Q2 2022 Rogers Communications Inc Earnings Call
Thank you for standing by this is the conference operator welcome to the Rogers Communications, Inc. Second 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 will conduct a question and answer session to join 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 and zero.
I would now like to turn the conference over to Paul Carpino, Vice President of Investor Relations with Rogers Communications. Please go ahead Mr. Carpino.
Thanks, Ariel and good morning, everyone and thank you for joining us today I'm here with our President and Chief Executive Officer, Tony Staffieri, and our Chief Financial Officer, Glenn Brent 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 twenties.
'twenty one 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.
Thank you Paul and good morning, everyone.
Our results for the second quarter demonstrated strong growing momentum across each of our businesses.
Our economy and our markets continue to expand our teams executed well in capturing an increasing share of this growth and converting it into meaningful financials for each of our wireless cable and media businesses.
Our drivers of top line growth centered on a few main factors, namely the return of travel as well as market share gains in our wireless business.
The expansion of our footprint into new areas, while capturing a growing penetration rate in our cable business.
And the return of fans to the Roger Center together with meaningful growth in advertising revenues for our media business.
Our network outage just after quarter end was a major disappointment to all of us at Rogers.
Network quality and reliability have been a core foundation of our company.
And this isolated, albeit significant outage had a major impact on our customers.
Changes are already underway to address not only the root cause of the outage, but more importantly to ensure we emerge from the incident with more strength and resiliency that is truly industry leading.
As I've stated publicly in recent days, we can and will do better and I am committed to ensure we make the necessary changes to earn back the trust and confidence of our customers and Canadians.
Our improvements will include changes to our network architecture that will separate our wireless and wireline networks for better redundancy.
Better partitioning of our network to reduce the risk of a national spreading of an outage.
Changes to our internal processes on how we plan control and execute network upgrades and.
And importantly.
Fail safe method of ensuring communications for emergency and essential services work all the time irrespective of any one carrier's outage.
In terms of financial impact of the outage the estimated cost of the customer credits, we will issue in the third quarter will be about $150 million.
And will be reflected in those results.
As well the investments in our network will mean, a re prioritization of projects within our consolidated capital envelope to ensure the needed network improvements get done as quickly as possible.
I am confident we're doing the right things for our customers to rebound from the outage and we will we will need to step up our efforts as we head into the busy back to school and fall season.
Yeah.
Our Q2 results emphasize the strength of our assets, which delivered with better execution by our teams.
In wireless our renewed focused efforts are producing results and this has allowed us to capitalize on growing share during the increased market activity, we are seeing in Canada.
Service revenue and adjusted EBITDA, both increased 11% this quarter driven by higher roaming revenue and a larger mobile phone subscriber base as the economy continued to grow.
Underpinning this recovery, where strong kpis across the board in the areas of quality smartphone loading churn performance and ARPA growth.
Post paid mobile phone net adds were 122000 up 62000 from last year.
Our efforts to drive better execution, specifically in phone loading were also reflected in our prepaid. Net addition gains where we saw 55000 net new subscribers compared to a loss of 28001 year ago.
Our strong distribution network excellent churn performance growth and immigration and overall better execution has driven these disproportionate share gains.
Additionally, with more people returning to the office, we are seeing greater demand for our unlimited plans, which provide the extensive data buckets and speeds needed to support video and other business applications being used in a hybrid work model.
In fact data usage is up 40% per subscriber compared to the same period last year.
Q1, postpaid mobile phone churn improved by eight basis points to an impressive 0.68%.
This reflected the best customer loyalty performance in the in the company's history.
Our teams have worked hard to earn this loyalty by delivering the service and value our customers expect.
Everyone at Rogers recognizes to maintain this performance we will have to work very hard to earn back the trust and confidence of our customers. Following our network outage, but we're committed to do so.
Finally, the mobile phone <unk> was a solid $58 83 up.
Up 6% from one year ago, clearly, we are seeing Canadians embraced the return of travel and a roaming revenue in Q2 has recovered to 130% of the roaming revenue we saw in Q2 of 2019.
Additionally, our loading on the Rogers popular unlimited plans is also contributing to better <unk> dynamics.
In cable we delivered another quarter of sequential improvements in our growth revenue grew 3% this quarter and adjusted EBITDA increased by 6%.
Reflecting a 100% flow through rate of incremental revenue.
A particular note adjusted EBITDA has benefited from the significant improvements in an efficient and efficiency, we have prioritized in 2022 relative to the prior year.
This includes better managing of expenses and delivering improved operating efficiencies.
Beyond improving our financials. Our team has been focused on loading growth in our cable and internet products and their progress is reflected in our results.
For example, retail Internet loading was 26000 almost doubled from the same period last year and importantly, the gains have been driven by loading on the Rogers brand.
