Q3 2022 BCE Inc Earnings Call
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[music]. This conference is being recorded so it goes to the homes that don't have as you see.
Please standby your meeting is about to begin good morning, ladies and gentlemen, welcome to the BCE Q3, 2022 results conference call.
I would like to turn the meeting over to Mr. Fotopoulos. Please go ahead Mr. Fotopoulos.
Donna and good morning, everyone and thank you for joining our call with me here today are <unk>, president and CEO and our CFO Glen Leblanc you.
You can find all of our Q3 disclosure documents on the Investor Relations page of the D. C. C. A website, which we posted earlier. This morning before we begin I want to draw your attention to our safe Harbor statement on slide two reminding you that todays slide presentation and remarks made during the call will include forward looking information and therefore are subject to risks and uncertainties results could differ.
Materially we disclaim any obligation to update forward looking statements, except as required by law. Please refer to our publicly filed documents for more details on our assumptions and risks with that I'll turn the call over to America.
And good morning, everyone.
The Bell teams continued execution excellence and customer centric approach.
With our unmatched leading broadband networks yielded a record 401132.
Total broadband wireless and wireline net customer activations in Q3.
Our disciplined focus on balancing market share growth and financial performance delivered healthy consolidated revenue growth of three 2%.
Despite an AD recession, causing pressure in media advertising.
And some continued pressures in the <unk> sector.
Adjusted EBITDA grew a more modest one 2% as we absorbed a $38 million and exceptional storm related costs and inflationary pressures, while also funding record subscriber acquisitions.
Mccain, Fiona, which devastated Canada's Atlantic region in Eastern Quebec in late September was the biggest storm to ever hit anywhere in Canada, and our team stepped up like never before.
Our preparations ensured our core networks remained largely operational but the damage to our infrastructure in the field was unprecedented.
Huge thank you to our field network and wireless operations teams, who worked tirelessly to keep our customers connected.
Also want to acknowledge every bell employee who supported our storm efforts, whether you're part of service and restoration managing customer inquiries welcoming people in our stores to charge phones are huge cruise covering the story.
Your focus on preparing and delivering for customers is greatly appreciated and I'm. So proud to be part of this dedicated and talented team.
Without question.
This event underscores how much Canadians value fast and dependable connections. This is wide bell has been investing in our networks to build the communications infrastructure that is among the best and most reliable in Canada, if not the world.
In fact, a study recently commissioned by the CW shows that Canada's network operators outpaced international peers in Capex in 2021 investing $168 per subscriber compared to a G. Seven in Australia average of only $87.
But we are not standing still.
As you know we continue to push ahead with our historic Capex acceleration program.
<unk> close to $3 5 billion so far this year.
We remain firmly on pace to reach 5 billion in planned Capex for 2022.
By the end of the year, 80% of our mid term broadband Internet Buildout plan, comprising 10 million residential and business locations will be completed in five <unk> plus service will be available to 60% of the addressable population.
Offering the best data speeds and lowest latency of any Canadian network provider.
Both PC Megan Clark recognize bell <unk> mobile network as candidates fastest and their latest reports.
Such third party recognition reinforces the bells network leadership and the value of our unprecedented the generational investments, which will continue to drive socio economic benefits to Canadians, while supporting substantial free cash flow generation for years to come for our investors.
A quick look now at Bell wireless operating results in Q3.
Was another standout performance with our highest ever number of total mobile phone net adds which increased 64% over last year to more than two 224000.
This drove strong revenue growth of seven 4% and seven 8% higher adjusted EBITDA, demonstrating that our consistent focus on higher value mobile phone loadings customer base management and acquisition cost discipline continues to pay off.
We achieved these results against the backdrop of a declining wireless prices, even if the Canadian economy faces rampant inflation.
According to latest stats can data the <unk>.
First of all goods and services in aggregate has increased approximately 7% over the past year and 11, 6% since the beginning of 2020, while the cost of cellular services has declined 3% and.
And 25, 7% respectively.
In residential wireline fueled by a growing fiber footprint, we continue to gain a significant share of internet subscriber growth.
We added 95036, new net fiber customers in Q3.
That's up 33% over last year, and our best ever result.
Driving strong residential internet revenue growth of 8%.
These results are a direct reflection of the differentiated value of fiber based internet services that provide the fastest dedicated symmetrical speeds that cable cannot match.
By the end of the year 5 million homes will qualify for symmetrical speeds of at least three gigabits.
That is the broadest multi gig broadband footprint anywhere in North America.
And in September we announced an agreement to purchase Internet reseller distribute tell this acquisition will further strengthen our competitive position and support bells Internet growth strategy, particularly in the value segments of the residential and SMB markets.
Turning to media now we continue to see good momentum across our streaming distribution platforms and digital AD markets, which is which enabled us to take share in a TV AD market that is currently facing some significant pressures.
