Q3 2022 BCE Inc Earnings Call
<unk> 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 $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 work 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 youre.
<unk> 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 a 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 Ta shows that Canada's network operators outpaced international peers and Capex in 2021 investing $168 per subscriber compared to a <unk> 7 million 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, having invested 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 and <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 Mag Uccle recognized Bell <unk> mobile network as candidates fastest and their latest reports.
Such third party recognition reinforces bells network leadership and the value of our unprecedented 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.
It was another standout performance with our highest ever number of total mobile phone net adds which increased 64% over last year to more than 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 declining wireless prices, even as the Canadian economy faces rampant inflation.
According to latest stats can data the price 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 our 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 and App, we continue to see good momentum across our streaming distribution platforms, and digital AD markets, which 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 would also give a quick update on some recent ESG developments clean 50, a national sustainability organization named Bell its inaugural Ghd.
<unk> 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 <unk> 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 to the electrification of our vehicle fleet and the shift away overtime 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 <unk>, 9%.
Our <unk> 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% of 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 <unk> monetization strategy.
With only 35% of postpaid subscribers currently on a <unk> 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.
It was 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 <unk> performance for fiber.
Net adds.
We also added 38093, net new IP TV subscribers, which is up 24%.
And thats 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 TV bookings that I referenced earlier.
CTV remained Canada's most watch 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 television competitors with market share of primetime audiences up 4%.
<unk> 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 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 multiyear 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 down from our previous expectation of 27.
No further tax adjustments are anticipated in Q4.
Lastly, despite a $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.
<unk>.
Despite consumer holding onto the 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 two.
Let's move now to slide nine.
Wireline reported its first quarter of positive top line growth in almost two years with.
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 <unk>.
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 of $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 <unk> said in his opening remarks, and 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 election Euro Cup soccer and the Tokyo Summer Olympics.
The financial impact of these factors was moderated by a strong cohort recovery and our out of home further gains in digital advertising as Merkle mentioned.
And a two 2% increase in subscriber revenue from ongoing crave streaming growth.
Although 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 on premium sporting events.
And lastly, I'll finish on slide 11, with $3 5 billion of available liquidity, our manageable debt leverage ratio of three two times adjusted EBITDA.
Our 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 held.
Helping them mitigate the impact of rising interest rates. Moreover.
With the substantial pension solvency surplus.
<unk> 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 assist in parts of our business through Q4 and on that I will 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 a few months.
Donna we are ready to take our first question.
Thank you.
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You for your patience.
The first question is from Maher Yaghi from Scotiabank. Please go ahead.
Yes, good morning, guys I wanted to.
Maybe quickly on your internet loading very impressive in the quarter.
You really you recently introduced eight gig symmetrical internet speeds in the market are there any services that are requiring such high speeds.
And just in terms of competition.
Comcast also announced in September that they have shown that DOCSIS core point always capable of achieving speeds of up to 10 gig symmetrical capability.
Are you concerned that this technology could.
Help your cable peers closed the gap here in Canada.
Do you think they can do it in a cost effective way.
And just a follow up on the wireless also very strong subscriber loading there.
Probably helped by immigration and students coming back to University.
Are you expecting that strength to continue is it sustainable in your view and.
Just in terms of 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 a few.
62%, just like 62% of consumer fiber to the home Activations in September for Bell, where on multi gig speeds.
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 does matter.
<unk> 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 is one of only two three months away. We will have 7 million fiber locations all of them will be capable of delivering gigabit.
Symmetrical upload and download speeds 5 million capable of three gigs and over 1 million capable of eight gigs and Thats 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 disadvantages gone.
And it's now a sustainable advantage, which is going to persist for a long time and I think cable is going to be catching up for quite a long time. So and then you asked me about the annual re reference of the Comcast <unk>.
Eight gig 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.
The true symmetrical DOCSIS path, it's 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 to 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.
E <unk>.
I think like.
It's been strong for the entire industry you see our results were 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.
Just look at the kind of tailwind that are operating in everyone's favor there's immigration.
And the federal government's indicated thats going to continue to grow over the foreseeable future.
We've got in the near term here strong consumer roaming and we're seeing roaming pickup in business with.
We've got very healthy increases in network usage.
Big one is the <unk> upgrade cycle, probably should have started with that one we still only have 35% of subscribers with five G. Devices. So there is a lot of room for growth there.
And <unk> customers I mean, David I would say this all the time.
They use twice as much data and they spend more and we're seeing strength in all in all channels. So.
I think there's continued room for for momentum there.
I hope that answers both of those questions Mark.
Yes, 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, the $38 million 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 about 34 of that impacts our wireline business of a 4 million wireless by broken down by storm and inflation $19 million of storm. The vast vast majority of that is related to Fiona and unfortunately, they will probably be additional costs flow into Q4.