Additionally, we delivered the fourth consecutive quarter of positive video loading as well.
I'm very proud of the team's improved execution in our cable results. This improvement was needed as we fell behind our peers over the past couple of years, but theyre hard work is starting to pay off.
These better results also put us in a good position for when we come together with Shaw once regulatory approval has been received in the meantime, we know we have more work to do and we will continue to make additional investment in our selling channels improvements in our call center performance and providing a better digital.
Periods for our customers.
Finally in media I'm very happy to report our team has returned the business back to profitability a full quarter ahead of schedule Rev.
Revenue grew 21% primarily as a result of the return of home games for our Toronto Blue Jays at the Rogers Center as well as higher advertising revenue at our Sportsnet channels.
Our media business experienced severe and extended impacts to its operations during the pandemic period, but we believe the worst is over and expect continued profitability in the second half of the year.
Finally, let me touch on the Shaw transaction, we have extended the outside date for completion with shot to the end of this year.
We believe that the Rogers Shaw and Quebec core agreement dresses the concerns raised by the commissioner of competition administer champagne.
We will continue to engage with competition Bureau, and I said to highlight the significant benefits the merger will bring to Canadians and obtain the outstanding approvals.
We do this we continue to work through the competition Tribunal process.
Yes.
Rogers Shaw in Quebec or are committed to seeing this transactions through to completion.
The three companies have put together a competitive and commercially sustainable remedy that will create a strong Canadian fourth carrier with proven operations in multiple provinces that will reach over 80% of the Canadian population.
Rogers, Sean, Quebec, or look forward to securing the outstanding regulatory approvals to deliver significant benefits to Canadian consumers businesses and the economy.
In summary.
Our Q2 results reflect the quality of our asset base built over our 60 year history as well as the dedication by the Rogers team to improve execution and restore our performance after a few very difficult years.
We have reinvigorated our organization with an experienced hands on executive team, who have given their teams to leadership clarity and accountability to do their jobs, well and we're excited with the opportunities ahead.
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 I'm glad to be with you. This morning.
Rogers' second quarter results reflect the benefit of a recovering economy through the second quarter together with the continued commitment by our teams to drive better and more consistent operating and financial performance across each of our businesses.
In wireless service revenue was up 11% year over year.
We are seeing the benefits from higher roaming revenue as global travel recovers.
Our larger postpaid and prepaid subscriber base.
And an overall increase in market activity as Canadians return to being more in mobile.
This has included domestic activity such as return to office in school.
As well as the resumption of travel and more immigration and an increase in foreign students.
Our second quarter Kpis also reflect the hard work and investments our teams have made over the past year and improving customer service levels and driving sales and operating performance.
We delivered postpaid mobile phone net customer additions of 122000 in the quarter roughly doubling the 60000 from one year ago.
This was driven by strong base management strategies benefiting from very low postpaid mobile phone churn.
And by providing customers with value and flexible plan value and flexible plan offerings.
All against the backdrop of a growing and competitive marketplace.
These drivers also contributed to growth in our prepaid mobile phone base.
Where we added 55000 prepaid subs compared to negative loading one year ago.
Our postpaid mobile phone churn through the quarter was very strong at 0.68%.
An eight basis point improvement year over year.
With continued increases in travel activity by Canadians.
<unk> is also recovering and was up 6% for the quarter to $58 83.
Given the pent up demand by Canadians to resume traveling Q2 roaming revenue is now at 130% of the second quarter prepaying debt pre pandemic levels of 2019.
Additionally, further customer migration towards the Rogers' infinite unlimited plans is also contributed to improvements in ARPA.
And finally wireless adjusted EBITDA was also up 11% year over year, driven by the flow through of service revenue growth.
And the adjusted EBITDA service margin remained a strong 62% in the second quarter.
And our cable business total cable revenue was up 3% year over year and adjusted EBITDA was up 6% in the second quarter.
Cable service revenue benefited from a modest price increase across our Internet base announced last fall.
While cable adjusted EBITDA increased by 6%, primarily as a result of improved cost efficiencies.
Along with the higher service revenue.
Okay.
This gave rise to our cable adjusted EBITDA margin of 50%, which is up 140 basis points from the prior year.
On a product basis.
Our teams are executing on more effective sales and marketing strategies, and our cable and Internet business.
We delivered 26000 retail internet net customer additions in the second quarter compared to 14000 last year as customers of US have responded well to a more energized sales effort and have embraced the value of our ignite platform.
In video, we added 21000 net customer additions across both our legacy and ignite product, which compares to 4000 video losses, one year ago.
Total customer relationships also increased in the quarter to just over $2 6 million.
Up 2% year over year.
Moving to our media business, we have seen solid improvements in both revenue and profitability.