Growing customer usage of Bell media that Sam television advertising sales tool platform, which more than doubled bookings in Q3, together with a 29% increase in crave direct to consumer subscriptions contributed to strong 40% growth in digital revenues this quarter.
I'd also gave a quick update on some recent ESG developments clean 50, a national sustainability organization named Bell its inaugural Ghd.
H G reductions champion for achieving meaningful greenhouse gas emissions reductions and recognized bells solar cell site initiative is one of the most innovative and inspiring sustainability projects undertaken in Canada in the last two years.
Additionally, our science based targets for <unk> emissions reduction were approved by the science based targets initiative positioning Bell as a corporate leader in the transition to a low carbon economy.
By reducing G. H G emissions across our operations, we are continuing to take action to help fight climate change and improve our energy performance.
One way, we're tackling direct emissions is through the electrification of our vehicle fleet and the shift away over time from fossil fuel based transportation.
Date, we've installed over 200, EV charging stations to power, our growing fleet of electric vehicles.
I'm going to turn now to slide five of our presentation for a review of some key operating metrics first off wireless.
We added 167798, new net postpaid mobile phone subscribers, which is up 46% over last year.
This record Q3 results can be attributed to greater foot traffic as retail stores returned to full operation continued <unk> momentum.
Immigration growth strong business customer demand increased folks focus on bundling wireless with residential Internet service as well as our lowest ever Q3 churn rate, which improved three basis points over last year to 0.9%.
Our ARPA was up two 2%, which is our sixth consecutive quarter of year over year growth.
This was supported by higher roaming revenue that is now at 114% pre COVID-19 levels.
Roaming should continue to support our growth for the balance of the year and beyond roaming we remain focused on driving sustainable <unk> growth via our five G monetization strategy.
With only 35% of postpaid subscribers currently on a five G capable device.
And the vast majority of them taking premium unlimited data plans, we see good runway for continued growth.
As for mobile connected devices net adds increased 49% over last year to 49044, driven by higher demand for all of our Iot solutions.
Let me turn now to Bell wireline.
An outstanding quarter for Bell Internet with 89652 retail net adds.
Our best result in 17 years, as we leveraged our rapidly growing fiber footprint strong brands fastest symmetrical speeds and network reliability and as I mentioned earlier, we had our best ever five performance for fiber net adds.
We also added 38093, net new IP TV subscribers, which is up 24%.
And that's on the strength of our multiple brand customer segmentation approach and a more active back to school period versus last year.
Taken altogether total retail residential net customer ads, including satellite and local phone, where 56314 this quarter, which is up 70% or 23000 higher than last year.
This represents our strongest results since 2005, and really is a testament to the bell team's execution and our extensive network investments.
I'll turn now to Bell media again, as I mentioned advertiser demand slowed in Q3 due to the economy and ongoing supply chain issues in certain key consumer good verticals and that impacted traditional TV and radio advertising sales.
However, given bell media's broad mix of assets and consistently top ranked properties the year over year decline in total advertising was contained to only 2%.
Notwithstanding this backdrop digital revenues continue to accelerate as I mentioned earlier growing 40% over last year and that now represents 31% of total Bell media revenue up from 22% last year.
This was supported by growth in crave subscriptions and the strong increase in Sam T V bookings that I referenced earlier.
CTV remained Canada's most watched conventional network in Q3, expanding its lead with a 29% increase in audience market share while Bell Media's English language Entertainment specialty channels also had a strong showing finishing the broadcast year with five of the top 10 properties, including the top.
Three spots for CTV comedy CTV drama and discovery.
On the French language television side Nouveau continued to gain viewership outpacing its French language TV competitors with market share of primetime audiences up 4%.
And they have the S ones was once again the top ranked sports television channel benefiting from record audiences for F. One racing and a strong start to the NFL season.
And before I hand, the call over to Glenn for a financial overview of the quarter I wanted to end by saying that I have great confidence in our long term outlook.
That confidence is underpinned by our investments in leading long life infrastructure assets that will support meaningful growth opportunities and cost reduction across the business.
The strength of our products and services and consistent strong execution by the bell team within our well defined and clearly articulated strategy.
Although no call, although no company, obviously is completely immune to the risks of a recession, we do have a very stable and diversified business that generates consistent and substantial cash flow, we have a strong balance sheet and cost discipline and all of that enables us to offset economic pressures as they arise Glenn over to you.
Thank you Marco and good morning, everyone.
Our Q3 financial results highlight our consistent execution excellence.
And leading asset mix across all back Bell operating segments.
Total BCE revenue grew three 2%, which delivered a one 2% increase in adjusted EBITDA.
Our results. This quarter included the cost impact of Hurricane Fiona as well as ongoing inflationary pressures, particularly on fuel utility and labor costs, which in aggregate totaled $38 million.
Normalizing for these exceptional costs adjusted EBITDA growth would have been two 7%.
Despite higher EBITDA net earnings and statutory EPS were down year over year.
