been investing in this infrastructure for for a number of years now.
What youre seeing is that our investments beginning to.
Show results and performance, we're very happy with the progress that we're making on on DOCSIS.
Both in terms of what we have available on DOCSIS three one.
And also with DOCSIS four <unk> the speeds that we'll provide in the.
Not too distant future and so essentially what you're seeing is a combination of all these capabilities come to bear on the market.
Thank you.
Thanks, Vince next question area.
Our next question comes from drew Mcreynolds of RBC. Please go ahead.
Yeah. Thanks, Thanks, very much and good morning, maybe a quick follow up here just on the <unk>.
Fiber question.
Just for George perhaps.
We often.
Get asked what percentage of your.
Our targeted broadband footprint.
Its fiber versus that hybrid.
Are you able to at all kind of provide us with some context there.
Secondly, just a quick one on media a lot of moving parts and great to see things normalize here and particularly for the case.
When you kind of look short and medium term is there kind of a normalized margin we should have in the back of our mind for that segment.
And then third and last just on underlying mobile phone are too great to see the 3% growth, obviously, a little bit more roaming ahead and you spoke about some up hearing there underneath the hood excluding roaming.
Could you just unpack that a little bit more in terms of.
Underlying <unk> growth the key drivers and to what extent you're seeing five G.
Tried some of that up here. Thank you.
Sure maybe I'll start with the last one and then.
Glenn will talk about the media margins longer term and George can talk about the.
Our fiber deployment strategy.
In terms of mobile phone <unk> as you saw the uptick in 3% was largely attributable to the increase in roaming revenue.
One of the things you saw underlying you'll see it play out in future quarters is a very good migration in the first quarter much like cable migration from the Fido brand onto the Rogers brand in.
In part due to our emphasis.
In large part due to our emphasis back on the Rogers brand and so that migration is happening nicely, but importantly, when you look at the underlying data usage trends, we're back up to 50%.
Year on year growth rates.
We've talked about it before as we move in and out of Lockdowns in the pandemic coming out of it we see out of home usage Spike up and therefore, the use case for unlimited becomes much more compelling and so that's what we're seeing play out in the marketplace and.
So im quite pleased with that so at the core the fundamental <unk> driver is going to be data usage.
<unk>.
The demand is driven by five G higher speeds much lower latency et cetera. So.
That's what we expect to see play out in future quarters.
But the reality is it'll be overshadowed by roaming revenue increases for the next while.
But on media and then maybe on on media.
Drew I think I think we are.
And we're certainly in a position that we will deliver positive EBITDA for the year.
We're still working through the recovery through Covid and the shifts that have occurred through COVID-19 , but certainly seeing the resumption of live sports.
And our portfolio of sports assets being second to none were seeing a strong recovery building through the first quarter and anticipate that will continue.
Through playoff season for the NHL as well as through the.
The young season underway now for for the Blue Jays and so.
We were confident that we've got the best sports.
Content available and and we are seeing.
Hey.
The recovery and growth coming back from advertising around those products, there's been a shift and just you know just general population trends and work schedules over the last couple of years as we all know that's impacted some of the media assets, particularly across our radio station.
<unk> has offices returned to either a full time or a hybrid model of coming back to the office, we anticipate at that.
That recovery will continue.
To build.
We are seeing though also some.
Some positive recovery coming back from new advertising categories.
Online bedding, certainly has created a new category for our for advertising revenues.
And as have crypto currencies for example, which pre pandemic, we would not have seen.
Those as being as prominent as certainly they are they are now they also lend themselves well to the resumption of sports programming and we're seeing the benefits of that so.
Overall, we will see positive EBITDA through this year.
It's continuing to build.
Good morning drew and thanks for the question on the on the fiber cable question.
So think about it this way our entire.
Wireline and frankly, a wireless network is.
Is enabled by fiber and so whether it's a DOCSIS or cheap on really what you're talking about this as the last mile.
Everywhere else, we have fiber the choice for the last mile is really where it makes economic sense to go with one versus the other technology.