Revenue grew 21% due to higher Toronto Blue Jays revenue, primarily as a result of the return of home games to the Roger Center as well as higher advertising revenue at Sportsnet.
Importantly, our media business also returned to profitability with adjusted EBITDA of $2 million compared to negative $75 million in the second quarter of last year.
At a consolidated level.
Total revenue for the second quarter was up 8%.
In total service revenue was up 10%.
Adjusted EBITDA increased 16%.
And adjusted EBITDA margin increased by 280 basis points to 41%.
Capital expenditures in the second quarter were $778 million.
Our 8% higher than last year.
With capital intensity of 20%, which was flat to last year.
Free cash flow was $344 million.
Reflecting a 14% year over year improvement despite the higher capex spending.
Cash income taxes paid decreased this quarter by $30 million or 17%, which is really just due to the timing of installment payments.
Turning to the balance sheet.
We exited the quarter with a debt leverage ratio of three two times.
That's down from three four times at our 2021 year end and reflects the solid adjusted EBITDA performance.
Our total weighted average cost of borrowings at June 32022, now stands at $4 two 6%.
And our weighted average term to maturity is 12 three years compared to 395% and 11 six years, respectively. At December 31 2021.
As a reminder, these averages include the bond financing we put in place in March 2022 to fund the Shaw transaction as we seek regulatory approval.
Overall, our better results and financial stability reflect our Rogers team that has positioned the company well to deliver more consistent results.
In terms of our outlook you.
You saw in our press release. This morning that we are confirming our 2022 full year outlook that was provided with our March quarter.
This includes the one time impact of the estimated $150 million and five days service credits and related customer costs associated with the network outage, which will flow through both our wireless and cable businesses in the third quarter.
For the third quarter, our wireless and cable financials will be impacted by the network outage.
And by the related onetime customer service credit, but we expect customer additions will normalize through the third and fourth quarters.
And we will recover more in line with our first half trending in the fourth quarter.
For wireless on a year over year basis, we anticipate third quarter service revenue growth will remain positive.
Moderator <unk> in the low to mid single digit range as a result of the impact of the service credits.
Adjusted EBITDA will be flat to slightly lower than the prior year due to the flow through impact of the service credits.
In cable, we anticipate approximately mid single digit decline in revenue and EBITDA for the third quarter again as a result of the impact and flow through of the five day service credits.
In our media business, we anticipate revenue will grow year over year in the high single digit range and that adjusted EBITDA will remain positive and show continued strong improvement.
And finally on cash taxes, we expect our cash taxes will be approximately $190 million up 8% from the third quarter of 2021.
In closing our Q2 results reflect how hard the company has worked to improve its operational and financial performance.
We have work to do to gain back customer confidence from our July outage.
But we have a strong balance sheet, a very committed team and sound fundamentals to achieve to achieve this objective.
Let me now turn this back over to Ariel to commence with the Q&A.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad Youll 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.
<unk>.
Our first question comes from Vince Valentini of TD Securities. Please go ahead.
Yes, thanks, very much and congrats on the strong second quarter.
Two questions if I could one on roaming the 130% is a bit surprising I don't think were anywhere near back to 100% of travel volumes for people, especially on the business side can you give us any sense of where the new global should be a lot of people were expecting more roaming revenue growth in 2023, and I don't want I don't want to list.
You to leave the impression.
That won't happen anymore.
Is $150, 170% of where you were in 2019 are better.
Endpoint now given higher subscribers and rate changes.
And the second question just on the Q3 guidance.
The full year guidance I appreciate the color.
But can you can you confirm that.
The unchanged guidance for the full year factors and what Youre seeing on the customer side as well I mean, the $150 million is clear in terms of credits.
I assume there has to be some kind of impact you to churn in and shop adds at least temporarily that you've already seen so can you talk about what you've seen in the past couple of weeks in terms of subs and just confirm that despite those headwinds youre still confident in the guidance.
Thank you Vince it's Glenn let me start with the the roaming question and then I'll, let Tony take the second question around customers.
On roaming we've seen a strong recovery underway in the consumer segment.
Still.
Recovery to come in the business segment. Many of US are are still looking to return to office, let alone returned to business travel and so more to come in that.
But on the consumer side, we're seeing.
Roaming traffic roughly three quarters of where we were pre pandemic. So we haven't seen a full recovery yet on on volumes.
And.
And thats flowing through to the.
The levels you see at 130%.
It's with respect to the second part of your question on our outlook for Q3 and the full year.
Since the outage of July eight we did see an impact on our subscriber results.
But we're encouraged by the patients our customers have shown.
And we're seeing very good trending on a daily basis and so as.
As we look to the back half of the quarter and keep in mind in back to school and as we close out the quarter, we still have commencing in about mid August 80% of the quarter's activity ahead of us and so based on the trending we are seeing as I said, we are encouraged with the trending much there and have confidence.