But this is mainly due to the noncash mark to market equity derivative losses from a decline in the BCE share price during the quarter.
Additionally, as part of our multi year post Covid plan to consolidate real estate space that I detailed last quarter, we recorded a further asset impairment charges. This quarter as we continued to vacate some leased properties.
However, adjusted EPS was up seven 3% benefiting from an $80 million tax provision reversal from the resolution of uncertain tax positions related to the MTS acquisition as.
As a result, we now expect an effective tax rate of 25% for the full year of 2022.
<unk> from our previous expectation of 27.
No further tax adjustments are anticipated in Q4.
Lastly, despite $153 million increase in capital expenditures consistent with our broadband acceleration program.
Free cash flow was up 13.4%, reflecting the timing of cash tax installments lower pension funding due to our strong solvency position of our defined benefit pension plans.
Turning to wireless on slide eight.
Another strong quarter in a long line of strong quarters.
Service revenue was up 7% driven by our focus on high value <unk> subscriber subscriber growth strong year over year mobile connected device growth and continued recovery enrolling with the Q3 amount at approximately 114% of pre Covid 2019 levels.
Despite consumer holding onto their handsets longer and a sustained high level of pre owned device activations equipment revenue increased eight 6% year over year, reflecting a higher sales mix of premium mobile phones.
Due to the flow through of high margin service revenues and our disciplined and targeted response to competitors promotional offers wireless EBITDA grew a very healthy seven 8%, which delivered a 20 basis point margin increase to 44 point too.
Let's move now to slide nine.
Wireline reported its first quarter of positive top line growth in almost two years.
With total revenue up 1%.
This was led by residential Internet revenue, which increased 8% on the combined impact of strong subscriber growth, including higher year over year business Activations and higher ARPA.
Although our overall <unk> results continue to reflect the effects of the global chip shortages and related spending delays on new services.
The year over year rate of service revenue client has stabilized.
Total product revenue, however was up 46% and this can largely be attributed to the timing of sales to certain large enterprise customers an easier year over year comparisons given that the data equipment supply issues began to intensify in Q3 of 'twenty one.
Notwithstanding the increase in revenue this quarter wireline EBITDA did decline one 2%.
This was a direct result $34 million in costs absorbed because of hurricane Fiona and ongoing inflationary impacts normalizing for these cost pressures underlying EBIT growth was quite respectable this quarter, increasing one 4%.
Over to media on slide 10, despite a weaker advertising market. This quarter total media revenues remained stable year over year.
As America said in his opening remarks, but it's worth repeating that it is a testament to our diversified mix of media assets, including a growing contribution from digital platforms and consistently high ratings for all of our television properties.
Advertising revenue was down two 3%, reflecting softer television advertiser demand and a slow radio recovery from Covid due to ongoing macroeconomic uncertainty as well as the non recurrence of approximately $15 million and related revenue generated last year from the federal reserve.
Election year.
We're all Cup soccer and the Tokyo Summer Olympics.
The financial impact of these factors was moderated by a strong COVID-19 recovery an hour out of hall further gains in digital advertising as Marco mentioned.
And a two 2% increase in subscriber revenue from ongoing crave streaming growth.
Hello, total media revenue was flat year over year EBITDA was down 15, 3%.
This result was expected given our higher programming and broadcast rights costs associated with the return this year to regular sports broadcast schedules and the normalization of TV content deliveries.
This return to a more typical pre COVID-19 cost structure and a choppy advertising market are expected to weigh heavily on bell Media's EBITDA in Q4.
That said advanced advertising for the upcoming FIFA World Cup is exceeding our expectations with revenue already up 50% from the 2018 World Cup.
This success is a testament to the massive popularity and value advertisers place a premium sporting events.
And lastly, I'll finish on slide 11, with $3 5 billion of available liquidity and manageable debt leverage ratio of three two times adjusted EBITDA.
Historically low after tax cost of debt of just two 8% with an average term to maturity of 14 years and a capital structure that has has a substantially high portion of fixed rate debt bce's balance sheet is very healthy health.
Helping to mitigate the impact of rising interest rates. Moreover.
With a substantial pension solvency surplus.
Totally 3 billion that has low sensitivity to interest rate movements approx.
Approximately 1 billion in U S dollar spending that has been economically hedged well into 2024.
And our relatively low cyclical.
But the cycle for our majority of our revenues Bce's free cash flow generation is strong reliable and well protected from market uncertainty.
With three quarters of favorable consolidated results already reported.
Sound industry fundamentals and our competitive position that is better than ever we are on track to deliver on our 2022 financial guidance. Despite some difficult economic conditions that are expected to cyst and parts of our business through Q4 and on that I'll turn it over to you.
And the operator to begin Q&A, great. Thanks, Glen So before we start so that we can get to everybody in the queue that I see here I. Please ask you to limit yourselves to one question and a brief follow up.
I don't know Donna we are ready to take our first question.