As I said, we were very comfortable and very happy with the DOCSIS Road map and the speeds and capabilities that <unk> provides.
And the choices of where we deploy one versus the other technology it really depends.
Uh huh.
The age of the infrastructure.
The passive infrastructure available to us as well with its poles of ducts and so that's how we make the choice not so much on the capability that exists in the last month.
Yeah.
Thanks, very much for the additional color. Thanks.
Thanks, Joe next question area.
Our next question comes from Sebastiano Petti.
J P. Morgan. Please go ahead.
Good morning, Thanks for taking the questions I was wondering if you could update us just shifting back to the cable side can you update us on the competitive environment in retail internet, but the economy reopening are you seeing a pickup in competitive intensity relevant versus your telco peers.
And then related to that capital intensity spend in cable stepped up this quarter I mean, as we've discussed in fiber to the home deployments network expansion efforts.
As we're thinking about the go forward in the remainder of 2022 and when should we expect even estimate when the footprint expansion as well as what Youre also Jim on the pitch wireless sites will begin to flow through the kpis.
Right.
Good morning, Sebastiano and thanks for the question I'll start with you.
Your question on cable competitive intensity in the marketplace. It continues to be competitive as you would've seen in previous quarters and previous years I would say the landscape.
At least in part driven by us.
But the market in general has pivoted from Internet only to a whole home solution that includes video that we've talked about in.
And increasingly you'll see smart home monitoring as part of that.
And and.
And so we would describe it as.
Moving to whole home away from flanker to the premium brand.
With continuing promotions in the market.
On a neighborhood by neighborhood basis, and so nothing has really changed in that context.
Sure.
And it's against that backdrop that our execution is.
<unk> is performing well the second piece of it relates to and the reason. We're so focused on that is how are we doing in terms of penetration of homes passed and Glenn will talk about our capex outlook, but think about it broadly as we want to increase the number of homes passed.
And we will invest where it makes economic sense to do so and so this quarter you saw our homes passed increased by 3% on a year on year basis, as we look to population growth within our territory footprint. It is growing at 5% and so our expectation is to try to.
Have cable capex keep up with that.
Demand, if you will and ensure we execute on the right penetration rates for that increasing footprint.
I think thats I think thats rates of SG&A I think look we we are looking to expand footprint where.
Where we can help.
Broadened the reach of <unk>.
Of Internet connectivity.
Further into rural Canada, you've heard us talk about that for some time.
And that is that is reflected in the capital intensity that you've mentioned I think in terms of driving the kpis through that.
We you heard me say earlier, we are confident that we have the best Internet and TV experience available to customers.
Over to us to lean in on investing in customer service and sales execution to help drive those kpis.
And so I think we're seeing early signs of that.
We've seen some in the first quarter and we'll see that continue to build through this year certainly we're focused on it I don't think there the.
The impetus is investing more in capital spend it's investing more in customer care and sales execution to drive those kpis results that you've mentioned and so.
We're on it and seeing early signs of that more to come.
On the on the cable investment Youre going to continue to see.
Capital intensity levels, roughly at where they are right now.
Rolling forward I think we still have more to do in terms of expanding footprint in.
And building out that capability.
We will be doing that across our national network as we come together with Shaw.
So we will continue to make sure we have the best TV and Internet experience.
Across all of our footprint and maybe I'll leave it there.
If I could quickly follow up I think Jeff asked about it earlier, but.
You alluded to in your comments executing against some of those synergies into the deal closed.
Expectation would still be.
In your prepared remarks.
Our expectation is that post deal close still targeting that $1 billion synergy. So while you may be improving process efficiencies into the deal close.
This deal close on a pro forma basis $1 billion or so.
How we should think about the synergy opportunity.
Yes, I think you can think of it in that context over the over.
Over the 24 months post post closing we're leaning in now and if we can achieve that earlier, we will achieve it earlier if.
If we can go beyond that we will but but think of it in the context of that in terms of the cost synergies of house channel.
Thanks again.
Thank you.