<unk> and our ability to maintain the full year guidance.
Fair enough. Thanks.
Our next question comes from Maher Yaghi of Scotiabank. Please go ahead.
Thank you for taking my questions.
Good morning, guys and congratulations on the results our strong momentum in here.
Can you discuss a little bit.
The market the wireless market.
Beyond the fact that you have more activity by consumers are a recovering economy.
How do you feel about your own market share gains you did in Q2 here on postpaid.
Versus.
The level of activity overall in the market then going into the second half.
Where do you think.
Are you seeing any initial impact from.
A.
Lining or.
Slowing economy, we've seen the results early coming in from the U S. Such as AT&T discussing some weakness on the consumer side in terms of payments in terms of delayed payments are you seeing any of those so far here in Canada.
Yeah.
Sure the question there.
In terms of wireless growth.
I'll start with what's driving the market and one of the biggest drivers is certainly the immigration.
Students, returning and Thats all helpful to the growth in the marketplace on a year over year basis, we expect the market will probably be if not at 5%.
Over 5% growth for Q2.
In addition to that we're seeing good increases.
Penetration rates second.
Second phones and.
And third phones continue to come along nicely and so that's contributing to the increased size of the market as well.
Our execution in terms of share has really been about focus we've always had a very strong distribution network and as things continue to open up fully in the second quarter. We're pleased with the way those distribution channels behaved.
And performed.
In terms of the slowing economy.
We believe that in large part because of what we're seeing is continued immigration.
And students to Canada.
We haven't seen the impact of a slowing economy yet.
And again, our optimistic that.
It's probably going to be moderated because of those immigration levels, but we'll have to see how that plays out.
We are not to date seeing any deterioration in performance on our receivables and customer accounts.
Thank you. Thank you Tony and if I can maybe have a follow up on the outside date change that you did push out and shop transaction.
You are doing smaller increments, but when it comes to changing the outside date any read through from the significant increase in the outside date change on how we should as investors interpret your view on the timing of closing the transaction.
You should think about our extension of the outside date to the end of the year, which is after the tribunal process.
It was really reflecting the commitment that we and Shaw have to getting this transaction done and now with the sale of freedom mobile to Quebec or the.
The commitment that Quebec or has to getting this transaction done and so amongst all three parties. We're committed to seeing this through and wanted to set a date that made it clear that we have that commitment.
Thank you very much.
Okay.
Next question Arrow.
Our next question comes from David Barden of Bank of America. Please go ahead.
Hi, guys.
Sitting in for Dave. Thanks, So much for taking the question and congrats on the strong quarter.
I just wanted to ask kind of a follow up to the economy question.
It's good to hear no impact on the consumers yet.
Like costs haven't seen an impact yet so I was just wondering if you could comment on the inflationary pressures you may be seeing.
And maybe if you can add some color along the lines of how much of your costs might be exposed to inflation or Conversely, how much are locked in and you're protected on that and then separately looking at the shot transaction.
The outside date matches the.
The financing redemption date are there.
Contingencies in place that investors should be aware of that.
The flexibility of <unk>.
What can happen with that.
Minor delays past the occurrence.
Anticipated outside date.
Okay.
Thank you Matt on the.
On the inflation question, we we see.
Some pressure as we work with with vendors and have been managing for.
<unk>.
Couple of years now.
<unk>.
This pressures as a result of.
Supply issues coming from Covid as well as just length of delivery on the supply we've been managing that for a couple of years now not really seeing.
Any.
Any additional pressure right now in fact, we're starting to see some of those E. As well we've been working hard through that in preparing for the <unk> acquisition as well as just in terms of looking at our own performance and results on some.
Efficiency measures across the organization trying to.
Dress, if and when the economy turned.
And we were facing.
Inflation pressures that we could build in a little bit of buffer that seems to be helping us to manage so.
So far we're not seeing an undue amount of pressure coming from.
Coming from the vendors, which is what you see reflected in the expanding margins across both the <unk>.
Wireless and cable.
And so and then within media again with the recovery of our revenues with the Blue Jays back.
The revenue resurgence that we've seen from that in the AD pick up from the sports related.
Advertisers as has helped buffer anything there.
Turning to your question around the extension of the outside date and the year and timeline for our special mandatory redemption on the bonds that we issued in March.
We have a number of strategies opened to us and plenty of runway and time to to manage that we also remain confident that there is plenty of time between now and year end to close the transaction and to use those bonds to fund the acquisition in the event that isn't.
<unk>.
It doesn't prove to be possible when we get to the year and then we have a few different avenues, we could go we could seek.
Alternate funding through Bank group, we could seek to extend the ASMR we could seek.