We're still doing tree clearing and clean up from.
Devastating storm that had Atlantic Canada of the $19 million that's inflationary it's it's.
Really split between fuel and utility is about half of that in labor and about the other half is we've.
<unk> 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 expect to Glenn Thank you.
Just a bigger picture question.
Marco.
I think you did meet at your your Internet aging in Q3, which was phenomenal.
We're 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 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 and the ability to lean in on promotions.
No.
Well first of all I'm I am quite happy with the balance of all those things Vince.
And I wouldn't interpret the.
The record results as being singularly driven by <unk>.
Competitors' network outage in early July actually the momentum has been there for quite a while and as the footprint grows youre going to see the momentum continue on the promotional intensity, it's a bit higher in Q3, but that's.
Thats to me Thats not unexpected given.
Our share gains.
In terms of.
Kind of managing managing margins don't forget that would kind of have a double benefit with the fiber build rate 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.
And service costs are much less as you as.
As you know and.
Ultimately our share gains don't have to be at the expensive 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 fiber share gain.
It's I mean, we're.
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.
Hi, macro answer 89 thought 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 in 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 monetizing speeds do matter and upload and download speeds do matter.
<unk> four subscribers and when you get asked or when I get asked are there any service is actually more asking 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't think of things as one user one session in the home and therefore anything can work on a 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 swing to us where we have fiber.
Yes, and just adding to that Stephanie.
We made a decision a number of years ago to accelerate our broadband <unk>.
<unk>.
And I think it's truly paying off 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 Berlin, Bert yet, but can you be sure.
Sure early early learnings from that.
Yes.
So one of the.
No.
The cross sell of four.
The bundling cross sell of mobility to Internet and vice versa is actually one of the key drivers of our competitive success.
In the in the communications industry.
Today, So I mean, that's part of our focus on that in the last couple of years is bearing fruit.
And that's how you can compete in this industry.
For us its focus on high quality loading focus on the Bell brand.
Whether or not it's wireless or wireline, we've made major investments.
In digital channels, and self install capabilities and in 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 are 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.
Base of customers.
Thank you.
Thank you. The next question is from.
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.
Difficult wireless prices.
We got we got five D and we'll see what happens with competition in Canada what would.
Or could make wireless pricing 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.
<unk> two wireless plans in any specific manner. It was the stats can data and in fact, where we see significant growth right. Now is in five G and <unk> pricing has held up really really well which shows that.
We're in a good position to monetize <unk>.
<unk>. So yeah of course, we're always in a competitive environment and we adjust 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 two <unk>.
Sustained both continued loading momentum as I talked about earlier and the ability to monetize that appropriately.
Great. Thanks, and then secondly on Bell ventures.
From what I understand it's been a 100% new endeavor here, but it does seem like a renewed focus.
Objective is to secure strategic partnership positions.
For ourselves and for the partner and ultimately to kind of highlight innovation using our networks.
Very clear thank you.
Thank you. The next question is from June .
<unk> some RBC. Please go ahead.
Yeah, Thanks, very much good morning too.
<unk> for me just just first on the economic headwinds either for you Glenda Murko.
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.
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 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 I'm Glen Glen.
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.
The macro economy or from a macro perspective.
That that you know.
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 portfolio really helping the us in otherwise difficult economic circumstances, and I said in my opening remarks that we continue to generate substantial cash flow and we're very disciplined on costs and we have a strong balance sheet and and ultimately the.
Accelerated capital investments that we've that we've been making our bearing fruit you see it on the results like so when you were at the time when we accelerate at 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 a potential recession I don't want to minimize the impacts but.
Stable.
And on the media side, we are in Iraq 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 SMB, we tend to see pullback in spending in recessionary times, but we're not seeing that right now actually I would say the country is that somebody is still recovering from the pandemic and then.
The final thing that obviously drew I watched carefully as consumer payment patterns and to date there has been no material change though.
Is merkle 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 on wireless and fiber less than five G.
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 going to 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.
Both of those factors.
Increase subscriptions to five G 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.
The next question is from <unk>, maybe 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 Orange vertical then how has that progressing to phone queue.
You mentioned digital was still holding up if you maybe 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 strength in 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 traditional linear television advertising and that a radio as you can expect when I mentioned and run them I remember remarks about one specific property. We are quite excited about FIFA World Cup and the success, we are seeing their on selling.
Advertising, but the overall advertising television 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 2000 twenty-three and I I think you've seen it from others in our industry, who are reported results recently.
On the first question I think I mean, the the typical stat. We share is that where we have fiber our service and support costs tend to be 40% 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.
Better network means more stable and reliable network means fewer customer calls to address issues and it really end to end because you.