Thanks, Sebastian next question Arrow.
Our next question comes from Simon Flannery of Morgan Stanley . Please go ahead.
Thanks, so much coming back to the deal expectations, you talked about the financing of the deal.
Outperforming on EBITDA and <unk>.
Revenues, so how should we think about the path of deleveraging here over the next couple of years.
<unk> is still the same or could you accelerate that and what are you thinking in terms of asset sales as part of that mix and then it's good to hear we haven't really heard much about inflation or supply chain on the cost side, obviously efficiencies have helped there, but any updates on what youre seeing and how youre managing about thanks.
Thank you Simon I think.
In terms of the of the financing that's that's done.
And so we have permanent financing in place.
The only.
Only remaining moving part will be.
The.
Settling out of <unk>.
<unk> sale proceeds versus.
Up to $6 billion committed bank term loan we have in place to to round out the.
$19 billion cash purchase price on the deal so.
So that is settled out in terms of trajectory for Delevering.
No I don't think there's there's not really anything to update further than what you've you've heard pre.
Previously as I as I, just mentioned the target remains a $1 billion of cost synergies.
Most closing over over two years I think.
That remains our target you will see us de lever on the back of.
The cost synergies as well as <unk>.
Revenue synergies that we drive youll see that.
Fall through on.
Higher earnings.
But really that's what we're executing around.
Simon It's early days, we havent yet closed the transaction.
And so more to come on that as we execute but you will see us de levering.
<unk> a pace the credit rating agencies certainly are focused on that I have spent my entire career.
Making sure that the credit rating agencies understand our capital priorities and how we how we fund ourselves.
And so that file continues to.
To be managed and we're satisfied and happy with where we are on early progress.
And the second part of your question Simon in terms of.
Macro supply chain issues.
I would say theyre at the margin.
By and large our supply chain has improved and we're getting what we need.
Frankly, the environment has pushed us to be better at planning and forecasting.
And getting that getting what we need on a timely basis and so nothing there to report of significance.
The inflationary cost pressure side, we are seeing that in some pockets of Great example would be on infrastructure build spend particularly on the labor side.
We see cost coming up, but we're managing it and we'll figure it out within our total capex and opex spend structure.
I think Glenn one add on for that Simon is with the with the sheer size that we will have with coming together with Shaw. It is helping us to manage delivery schedules better with vendors.
We had their attention before we certainly have their attention now with the volumes that we can drive in the work that we have in front of us.
Makes sense great. Thank you.
Thanks, Simon next question Ariel.
Our next question comes from Arvind.
<unk> of Canaccord Genuity. Please go ahead.
Good morning, Thanks for taking my question.
Wanted to take the <unk>.
Ireland art.
<unk> discussion a little bit further obviously looking beyond the near term.
You talked about sort of <unk> instead of continuing increases in speeds and lower latency and as some of the use cases increase as well maybe just talk about how you sort of look to monetize.
Those increased capabilities I know that in the market, we are starting to see.
Some tearing options as well as for speed.
Is that the direction you want to go in.
Wanted to get your take on how you see that going forward and then secondly, maybe just sticking to <unk> as well.
BTB side any kind of color around when we can expect to see more materiality.
On that front be it on the Iot front, all private public Mac and so forth.
You've made a number of interesting press.
Press releases of late.
Any additional updates that would be helpful. Thanks.
Thanks for the question.
I'll start with the second part.
In terms of <unk>.
We're seeing really good progress in terms of our focus there, particularly on Iot, we're seeing growth in.
Attach rates on Iot, so that's coming in nicely.
It isn't part of our disclosure yet, but you can expect to see it post shall close in terms of how we're progressing on that front and so not a lot.
Want to say on this call it will be future quarters that you you start to look at that when we have something meaningful to say.
Thats relevant to the financial projections.
First part of your question related to how we think about.
<unk> drivers beyond just data usage and absolutely with the functionality that <unk> brings.
In terms of not only speed quality, but other functionality and you see it in other markets, particularly in the U S. And so you can expect us to have value propositions that start to tear it based on beyond just speed and what we're finding is speed is one thing but customers are actually interested in other.