To access the capital markets.
Any one of those are open to us first and foremost our intention is to close the transaction within 2022 and we're confident.
We should be able to do so.
Okay. Thank you so much.
Thanks, Matt next question area.
Our next question comes from drew Mcreynolds of RBC. Please go ahead.
Yes, thanks, very much and good morning, and great to see.
The results here.
Net.
Yes that question was my question. So I'll move on here at two from me.
Just first.
Just.
In terms of what you are learning on the outage and.
Certainly the governments kind of scrutiny of the outage is there any change in kind of general network.
Approach here in terms of how you architect or where your network share is there any been any thinking there.
Versus your.
Previous position.
Then second question just on fixed wireless.
Rogers in terms of <unk>.
Spanning that footprint.
You know what.
There is still some expansion to go in.
Presumably there is a percentage of your internet loading that comes from that if you're willing to quantify that that'd be great.
Yes, just wondering where you are in that expansion trajectory. Thank you.
Thanks for the questions drew with respect to the outage and the impact on how we think about the network.
I think there's probably four key points.
That are worth highlighting.
And I touched on them in my upfront comments and clearly as we focus on two things.
The resiliency and redundancy of our network is one category and the second is what are the procedures in place for the telecom industry more generally for emergency calls and I'll come back to that one.
With respect to <unk>.
Our network, there's really three main points to think about and one is today.
Much like.
All carriers around the world, we have a common IP core gateway for wireless and wireline and the strategy goes back some time in terms of doing that to capitalize on efficiencies.
Yes.
As we provide services, particularly in the enterprise small business sector.
The importance of redundancy is ever more clear coming out of the July eight outage and so we're going to proceed to separate physically separate the wireless and wireline.
Networks for core gateways, so that we prevent an outage that would impact our entire system.
Yeah.
We've disclosed that we estimate the cost of doing that will be about $250 million.
That will be over several years, the Shaw transaction will help.
In part reduced that cost, but importantly, reduce the timeline.
And so as we work through the closing of that that'll be an important benefit of the transaction in terms of redundancy.
The second thing we're focused on is greater partitioning of our network. So if we have an outage in a particular area for whatever reason it does not spread to our entire national network.
We had.
What I would describe as firewalls in place to prevent that but they failed and so very quickly we're going to ring fence.
Our network on a more localized basis very quickly.
The third area relates to.
Our internal processes for creating reviewing and executing codes.
You would have seen and if you didn't see it our CRT SEC filing was very clear and transparent on the cause of the code on the cause of the outage and it started with a coding error.
And then spread to a hardware failure as a result of data overload.
That first instance of coding failure, we just can't have and so we're making changes so that we quickly improve.
The accuracy and reliability of our coding to prevent any errors in the first instance, and then of course better processes to capture those and uncover them.
In subsequent reviews.
And then on top of that we are working as an industry.
Under.
The memorandum of understanding that administer Champaign has requested.
And that has a few parts, but the most important as a failsafe measure for emergency calls.
As an industry, we had worked on a solution, but what we found was while many 911 calls did switchover many did not and that is unacceptable and so we're working on.
A much more resilient.
Way of ensuring that those emergency calls transfer over to an alternative network of 100% of the time and we're confident we have a solution that we're targeting that is going to work and we're on track to have that Mou completed within the 60 day window that the minister requested.
In terms of your second question on fixed wireless access.
That is something we've recently entered into in a much more aggressive way, we do see a very good size of market for fixed wireless access.
And I would say, it's still early days for us in executing that so as you look to our subscriber results fixed wireless access are very small in the numbers.
Frankly, not material and so it still continues to be a growth opportunity for us and more to come on that one.
Okay. Thank you.
Thanks, Joe next question Arrow.
Our next question comes from Sebastiano Petti of Jpmorgan. Please go ahead.
Okay.
Hi, Thanks for taking the question.
Just wanted to follow up on the.
On the inflation that you're seeing here.
And you can call out in the press release at the Bank of Canada has talked about a potential recession in the next six to 12 months.
Okay.
While you're not necessarily seeing the inflationary pressures now I mean can you update us perhaps on some of the conversations youre having with.
Yes.
Partners are some of your customers on the enterprise SMB side, what if any impact are you seeing there they also benefiting.
Improvements just overall market activity immigration calls et cetera.
I think we're seeing.
Through the first half of the year, so vast channel I think we've seen.
Strengthening from the recovery of coming out of Covid and we're still seeing some of that build returned to office here is still underway across the country.
In various stages.
As we move through the summer and come on the other side of Labor day, I suspect, we'll see that more in earnest certainly.
We all see the media reports of the impact of gas prices on home wallets.
And spending and the impact of.
Of that on pressures within businesses in terms of demands on on wages and what have you and so we'll see that roll through I suspect somewhat through the second half of the year some of that will roll into 2023 as companies.
