Q3 2022 Rogers Communications Inc Earnings Call

Thank you for standing by this is the conference operator welcome to the Rogers Communications, Inc. Third quarter 2022 results conference call.

As a reminder, all participants are in listen only mode and the conference is being recorded following the presentation. We will conduct a question and answer session to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal, an operator by pressing star and zero.

I would now like to turn the conference over to Paul Carpino, Vice President of Investor Relations with Rogers Communications. Please go ahead Mr. Carpino.

Thank you Ariel and good morning, everyone and thank you for joining us today I'm here with our President and Chief Executive Officer, Tony Staffieri, and our Chief Financial Officer, Glenn Brent Today's discussion will include estimates and other forward looking information from which our actual results could differ. Please review the cautionary language in today's earnings report Ernie.

<unk> report and in our 2001 annual report regarding the various factors assumptions and risks that could cause our actual results to differ with that let me turn it over to Tony to begin.

Thank you Paul good morning, everyone.

I am pleased to report that Rogers Q3 results continue to demonstrate strength and consistency in our wireless business and media results that reflect the unique value and quality of our sports and media assets.

Additionally, we invested aggressively in our networks and our customers experience to ensure we deliver the resilience and services our customers expect.

We're making excellent progress on our priority to drive better execution in 2022, and I'm proud of what our teams have delivered to date.

Let me provide some highlights on our Q3 results and progress across key priorities before turning it over to Glenn for additional detail on the quarter.

Before I start let me note that given the Shaw Rogers, Quebec or transaction is now in front of the competition Tribunal, we will not be taking any questions on the transaction. We remain confident in our response to the commissioner and the response of Videotron and Shaw and greatly appreciate the hard.

Work of the tribunal to bring this to a timely conclusion. So that this transformational transaction that will increase competition and choice for consumers can close.

When appropriate we will provide further updates on the progress.

Turning to our Q3 results and wireless Rogers continues to be strong we're delivering on our commitment to drive better execution and you had been seeing this consistently throughout 2020 to by.

By leveraging our extensive distribution network growth and immigration and effective base management Rogers is achieving strong share gains in a growing and competitive Canadian wireless market and continuing to offer consumers choice.

We had postpaid phone net subscriber additions of 164000 in the quarter and total mobile phone net adds of 221000 up 30000 from last year.

We saw success in all brands across our markets and impressively. We have delivered total net wireless additions year to date of 448000 up 137% from last year.

As we have seen throughout the year demand for Rogers' infinite unlimited plans has continued to grow driven by more people returning to the office strong immigration growth and more consumers traveling outside of Canada.

Since launching unlimited plans in Canada in 2019 Rogers has become the largest provider of unlimited data plans to Canadian customers with more than $3 2 million customers on these robust and five G capable plants.

As the need for data continues to grow and new applications are developed the value of these plans becomes even more important to customers.

Yes.

To our infinite unlimited plans consumers are leveraging the extensive data buckets and higher speeds that support video and business applications used in a hybrid work model or while traveling on vacation with friends and family.

All of these plans is clearly evident and overall monthly data usage, which continues to grow.

On average our customers are now using $6 six gigs per subscriber up 35% compared to the same period last year.

An infinite plans data consumption is even more impressive with customers using almost 10 gigs per subscriber per month.

This is up 17% year over year and more than triple. The usage went unlimited plans were launched back in 2019.

The simplicity and value of these plans combined with the record investments being made to support this usage are allowing customers to leverage the full capabilities of their mobile devices.

In our media business, we have accelerated our return to profitability driven by our leading portfolio of sports assets, we delivered double digit revenue growth and have seen significant growth in adjusted EBITDA, reflecting.

Reflecting the growing value of this franchise.

While other non sports media players in Canada have seen weaker performance in this business Canadians appetite for sports programming and attending Blue Jays games in person remained robust and drove excellent financial performance.

On the cable front, where we had delivered strong execution in the first half of the year, we did not achieve the subscriber results, we expected of ourselves with our performance in Q3.

Against the backdrop of very aggressive and opportunistic promotional activities from our national competitor, we were less effective in responding to this dynamic early in the quarter, but we have since focused on tactics that balance subscriber growth and market share with wireline profitability.

While very disappointed with the network outage the impact was isolated and our teams have worked hard to regain customer Trust importantly, we have gotten better from what we have learned as we accelerated investments in network resiliency in order to provide always on connectivity and service to our customers.

Overall I was very pleased with our underlying Q3 financials, which were strong.

Excluding the $150 million in credits, we provided to our customers in Q3 total service revenue was up 7% and adjusted EBITDA was up 8%.

In wireless our underlying business reflected strong financials with service revenue up 9% adjusted EBITDA up 7% and blended mobile phone our boot up 3%.

And in our cable business revenue and adjusted EBITDA were both up 2% and we maintained cable profitability. Despite the aggressive promotions.

Importantly, these credits will not carry into the fourth quarter and we're encouraged that our better execution plans are working additionally.

Additionally, even with the impact of the credits we are able to maintain our 2022 full year guidance ranges.