Thank you.
We will now take questions from the telephone lines. If you have a question and you're using a speaker phone. Please lift your handset before making your selection.
Have a question. Please press star one on your devices keypad.
Canceled a question please press star two.
But star one at this time, if you have a question there'll be a brief pause so participants register thank you for your patience.
And your first question is from Maher Yaghi from Scotiabank. Please go ahead.
Yes, good morning, guys I wanted to.
To start maybe quick quickly on your internet loading very impressive in the quarter.
You really you recently introduced a eight gig symmetrical internet speeds in the market are there any services that are requiring a such high speeds and just in terms of competition.
Comcast also announced in September that they have shown that DOCSIS 4.0, it's capable of achieving speeds of up to 10 gig symmetrical capability.
Are you concerned that this technology could.
<unk> helped your cable peers close the gap here in Canada, and you think they can do it in a cost effective way.
And just a follow up on the wireless also very strong subscriber loading their.
Be helped by immigration and students coming back to University.
Are you expecting that strength to continue is it sustainable in your view and.
In terms of what we what youre expecting for 2023 in Q4. Thank you.
Hey, Mark Thanks for the question, let me start first with the wireline question on fiber.
Look on here's the way I look at it.
Our best networks value proposition clearly is standing out it's been doing so for a while but particularly stood out in Q3, and we think that that will continue.
It's clear to me that multi gig speeds in network reliability really are at the forefront of the purchase decision Margaret if you.
62%, just like 62% of consumer fiber to the home Activations in September for Bell were on multi gig speeds.
So and it's even higher on the Bell brand. So those are those are big numbers. So what that shows to me is that there is a clear demand for multi gig.
Services, because symmetrical upload and download actually doesn't matter consumers realize that and they understand the benefits of fiber and if you think about our footprint. We've got by the end of the year. This year, which as you know we're only two or three months away. We will have 7 million fiber locations all of them will be capable.
[noise] of delivering gigabit.
Symmetrical upload and download speeds 5 million capable of three gigs and over 1 million capable of eight gigs and that's just at the end of this year alone and we've got strong growth in all territories.
And basically we're at a point, it's pretty clear that the traditional telco technology disadvantage is gone and it's now with sustainable advantage, which is going to persist for a long time and I think cable is gonna be catching up for quite a long time. So and then you asked me about that and you referenced the Comcast <unk>.
<unk> trial.
That's a trial.
And it speeds delivered in the laboratory environment and when we when we look at it.
We don't see true symmetrical multi gig DOCSIS paths.
It's the true symmetrical DOCSIS path is quite unclear and it's going to take a while and even then I don't think theyre going to come close to our upload speeds and it's going to be an expensive proposition either way. So you got to decide do you do a fiber overlay, which is expensive or or determined a DOCSIS path, which is uncertain.
So again it just comes back to the fiber advantages is a sustainable long term one on wireless.
I.
I think like.
Thank you.
It's been strong for the entire industry you see our results are very strong the record results and then youre going to see healthy healthy growth across the entire industry and I do think it will continue and I don't see that in a cavalier manor.
Look at the kind of tail winds that are operating in everyone's favor theres an immigration.
And the federal government's indicated that's going to continue to grow over the foreseeable future. We've got you know in the near term here strong consumer roaming and we're seeing roaming pick up in business.
We've got very healthy increases in network usage, a big one is the five G upgrade cycle, probably should've started with that one we still only have 35% of subscribers with five G devices. So there's a lot of room for growth there.
And five G customers I mean, I see I say this all the time.
They they use twice as much data and they spend more and we're seeing strength in all our in all channels. So I think there is continued room for for momentum there.
I hope that answers both of those questions Mike.
Yeah, yes, thank you very much.
Question. Please.
The next question is from Vince Valentini from TD Securities. Please go ahead.
Thanks, very much hopefully I can sneak in a clarification before my big question that 38 million any any chance you can break that apart between what was actually storm, which is obviously nonrecurring and and what was just the inflationary pressures.
Good morning, Vince sure.
The total cost as I mentioned $38 million or about 34 of that impacts our wireline business of a 4 million wireless by broke it down by storm and inflation.
$19 million of storm the vast vast majority of that is related to Fiona.
Unfortunately, there will probably be additional costs flow into Q4, as we're still doing tree clearing and clean up from that devastating storm that hit Atlanta, Canada of the $19 million. That's inflationary. It's it's it's really split between fuel and utility is about half of that in labor and about the other half.
Half is we've.
We've had to put through higher than typical wage increases and we.
We've had some collective bargaining agreements related to our unionized labor workforce come to an agreement. So that's a pretty good breakdown Vince of how that 38.
No no that's that's more than what I expected Glenn Thank you.
Just a bigger picture question.
For Marco.
I think you didn't meet that your your internet, adding in Q3, which were phenomenal where were partially driven by a bit more aggressive promotional activity than we've seen from you guys typically.