Many of us look too.
Increases at the start of the year as opposed to through the year and so there's probably going to be a bit of a staged effect on that across.
Across businesses.
We're not we're not seeing or hearing anything, particularly notable beyond those broad trends.
In talking with our customers I think all of us are watching carefully to see what's happening with our overall costs, whether it's from the capital markets from wage pressures.
Or input pressures the input pressures, we've all been managing in terms of source of supply and price on on input.
Costs for the last two and a half years.
If anything some of that might be tempering, a little bit as we.
We come further out from Covid.
It's worth adding that what we have seen.
Past slowdowns is for our industry more of an impact on the enterprise business side.
That is still a growth opportunity for us and are very much under penetrated in that segment of the market relative to our competitors and so structurally from an exposure standpoint.
We spend much less exposed to that impact of an economic downturn.
And then I think in the press release, Thanks for that guys and then in the press release I think you can call out just how you continue to pursue the divestiture of the deal.
Definitive agreement.
Documents are progressing.
Obviously.
A key area of focus as it pertains to the broader overall.
Transaction, obviously, you announced today that you are committed to the deal.
You kind of update on that.
It's something that topical for investors as it pertains to the deal.
Any color on time, thanks again.
Especially on a in terms of the deal its got a lot more to say other than what we have disclosed we've extended the outside date, we continue to work with Quebec over on the definitive agreements as you would expect.
So large deal.
Close to $3 billion and contains.
A few complexities as we worked through that and we're committed to that deal and we believe our partners as well.
We'll work through the Bureau process.
<unk> process is the key step I would say is the tribunal, but as I've said in the opening remarks, we will continue to engage with them, let's see if there's an opportunity to meet.
Their requirements and concerns sooner.
But we'll just continue on with the process.
That's great. Thank you.
Alright, Thanks, Sebastiano next question Ariel.
Our next question comes from Simon Flannery of Morgan Stanley . Please go ahead.
Hi, guys. Thanks for taking the question this is diego filling in.
You've noted that you expect customer trends to normalize as we get.
To the back half of the quarter I was just wondering what are you doing.
Some of the specific actions that you're taking to retain customers given the network outages are proactive customer outreach other operators other offers or actions that you're taking besides.
This service credits and are just some of your competitors being aggressive on this front and then maybe you can touch on the differences youre seeing on wireless versus cable that'd be helpful.
Thanks for the questions Diego.
Let me start with a couple of things.
The activity we have seen is.
Calling into our call center around the customer credits and as we've publicly disclosed those are going to be automatically applied to bills in the third quarter and we've disclosed the estimated cost of that in terms of subscriber activity. Both in terms of gross adds and churn.
As I mentioned earlier.
We certainly saw an impact in the early days following July eight, but we're very much encouraged by that.
The improvements were seeing each sequential day on those metrics that really get at the customer sentiment over our entire customer base.
And I would say, we're seeing it equally in terms of cable and wireless both continue to improve well.
In that.
In terms of.
What we're seeing in the marketplace in terms of offers.
As we.
Enter into the back to school period, what we are seeing is the.
The usual pickup in competitive intensity.
That's not dissimilar to prior years.
So we haven't seen anything that is noteworthy.
In terms of market dynamics other than what you would expect to see.
That's helpful and then I had a separate question.
We just tried to explore not announce that exploring that mobile that theyre shutting down their wireless service, noting how.
Both Andy and our regulatory framework as moves can you just provide what what's the latest you've heard from regulators on that front.
Obviously, you have your own agreement with quite a carton.
And then but can you just touch on how how that policy is moving along.
And any opportunities that you see there.
Yeah.
In terms of the <unk> construct in Canada.
That was announced a little while ago by our Canadian government. The construct is in place it's well understood.
And that's really a question more for Quebec or on how they intend to avail themselves of that Nbn over Jim I think based on public statements they've made they intend to be an aggressive competitor.
The wireless space at.
At a minimum.
Through the acquisition of freedom in at least four provinces and as I said covering almost 90% of the population.
So I think the evidence there is that they do intend to avail themselves of that regime, but as I said those are that's a question more for Quebec score and then specifically as it relates to explore that for them.
Great. Thank you that's helpful.
Alright, Thanks Diego next question area.
Our next question comes from Jerome deferral of Desjardins. Please go ahead.
Yes, thanks for taking my question.
I Echo the comments congrats on the great results. Despite the it won't be more uncertain economy.
Let's keep talking about this go backward deal a bit here I think it's fair to expect.
Changes in the competitive dynamics going forward, what would you say are.
Are the main attributes that you have that could help you withstand the change in the competitive dynamics in wireless.
After after the Shah.
Potentially.