Factors like latency.
In other.
Features if you will that.
That they find the value and so I think you can expect us to.
Hum.
<unk> that in the marketplace.
George spends a lot of time sort of looking at usage patterns.
So George maybe you can provide a bit more color on that yes.
Thanks Harvey.
The work we've been doing on five G recently launched the <unk> Standalone core.
We have certified all the top handsets in the market and so what you're beginning to see with these new capabilities and now low latency really becoming.
Feature.
Also as we start to light up the three five gig spectrum.
That will be available for wireless.
Enablement later this year.
Then you're really going to start seeing not just the combination of the.
More spectrum equating to more speed.
<unk> alone core that we've enabled with low latency and so now you're beginning really to see the possibility to enable.
<unk> that will differentiate the an effort for whether it's network slicing.
For specific uses like gaming.
Or even.
Things like emergency services and so on we're not really beginning to have that sort of second phase.
The network capability become a reality and you will see more and more.
Services.
Hitting the market is.
Yes.
The devices become more pervasive in our customers' hands.
Okay.
Great color. Thank you.
Thanks, Aaron Arrow, we have time for one more question. Please.
Our final question comes from Jerome Deferral of day Jordan. Please go ahead.
Hi, Good morning, everyone. Thanks for squeezing me in here.
First congrats congrats on the results are really impressive, especially on the cable margin front.
We've seen a few different definition changes.
Would you agree that in terms of ARPA growth your definition change.
Slightly boosting the number.
In terms of growth that we're seeing and if you agree with that if you can quantify the impact on.
On the change.
Hi, Jerome Thanks for the question in terms of the change we made what we wanted to do was align our disclosure with what youre seeing in the Canadian landscape on disclosure and focused on mobile phone.
And take out some of the noise with respect to tablets et cetera, and so the increase youre seeing of just over 3% on mobile phone or.
It's the same if you were to unpack it and do it on the way we used to do it just postpaid.
Same <unk> growth that works out to 3% as well so it's the same hopefully we've answered your question.
But let us know if not.
Yeah not sure at this so there's nothing sort of my question and then a second one if I may I was wondering if we're starting to see.
Some fixed wireless net adds in your internet numbers.
Okay.
You are Jerome and so we've as we stated last quarter, it's a big focus area for us.
George spent quite a bit of time throughout 'twenty, one and particularly in the fourth quarter readying, our wireless network to enable fixed wireless access in a number of new geographies for us and so with that we started executing on sales in the first quarter.
And so I would say that ramp up was rare.
Relative to our core internet offering light and small in terms of numbers.
But we are targeting.
Significant ramp up as we head into the second quarter and for the rest of the year and it will be included in our cable Internet net adds.
And as we move forward, you'll see us disclose the the difference between those two.
From a from a personal standpoint bear with the with the short commercial from me here, but I live on a farm road an hour west of our offices here in over the last couple of years, it's been just about everyday working from my home office.
I don't live in a Rogers territory in my my Wireline service, just wasn't able to handle the data speeds.
Very early on in <unk>.
In March of 2020.
Kai Prager head of network sent me a fixed wireless modem.
A <unk> modem.
I still use that to run my home office and over the course of two years of video conferencing calls.
My service was interrupted a total of five calls through that two years.
The service was exceptionally good this is going to be an important part of our expanding service and bringing them to rural Canada.
In helping to bridge that that digital divide we can't run wire everywhere, we will run it wherever we can.
But but fixed wireless as a as an excellent opportunity for.
Some areas that.
Right now were either unserved or underserved and so.
This will be unimportant part of that.
Yes, the way to a weighted thats the product. Thanks. Thanks, that's helpful and congrats again.
Thank you Jerome.
Thanks, Jerome and thanks, everyone for joining us today.
You want to sit in on our AGM, it's available at the Investor Relations site at our Investor relation site. Thanks for your time and if Theres any follow ups. Please reach out thank you.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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