Probably for good reason leaning in on the good networking and the problems that your competitor was facing a in the quarter, but I. Just wondering are you happy with the blend of sort of ARPA and margins plus volume that you gained so that you just keep up the current pace or should we view Q3 is a bit unusual because of the outage in <unk>.
The ability to lean in on promotions.
No I I, well first time I am quite happy with the balance of all those things, Vince and and I wouldn't interpret the the record results as being a singularly driven by comp.
Competitors' network outage in early July actually the momentum has been there for quite a while and you know as our footprint grows you're going to see the momentum continue on the promotional intensity, it's a bit higher than in Q3, but I wouldn't.
That's to me that's not unexpected given our.
Our share gains.
In terms of.
Kind of managing managing margins don't forget that we kind of have a double benefit with the fiber build right as we or triple benefit. However, you want to put it as we grow the footprint share swings our way and.
And we get the benefit of embedded cost reductions by having.
Better.
Fiber network, where the cost support.
And service costs are much less as you as.
As you know and Ulta.
Ultimately our share gains don't have to be at the expense of our of industry profitability. If you think about it.
Fair enough. Thank you.
Thank you. The next question is from Stephanie price from CIBC. Please go ahead.
Hi, good morning.
The comments on the fiber rollout and talk about the competitive environment that you're seeing against cable peers here. So any update on how we should be thinking about either share gain.
It's a I mean, we're chair.
I guess the short answer is we're taking significant share of market growth in every area, where we have fiber. So even just kind of hot high macro answer 89 stop for US 89000 total Internet net adds which is very high at 95000 fiber net adds so we're.
Continuing to see big growth, where we have fiber and and customer losses, where we have where we have copper networks, where the speeds just don't keep up with customer demand. So it comes back to the my first answer to monitoring speeds do matter and upload and download speeds do matter for four four.
<unk> subscribers and when you get asked or when I get asked well are there any services actually Omar asked me. The question that I didn't answer it where are you are you seeing services that need eight gigs I think he asked me, but I get asked that all the time.
Multi gig does matter and you can think of things as one user one session in the home and therefore anything can work on 100 Meg pipe.
It's very rare that you have one user one session in the home in fact, most most households are multiple family members and then everyone using things at the very same time and more and more and more devices are being connected at the same time. So these things do matter.
So again, it's a bit of a macro answer, but youre going to see share gains.
Swinging to us where we have fiber.
Yes, just adding to that Stephanie.
We made a decision a number of years ago to accelerate our broadband.
Investment.
And I think it's truly paying off the the results speak for themselves.
We set a record for the highest fiber internet ads in our in our history.
And I think that speaks volume to the strategy is working where we have fiber we take share.
Thanks, and just a follow up here on bundling it looks like wireless and wireline bundling offers it picked up across both bell and Virgin hoping you can share some early early learnings from that.
Yeah.
So one of the.
Yeah.
The cross sell of or the bundling cross sell of mobility to Internet and vice versa is actually one of the key drivers of our of competitive success in the AR in the communications industry today.
Today, So I mean, that's part of our focus on that in the last couple of years is bearing fruit.
And and that's how you can compete in this industry.
For us its focus on high quality loading focus on on the Bell brand.
They are not as wireless or wireline, we've made major investments in AR and digital channels and self install capabilities.
And and one of the other elements of the strategy and our execution has been that cross sell.
And if you if you have a large installed base that you can cross sell to whether it's one side to the other and vice versa Youre in good shape and if you own your own networks, you're in good shape. So those are the kind of two things high quality networks owner economics, and the ability to cross sell to an installed.
Our base of customers.
Thank you.
Yeah.
Thank you. The next question is from Matt as your home Dubai from Deutsche Bank. Please go ahead.
Yes, thanks for taking my questions and congrats for the strong loading in the quarter. However, you did mention in your prepared remarks.
You talked about a bit of a difficult wireless prices.
Oh, we got we got five G and we'll see what happens with competition and in Canada, what would or could make wireless pricing a turnaround in the next few quarters.
Well, what I said is I was referring to the stats can data, which shows that wireless the wireless services basket as measured by Statscan shows a continued decrease as compared to general inflation across all goods and services in Canada are growing dramatically. So I wasn't referring to wireless plans.
In any specific manner. It was the stats can data and in fact, where we see the significant growth right. Now is in five G and five G pricing has held up really really well, which shows that are that we're in a good position to monetize.
<unk> G. So yeah of course, we're always in a competitive environment and we adjust and we and we do things and I think frankly, the promotional intensity in wireless has been pretty good handset discounting has been pretty good five G.
Rate plan pricing has held up so those are the things you should look you should look at a two.
Sustained both continued loading momentum as I talked about earlier and the ability to monetize that appropriately.
Great. Thanks, and then second on Bell ventures.
From what I understand it's been 100% new endeavor here, but it does seem like a renewed focus.