Its all transactional.
Thanks for the question Jerome.
We thrive on competition, that's how we built this company over our 60 year history.
We welcome competition in.
Today, as we look to each of our markets. We have at least four wireless competitors in each of those markets and in addition on the cable front. There is a wholesale regime, it's referred to as Tpa and we compete with <unk>.
<unk> in the cable markets and there is competitive intensity there as well we have operated with that competition.
Over many years and our performance in Q2 reflected.
That competitive environment.
With a purchase of the assets.
We fully expect Quebec or to be fully engaged and that's why we think they would be.
A terrific buyer of those assets to get up every day thinking about cable and wireless and so.
<unk> are well suited to be the owners of those assets and continue to ensure the competitive intensity across all of the markets.
In Canada.
In terms of what our Val.
Value proposition will be it won't change we will focus in wireless on our network and we've talked about the things we will do there combined with superior customer service.
And then added to that the strength of our distribution channels. Those are really the fundamentals and there are other items.
But for the sake of brevity, we would really be the three main ones and in our cable business, it's really going to revolve around product superiority.
Yeah.
We have the ignite platform that we post Shaw will launch nationally and that includes.
Not only.
A terrific video platform, but smart home monitoring that's about to be improved as well and importantly.
A very competitive and leading internet product you would have seen earlier in the quarter, we announced trials, where we have symmetrical eight gigabits of speed up and down in our network. We introduced a new product, where we have already in market two five gigs of speed symmetrical on.
On an all fiber network and Youll continue to see more of that and so it'll be product superiority combined with continued improvements we have made and will continue to make with respect to.
Our service.
Faster service more reliability on service kind of things, we're focused on there and so I think the fundamentals aren't going to change and we think those will that'll be the right formula to continue to compete.
Great. Thank you.
Thanks, Rob next question Arrow.
Yeah.
Our next question comes from Arvind <unk> of Canaccord Genuity. Please go ahead.
Good morning, Thanks for taking my questions.
Just wanted to go back to the impact on the sub adds from the outage. Thanks for the comments you've already made but I was wondering if you can dissect a little bit.
How the impact to sort of broken down between gross adds as opposed to churn and then obviously wireless versus wireline as well and then secondly.
A separate question.
<unk> to the network and <unk> initiatives.
Unit Outstanding Anda that you were the first.
To set up a standalone commercialized <unk> network, what are you thinking of in terms of.
In terms of milestones on that front for the next step let's call. It 12 months. Thanks.
Thank you our vendor for the question I'll start with the.
The second part of it in terms of the <unk> initiative.
Okay.
Few quarters ago, we talked about the heightened investment we would do in network and putting aside the investments we're going to put into the outage.
We continue to aggressively expand on our <unk> initiative and so the key milestones. What you recently saw was the deployment of the 3500 spectrum as soon as it became available we're looking forward to the 3800 megahertz spectrum auction. So that we can quickly deploy.
Floyd that on a national basis, and so what you should expect to see.
As further penetration.
<unk>.
That spectrum, what we'd call mid range mid band spectrum.
3500 more nationally.
Did quite well in the last spectrum auction and we're working aggressively to deploy that and so you should look to our rate of deployment on that secondarily. The densification of our network both in terms of macro and small cells.
And over time, you'll continue to see a ramping up of the pacing of that Densification.
Good morning, Eric on your question around the impact of the outage on gross adds.
Im not going to be able to give you maybe the granularity that you're asking on or looking for what I would tell you is.
We have made sure that we've invested in our call Center staff, so that we have.
Our folks on hand to take the calls.
We have seen those call volumes.
Settle off some as.
As we've moved through.
The ensuing weeks as we've dealt with.
The rush of calls in the early days and also frankly as we've announced the.
But the five day service credit and the automatic nature of that.
That has settled off some of the the call volumes that we saw in the very early days following the outage in terms of day to day activity.
We are finding that in stores and.
And for our reps that they are.
They are seeing.
Some some wins.
As well as we obviously had seen some churn again more pronounced in the early days, we have seen that settle off some.
And are anticipating.
As we move through.
July and move in towards some of the campaigns around back to school that that will help to help move past the.
The traffic that we saw in the earlier days.
And the churn that we saw in the earlier days so.
There are a couple of different things going on that we anticipate will help temper that.
We've been quick to respond with.
With customers on on.
On the five day service credit and on.
Retention for our customers as they call in that is helping.
There's not really much more to put to it than that.
Great. Thank you so much thank you.
Thanks, Arvind area, we have time for two more questions.
Our next question comes from Stephanie price of CIBC. Please go ahead.
Hi, good morning, Thanks for taking my questions.
The first one on the cable side margins were up 140 basis points year over year I was hoping you could talk about the efficiencies that you're putting in place and how much can be deficiencies are related to my expectation at the close of the transaction.