You can do you can start scaling up self install. So then you don't have an installed cost.
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 lower church.
So and you gain share along the way of course as you can see so those are the fiber stories a good one all the way around.
Got it thanks, so much.
Thank you. The next question is from David Joyce embark niece. Please go ahead.
Thank you this kind of follows on the earlier question, but could do help.
Help us understand hope a very strong mobile phone that ads.
This quarter alone or possibly approaching half of the.
Canadian wide population growth how much of those net ads are coming from the incremental immigration how much is coming from increased penetration of products.
<unk> count.
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 this certainly 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 to me you identified all three but for me to assign a percentage to the mix it it's difficult.
Alright, Thanks, and if I could just follow up on on the Quebec side of things how do you balance your the capex spending with free cash flow generation that would that would.
Are you kind of.
This 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.
The seasonality of when you can can can I can do the upgrades but.
Is there are there are limiting factors with your infrastructure.
I'm just wondering what styles that you can adjust to maybe need to continue accelerating your capex the upgrade plants. Thanks.
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 past 10.
Holmes.
I know those will be fiber in about a million dollars of those with wireless of the home.
The constraint really is just the magnitude of work and 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 fall here, but we're very pleased the guidance. We've given 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.
Then that guidance so I couldn't be more pleased we don't feel we have any constraints on product.
Or.
That's slowing us and the ability to deploy or or fiber in five G strategy.
Okay. That's great. Thank you very much.
Thank you. The next question is sometime in Flannery Some Morgan Stanley . Please go ahead.
Hi, Good morning. This is Diego bra us affiliated 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 sales 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.
Managing leverage do this environment and especially with.
The big rising rates that'd be helpful. Thank you.
You start going on the second one yeah sure as I mentioned in my opening remarks were were pleased with our our balance sheet liquidity situation, we find ourselves in wood over 3.5.
A billion available or death.
Leverage ratios stays stable at three two times.
We have historically low after tax cost of data 2.8, as I said, so what we did was very opportunistic and the and the low interest rate environment, We took advantage and did significant <unk>.
Term placements and you're you've watched us do upwards of $6 billion between Canada, and the U S and.
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.
And when you use more of a floating debt structure in order to manage that so I think we're in great shape. If you look out to 2023 and you look at our towers, we have very little maturing.
$600 million and 23 so.
Kudos to our to our team of I'm very proud of the fact that we've 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, Yes on.
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 projects in 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 are poised to capitalize when some of that to play supply chain disruption eases. So for example, just a data point for you. The equipment were receiving now is four orders that we play six to 12 months ago, which kind of gives you a bit of a sense.
And then.
Five.
Pivot to the small and mid segment of the business market. We're seeing in the Smb's 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 thanks to you.
Thank you.
Question is from <unk> <unk>.
Petski some canaccord Genuity. Please go ahead.
[noise] Goodbye, 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 would get fibre deployment and there's gonna be some promotional activity around that but when you think of set up the 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 the biggest piece of that down the <unk>.
<unk>, particularly the inflationary environment way I think there's some justification for that and second B a quick follow up on your comments about Belle benches.
Can you just sort of 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.
<unk> drive revenues above just you know connectivity five G can potentially be different than four G. In terms of.
The telecom share up that economic pie and how is it that the venture initiatives plays into that thank you.
While the venture I'll start with a lot of the ventures initiative.
Is in large part designed to do to do just that actually so how do we how do we partner with.
With the right strategic partners with.
Yeah.
In which we can take that could an equity interest to do exactly what you just said which is both showcase sir.
You are our network is 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.
<unk>, which we plan to monetize for decades to come so the investments are bearing fruit now, but they are going to bear fruit for for decades to calm and we will continue to be patient on that strategy and play the long game as I say than in terms of.
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.
Get customers, who are on our network to tear up to higher rate plans and of course, they 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.
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.
Little bit different in your specific question, but it is part of the multipronged strategy.
Thank you.
Right Donna where ran 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 want to we've been asking a lot of companies.
To clarify something on the pension is just.
Let me see some reporting some kind of liability.
In fact.
<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 double check that there is no volatility.
Volatility your interest rate risks.
Creeping up in the pension.
Good morning, Matthew actually this is Ah quite.
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.
Of a very clear glide path towards immunizing, if you will the liabilities by moving to.
Lower risk or fixed income.
Waited portfolio and less on equity and I think it's proven to.
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've we've bounced around from 113 to 118 during the quarter I think of of of our solvency position, so still sitting at $2 $93 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 I'll 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 for the foreseeable future unrolling.
14% I mentioned is where we're at.
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 about Merkel mentioned it in his his remarks most of that 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 quarters. 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 question. Thank you ma'am. Thanks again have a great day.
Thank you.
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This country.
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