Are you looking to integrate maybe more products in your lineup or or maybe is it more adopting a strategy that's a bit more similar to one of your Canadian peers.
What we're doing well, we're always looking to to showcase our superior networks, and frankly candidates globally leading them.
MC Reynolds from RBC. Please go ahead.
Yeah, Thanks, very much good morning.
<unk> for me just just first on the economic headwinds either for Ya Glen or a <unk> you know.
I don't think anyone should be surprised they're gonna persist here in the queue for just would love to just get a better sense of the cadence of the economic headwinds through two three.
Uhm essentially are things still getting worse out there or is there any stabilization that you'll see here in real time and then the second question on five G monetization maybe for for you Murko as you're looking at a 2023 what are your expectations in terms of how to.
The different buckets will or won't kind of ramp up here as we go through the year. Thank you. Okay. On the first question, let me start and then Glen Glen.
Oh I'll start at the highest level of neglect and unpack. Some of this for for you you know on the economic pressures that were either seeing now I'm Gonna say, we I don't necessarily mean bell, but just you know.
The macro economy or from a macro perspective.
That that you know, we're we're seeing or feeling or like or is likely to come.
I'd say this from our perspective, we are a multi segment and highly diversified and resilient communications and media company. So you know the diversified revenue portfolios really helping the us in otherwise difficult economic circumstances, and I said in my opening remarks that we continue to generate some.
The actual cash flow and we're very disciplined on cost and we have a strong balance sheet and and ultimately.
Accelerated capital investments that we've that we've been making our bearing fruit you see it on the results. So we knew at the time when we accelerated them that it was the right strategy and I've never been more certain than than right. Now. So what we're going to do is we're going to keep driving on that strategy and execute against it and so gross.
Sure and and manage costs. So I think I'll I'll, I'll say that different pocket, a little bit more on the consumer side.
No data data usage is so ubiquitous and important critical today that it's not quite as simple to manage that down like it might've been 10 15 years ago on the enterprise side things are fairly stable for us in the context of difficult supply chain environment, and and a potential recession I don't want to minimize the impacts but.
Stable.
And on the media side, we are in a rat AD recession, Glen and I, both talked about it you can't hide from that but we are taking share because of our diversified asset mix in media.
The only thing I would add is.
Another segment that's M. B, we tend to see pullback in spending in a recessionary times, but we're not seeing that right now actually I would say the contrary is that somebody is still recovering from the pandemic and then the.
The final thing that obviously drew I watched carefully as a consumer payment patterns and to date, there's been no material change though is.
Merkel said, if there's a canary in the coal mine are in an area that we're facing the greatest headwind. It it's a it's a media advertising.
But all in all I would say, we're we're quite recessionary proof as we have proven in the Boston.
Quite resilient.
And our wireless and fiber less than five G.
I.
I guess you know as R. As are here the three things for me, where we're going to continue to expand our five G footprint. So that's that's good which is gonna continue to create demand for five G.
So we will take advantage of the five G upgrade cycle and then the other so that's kind of on the demand side on the pricing side of course as long as five G pricing hold which it has and I think it will you know both of those factors incur.
Increase subscriptions to five G and and and the pricing environment, which allows us to monetize that are the two key drivers and I think that's going to hold up well into into next year.
Okay. That's very helpful. Thank you. Thank you.
Thank you.
The next question is from <unk> Libby from Upenn.
Go ahead.
Great. Thank you uhm.
But the majority of your residential households on the fiber network right. Now can you talk a bit more on the cost efficiencies you can get maybe provide some examples where they would come from and how quickly. You think you can you can get there and just to follow up on advertising.
Can you provide a bit more color on the weakness you were saying is it across the board or uncertainty vertical then how has that progressing to phone queue.
You mentioned digital was still holding up if you made the trip out to demand for Walcott are you seeing any change there. Thank you.
Good morning, I'll handle the last part and then we'll probably tag team the first part but.
On media advertising is Merkle mentioned his opening remarks were actually it was getting pretty good strengthened recovery and the out of home and that's really a product of a lot of homeless so significantly.
Significantly impacted during the pandemic and where we're seeing healthy recovery Merkle also mentioned that we're having great.
Success in our in our digital advertising focus the areas that are are are being impacted the most is traditional linear T V advertising and that a radio as you can expect when I mentioned and run away rubber remarks about one specific property. We are quite excited about FIFA World Cup and the success, we're seeing there on selling.
Retiring, but the overall advertising T V and radio advertising is where we're seeing the headwinds and we expect that to persist in the queue for and and frankly, probably into 2023 and I I think you've seen it from others in our industry, who are reported results recently.
Go on the first question I think I mean, the the typical stat. We we share is that where we have fiber our service and support costs tend to be 40 per cent lower than they used to be on copper I mean, I would be that would be the headline answer it and just to give you a little bit more.
It's been more flavor to that.