Then for my second question is posting outage that Jason talked about spending 10 billion over three years to build and strengthen the network comp.
Comment on what that encompasses and how much that's expected to incremental thank you.
Sure. Thank you Stephanie and good morning on the <unk>.
The increase in the gross margins.
It really is mixed we still have.
Some significant work to come in.
And progress to come on driving.
Some of the synergies that we've identified but youre right in asking we have started that work in earnest.
Identifying.
Some of the some of the cost areas, whether its on content on people costs, just general administrative costs through all of our business units, but particularly within.
Our cable unit, that's the one that is going to be.
Most affected.
With the with the Shaw acquisition, and so <unk> coming in as a new head of the business unit has come in with Eni to driving a strong sales culture as well as a strong performance culture, and really youll see that across the entire ELT.
And so some of these efforts would have been in place regardless of having the Shaw transaction. However, the Shaw transaction will.
We will certainly transform our connected home business.
Bye bye, bringing it national.
And some of these these efficiencies are to drive better margins. Some of the efforts underway are to create some headroom or identify those opportunities for creating headroom.
We're bringing in.
Leadership and employees from the shore base.
And then on the content side that is another one of our large categories again some of those efforts would have been underway.
Regardless of of Shaw However.
It's no secret as to the size that we will have.
Once we come together with Shaw in terms of subscribers and certainly.
That will factor in for driving additional synergies.
<unk> forward as we work with programmers and.
In acquiring content.
And then on the on the capital expenditures.
The $10 billion.
Estimate that we've made or forecast we've made for the improvements in our spend that's a large envelope that every year, we prioritize what we are going to work on.
And every year.
Job, one really is to ensure that we have resilience and redundancy across our networks. The outage has identified that we have some more work there to do around processes and investment and we have already started looking at and implementing some of those changes but that.
That $10 billion number is ample envelope with with which we can direct our investing our networks.
Our.
Very strong very well built well designed networks. It's not that there is there is they are in need of a wholesale change they are not they are.
Leading edge technology on the wireless side, we have the largest individual portfolio of spectrum. We will continue to invest in spectrum. We will continue to invest in large and small cell sites on the wireline side, we continue to expand our footprint.
With fiber.
And so it's more determining our processes and in.
The separation of our networks just to help build on the resilience and so that will be within that $10 billion of envelope.
And the $250 million to separate our wireless and wireline again, we will find priorities.
Around that too.
To find the capital for it.
Thank you very much.
Thank you. Thanks, Stephanie aerial last question. Please.
Our final question comes from David Mcfadden of <unk> Securities. Please go ahead.
Oh, great. Thanks, gentlemen.
So a couple of questions when I look at the wireless ARPA growth, 6%, obviously quite strong.
And you've called out roaming as the primary factor bad. It's wondering if you can give us a breakdown between how much of that 6% is roaming and how much is just from people moving up to higher price data buckets or just increased sub growth because obviously.
Obviously, we're seeing a big resurgence in.
Travel and that's <unk>.
Positively impacting the roaming revenue, but sooner or later, we're going to get into an environment, where the roaming revenue growth settles down. So I'm just kind of wondering what the our true growth might look like then and then the second question might be on the 150 million customer credits, how much of that will be flowing through wireless and how much.
Flow through cable because.
When I look at your results for the first half and came on obviously quite strong.
So I was just wondering assuming are excluding the impact from the outage, whether it'd be reasonable to think that cable EBITDA growth could continue in the 5% range for the balance of the year.
Thank you David for the for the questions.
On the ARPA growth.
It's split roughly half and half.
Across.
The the roaming revenue impact and then broadly across customer impacts, whether it's trading up and plans.
We also as you saw in the quarter, we have added significantly to our customer base, obviously that provides.
Revenue growth as well and so its subscriber growth.
Moving more of those subscribers to our premium plan to our Rogers.
Brand.
And then.
Travel is.
Is that roughly half of the of the overall increase in <unk>.
On the $150 million service credits a few.
If you roughly used the proportion of revenues that would give you a pretty good approximation as to how they will impact our cable and wireless business.
Okay.
And then just lastly, I just wanted to reconfirm.
Some comments made earlier on this call.
Is it going to take a couple of years before you actually effect.
The separation.
Wireless and wireline networks are kind of be accomplished sooner than that.
It would we expect that would be in the 12 to 36 month timeframe.
And as I said the completion of the Shaw.
Transaction would cut that time approximately in half.
So that'll be an added benefit as we look to improve the redundancy.
Okay.
Alright, thank you.
Thank you David.
Great. Thanks, David and thank you everyone for joining us and if you have any follow up please give us a call.
Thank you all.
Thanks, Chris.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Okay.
Hum.
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