In terms of network investment our Capex spending in Q3 was $872 million up 18% from one year ago. This represents a record quarter for capital investment by Rogers.

Importantly network specific investment was up 52% compared to a year ago, demonstrating the commitment we are making to improve resiliency and the customer experience.

In closing I'm extremely pleased with the growth and leadership, we have seen in our businesses I want to thank the Rogers team across the country for their hard work and ongoing commitment to improving the customer experience and delivering better execution. Despite a protracted regulatory process associated with.

Shot Rogers, Quebec God deal I appreciate our team's passion and so do our customers.

Now I'll turn the call over to Glenn who will provide a few more details on the quarter.

Thank you Tony and good morning, everyone. Thank you for joining us.

Rogers third quarter results reflect strong underlying fundamentals in our wireless and media businesses with a continued commitment to investing in our networks to drive better operating and financial performance across all of our businesses.

For full transparency my remarks today will include commentary on our results with and without the impact of the $150 million and customer credits.

We expect the sustainable run rate for our business in the fourth quarter will more accurately reflect the ongoing business excluding the credits.

I encourage you to refer to our press release and other disclosures issued today to see the corresponding side by side comparisons we may highlight.

In wireless third quarter service revenue was up 3% on an as reported basis.

But up 9% year over year, excluding the impact of the credits.

As we have noted throughout the year, our wireless financials are seeing the positive benefits of multiple drivers, including higher roaming revenue as global travel recovers, a larger postpaid and prepaid mobile phone subscriber base.

And an overall increase in market activity, including growth in unlimited plans as Canadians returned to work and school further accelerated by immigration and an increase in foreign students and seasonal workers.

Our strong performance in wireless has been consistent throughout 2022.

And reflects our ongoing investment in network infrastructure and customer service.

Rogers reported total mobile phone net adds of 221000 up an impressive 30000 from last year, including 164000 postpaid net adds.

The wireless market in Canada is strong and Rogers continues to execute well across all brands.

Our results are also continuing to benefit from strong base management strategies, we have implemented.

And by providing customers with a wide variety of robust value oriented and flexible plan offerings that can meet the needs of any customer.

The wireless market was very competitive and active this quarter and our teams responded well to the busy environment.

There were approximately 666000 mobile phone net adds across the sector this quarter and.

Rogers has succeeded in attracting approximately one third market share.

Once again, reflecting strong competitive execution and attention to customer service.

Postpaid mobile phone churn was <unk>, 97% compared to <unk> eight 5% one year ago remaining under 1% and similar to our peers.

While our churn was more elevated early in the quarter. We had returned below 1% by the time the more promotional back to school selling period commenced.

<unk> as reported was 50 682.

Down 2%.

But grew 3% to $59 76, excluding the impact of the aforementioned credits.

With consumers continuing to travel.

Roaming revenues were strong in Q3 up 130% compared to the similar pre pandemic third quarter period of 2019.

While we did see a small pick up sequentially in business travel from Q2 to Q3 of this year.

Business roaming still remains muted relative to pre COVID-19 levels.

Additionally, ongoing customer migration towards the Rogers' infinite unlimited plans as seen throughout the year has also contributed to improvements in <unk>.

Wireless adjusted EBITDA was down 1%, but.

Put up a solid 7% excluding the impact of the customer credits as we saw excellent flow through from our service revenue growth.

As reported adjusted EBITDA margin was 62%.

And up a strong 64% on an underlying basis.

And our cable business total revenue and adjusted EBITDA were down, 4% and 10% respectively on an as reported basis.

But both were up 2% year over year, when excluding the customer credits.

Impressively EBITDA grew growth remained positive despite the aggressive promotional environment from our national peer.

Sure.

We were largely measured and balanced in our competitive response matching competitive offers where appropriate and otherwise maintaining underlying profitability versus driving loading.

On a product basis.

We delivered 6000 retail internet net customer additions in the third quarter and video net additions remained positive at 7000.

While the highly promotional environment and network outage impacted our third quarter churn and customer net additions in cable we remain competitive in the market and optimistic as we move into the fourth quarter.

Cable adjusted EBITDA margin was 48%.

But excluding the credits remained healthy and consistent with the prior year at approximately 51%.

In our media business, the quality of our sports and media assets delivered solid results in both revenue and profitability.

Revenue grew 12% driven by Blue Jays fans, who returned to in person attendance at Rogers Center.

As well viewership in sponsorships and advertising revenues associated with the Toronto Blue Jays games were also up substantially year on year contributing to the revenue growth.

As a result profitability within media was even more pronounced with adjusted EBITDA of $76 million or 130% turnaround from the same quarter last year.

At a consolidated level total service revenue was up 3% and adjusted EBITA was down 1%.

But excluding the customer credits up 7% and up 8% respectively.

Capital expenditures were $872 million or 18% higher than last year, reflecting capital intensity of 23%.

The additional investment reflects our commitment to drive better resilience across our networks for Canadians.

By the end of this year, we will have rolled out our 3500 megahertz spectrum to over 30% of the population with.