[noise] better network means more stable and reliable network means fewer customer calls to address issues and and and it's it's really end to end because you can do you can start scaling up self install. So then you don't have an install costs.
And then post install customers can mediate with you online through the App. So they don't have to call in so ultimately you know all these things lead to better services support cause and and and frankly, the most important thing.
Better network Superior network happier customer happier customer for lower chair.
So and you gain chair along the way of course as you can see so though it's it's the fiber stories of good alone all the way round.
Got it thanks, so much.
Thank you. The next question is from David Joyce embark. Please please go ahead.
Thank you this kind of follows on the earlier question, but could do help help us understand.
Stand Oh, the very strong mobile phone that adds this quarter alone or possibly approaching half of the.
Canadian wide population growth [laughter], how much of those net ads are coming from the incremental immigration how much is coming from increased penetration of products count.
Count and how much is coming from the the the the competition. Thanks.
Actually the short answer would be it's from all three and it's hard to unpack, but there's certainly there's certainly growth or because of an immigration I think we are doing well on on switchers, which is the last item you identified and there is still room to grow in the industry in terms of device penetration in Canada.
Compared to what we've seen some other country. So it's I mean, you identified all three but for me to assign a percentage to the mix. It it's it's difficult.
Alright, Thanks, and if I could just follow up on on the Quebec side of things.
How do you balance your capex spending with free cashflow generation that would that would.
Are you kind of this.
It was kind of ties in with the inflation the issue and some of the supply constraints, but are you really at your maximum operating capacity for for upgrading I know you need to sort of manage through.
The seasonality of when you can can can I can do the upgrades but.
There are there are limiting factors with your infrastructure.
I'm just wondering what styles that you can adjust to maybe we'd need to continue accelerating now you're capex the upgrade plants. Thanks.
Okay. Good morning look I I couldn't be more pleased of what we're accomplishing when or where they're accelerated capex program. This year I mentioned earlier and I've mentioned in previous quarters. This will be our largest spend in the history of B C topping over $5 billion, passing over 900000 homes and continuing on our ultimate fiber journey to to pass.
10 million homes What've nine of those will be fiber in about a million of those were wireless at home. They're the constraint really is just the magnitude of work.
We have.
Find out a window of construction in this country is you could appreciate and the teams have worked very hard through the summer and through and through the the the fall here, but we're we're very pleased you know the guidance. We've given on on Capex has to be roughly or in that 5 billion range and the guidance. We've given on free cashflow, 2% to 10% is still in line and we're confident.
[noise] that guidance, so I couldn't be more pleased we don't feel we have any constraints on product or or.
That's slowing us and the ability to deploy or or fiber in five G strategy.
That's great. Thank you very much.
Thank you. The next question is some Simon Flannery some Morgan Stanley . Please go ahead.
Hi, Good morning. This is diego bra us filling in for Simon. Thanks for taking the question on Enterprise can you just talk about what you're seeing on that front is there any updates to the product sells translating to services sound cycle and if that is improved.
And any higher level changes on buying patterns from enterprise customers.
And then the second question is is there any update on how you think about it.
Managing leverage through this environment and especially with.
The big rise in rates that'd be helpful. Thank you.
You start going on the second one yeah sure as I mentioned in my opening remarks. We're we're we're pleased with the guard our balance sheet liquidity situation, we find ourselves in wood over 3.5.
Billion available or death.
Leverage ratios stays stable at 3.2 times.
We have historically low after tax cost of data 2.8, as I said, So you know what we did was very opportunistic and the and the low interest rate environment, We took advantage and did significant.
Term placements and you're you've watched US do you know upwards of $6 billion between Canada, and the U S and the and the the last year or so and that was all.
Opportunistic and preparing us such that in a time of rising interest rates, we could like lean on things like commercial paper and securitization.
Oh and use more of a floating debt structure in order to manage their so I I think we're in great shape. If you look out to 2023 and you look at our our towers, we have very little maturing it gets about $600 million and 23, so cool.
Kudos to our to our team of I'm very proud of the fact that we set ourselves up to.
To manage through a rising interest rate environment, very well with the placements in the tapping the market is opportunistically as we did in your first question on enterprise Yeah. So on I mean, the the update is it's the same update as largely the same update as I gave the last quarter actually so we're not still not seeing any cancellation of Prague.
<unk> and the enterprise segment, but revenues continue to be delayed for the same reasons as I shared last quarter. So we're not losing market share. We don't think and then we also still believe that we're poised to capitalize when some of that to play supply chain disruption eases. So for example does that data point for you the.
He quit.
Quit met were receiving now is four orders that we play six to 12 months ago, which kind of gives you a a bit of a sense and then.
Five.
Pivot to the small and mid segment of of the business market. We're seeing in the S. M. B side continued improvement actually seeing volumes up turned down in the second quarter of revenue improvements. So we're pleased with that.
Alright, Thank you nice to you.
Thank you and the next question is from <unk>.
Petski some canaccord Genuity. Please go ahead.
[noise] <unk>. Thanks for taking my questions I wanted to ask about Internet <unk>, obviously, the internet revenue numbers. It very strong 8% growth you report it again it looks like the vast majority maybe close to 7% of that is subscribed to driven.
And I know that we are at a point, where you sort of driving forward with your fibre deployment and there's gonna be some promotional activity around that but when you think upset that the higher quality of services the speeds and so forth that you're delivering maybe just touch on the upside to pricing and how the <unk> component can become a bigger piece of that down the <unk>.
<unk>, particularly the inflationary environment way I think you know there is some justification for that and second B a quick follow up on your comments about bell benches.
Can you just share your thoughts on instead of the five G business models.
You know it it it's obviously, it's not completely clear at this point, but you know you Wanna drive revenues above just you know connectivity five G can potentially be different than four G. In terms of.
You know the telecom share of that economic pie and how is it that the venture initiatives today, but he's into that thank you.
Well the venture I'll start with a lot of the ventures initiative.
It is in large part designed to do to do just that actually so how do we how do we partner with you know with with the right strategic partners with yeah.
Yeah in which we can take that could an equity interest to do exactly what you just said, which is most showcase or the value of our network not not just for.
The connectivity part of it or the connectivity revenue part of it but to move up the the solution stack as you say so so yes. That's what we are trying to do on that on that side of things. We are playing the long game right. These are long term investments, we're making on fiber in particular long life fiber long legs infrastructure.
Assets, which we plan to monetize for decades to come so the investments are bearing fruit now, but they're gonna bear fruit for for decades to come in and we will continue to be patient on that strategy and and play the long game as I say that in terms of [noise] of.
Our poo grow in wire line, the quarterly growth has been pretty consistent all year and I look at our overall internet revenue growth as a key thing and that's continues to be up significantly 8% and really the approaches is is a multi pronged new footprint new subs.
Right, an existing footprint increased penetration.
Ah get customers who are on.
Network to tear up to higher rate plans then of course, there are tactical pricing initiatives that we always put into place at the right time and the last element of this multi multi pronged strategy is a product intensity.
And we had someone asked me earlier, but I think it was Stephanie about cross selling that's another way to kind of drive the overall revenue performance on on on the network asset a little bit different than your specific question, but it is a part of the multipronged strategy.
Thank you.
Great Donna we're running out of time. So this will be our last question that will take right now.
Thank you. That's the last question will be from that Matthew Griffiths from Bank of America. Please go ahead.
Alright, good morning, and thanks for taking my question I just wanted to quickly ask on the if you see a lot of more runway on roaming I know that's been a nice tailwind in the past, but are you seeing that level off or do you expect that to to continue and just made me for Glenn I just wanted to we've been asking a lot of company.
He's to clarify something on the pension is just.
Let me see some reporting some kind of liability.
<unk> investments that are you know with market volatility and rising rates are creating some some pension problems.
I know you mentioned that your well funded and the sensitivity is relatively low I just wanted to just double check that there's no new volatility your interest rate risks that are creeping up in the pension.
Good morning, Matthew actually this is.
Quite a journey on on pension management for Us and in my time here, we had many many years of falling and significant deficit position and we followed Ah Ah Ah Ah Ah very clear glide path towards immunizing, if you will the liabilities by moving to.
A lower risk or fixed income.
Waited portfolio and less on equity and I think it's proven.
To play out in times like this despite the fact that.
Interest rates in the discount rates have been all over the map and rising at a rate an unprecedented rate.
We really never saw any change in our in our funding position. We we bounced around from 113 to 118 during the quarter I think of of of our solvency position, so still sitting at $293 billion of of.
Of a.
I.
The surplus [noise] excuse me that's sitting in the pension plan do I expect that to continue to to change over time sure, but the important thing is we don't see it having an impact on our ability to take contribution holidays in the foreseeable future.
You could give back some of that and and I have a surplus fall down to 2 billion, but no. We are not seeing any problems in our pension plan and we're delighted with the holidays, we've been able to take and continue to think that that will be available to us Ah for the foreseeable future unrolling.
Hundred and 14 per cent I mentioned is where we're at that's Ah a product of both volume and rate because the rate increases it would say, we're probably at the high nineties right now in volume and the rest is right driven.
Merkel mentioned it in his his remarks most of that is is coming from consumers returning to to travel. Although we have not seen as much come back on the business side, yet. So we do believe tailwinds exist and will continue to see a bit of that tailwind in the in the coming quarters ahead, albeit naturally it's not going to be at the same level of what we've enjoyed the last four of <unk>.
<unk> as we went from virtually nothing enrolling too to a recovery to 114 per cent. So thank you Matthew for your question and thank you everyone for the morning.
Great. Thank you ever. Thank you so much. Thank you so much for your participation in the great. The great questions that you asked so thanks again have a great day.
Thank you.
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