With more to follow through the fourth quarter and into 2023.

Free cash flow of $279 million was down from $507 million last year.

Primarily as a result of the higher capital expenditures higher interest on borrowings, including borrowings associated with the Shaw transaction.

And the impact of the customer credits.

Turning to the balance sheet.

We are in a very solid financial position as we prepare for the acquisition and integration of Shaw.

At September 30, we had $3 $7 billion of available liquidity, including $700 million in cash on hand, and cash equivalents and a combined $3 billion available under our bank credit facilities.

We also held $12 $8 billion in restricted cash and cash equivalents that will be used to partially fund the cash consideration of the Shaw transaction when that closes.

Our debt leverage ratio at quarter end, excluding the Shaw financing was three two times compared to three four times at December 31 2021.

As previously highlighted we use adjusted net debt, excluding Shaw financing to analyze our debt and cash balances as senior notes derivatives and restricted cash and cash equivalents associated with the transaction financing have been issued for the specific purpose of funding the acquisition which of course.

Is not yet closed.

In August we received consent from specific note holders of $12 billion in bonds to extend the special mandatory redemption outside date to December 31 2023.

That was an extension of one year.

We have also extended the commitment on our aggregate $6 billion of bank term facilities by one year to December 31 2023.

This funding will be used for the Shaw transaction and with these extensions we have ensured a refinancing where plane remains in place should the transaction close in 2023.

As part of the agreement to extend the bonds special mandatory redemption date.

We paid an initial consent fee to note holders of approximately $520 million in early September .

And we will pay holders and additional consent fee of approximately $260 million should the transaction not closed prior to December 31 2022.

That second installment will be made in early January 2023.

With these transactions, we were able to derisk our financing obligations. While also maintaining favorable terms ahead of entering a period of more volatile global capital markets and rising global interest rates.

Our total weighted average cost of borrowings for all debt was four 4% at September 30, and our weighted average term to maturity was approximately 12 years.

I should note that 12 years reflects the five year rate setting on our subordinated hybrid debt securities for those trying to calculate the numbers.

In terms of our outlook, we are confirming our 2022 full year outlook, which we had revised upwards following our Q1 results.

To this point, we have not seen any material impacts to our business associated with inflationary and other economic pressures.

We continue to monitor the environment and feel we are in a strong operational and financial position to manage any potential changes to the overall economic or business climate.

As we look to the fourth quarter, we anticipate growth and profitability to continue across each of our businesses.

In wireless we anticipate fourth quarter service revenue and adjusted EBITDA growth to both be in the mid to high single digit range.

In cable, we anticipate both revenue and adjusted EBITDA growth to be positive in the low single digit range.

And in media, we anticipate revenue will continue to grow in the double digit range as seen in prior quarters and adjusted EBITDA will continue to be strongly positive for the quarter and year.

Overall, our underlying Q3 results and Q4 outlook reflect better execution and financial stability as we prepare to come together with Shaw.

And our teams remain committed to delivering ongoing improvements going forward.

The fourth quarter, we will see the continuation of a full year of solid improved operating and financial performance setting us up well for 2023 and as we look to close on the Shaw transaction.

And with that Ariel can you please commence with the Q&A. Thank you.

Thank you.

We will begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.

We'll hear tone acknowledging your request if you.

You are using a speakerphone please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.

Our first question comes from Vince Valentini of TD Securities. Please go ahead.

Yes, thanks very much congrats on the good operating metrics in the quarter, excluding the outage.

Question I have is kind of two part on on promotional activity and in wireless.

First is there's been some concern that September got chat a bit aggressive amongst all of the carriers, especially the flanker brands and I'm wondering your perspective on whether some of that normal demand in Q4 in October may have got pulled forward into Q3 or do you still see similarly strong trends in gross in <unk>.

Net adds in.

In October so far.

And then related to that.

Your wireless revenue.

Excluding surface scratch of course up 7%.

Sorry, up 9% and EBITDA up 7%.

Normally we see positive operating leverage if service revenue growth is that strong. So I'm wondering if that's a signal of maybe a bit of elevated spending on promotions or perhaps even handset subsidies.

In Q3.

I think starting with your second question, Vince I think the the.

The difference in the growth between the revenue and the EBITDA is more just timing and lapping the quarters I think if you look back in our third quarter prior year.

That would explain the seven versus 9% with.

With a fairly fairly strong third quarter last year.

And so there is nothing nothing in there that's particularly indicative of.

Of more aggressive promotional or activity that didn't flow through to the EBITDA in the third quarter of this year.

Yes.

And then sorry go ahead Tony.

With respect to the first part of your question Vince in terms of wireless competitive activity promotional activity in the third quarter. We saw a pickup in mid August in terms of back to school and I would say I wouldn't characterize this year as.

Materially different than what we typically see in prior years. It did intensify in sort of early to mid September .

In terms of some promotional activity, but again I wouldn't.

I Wouldnt highlighted are significantly different than prior years and as we head into the early parts of the third quarter, we're seeing the typical dynamic.

That you would expect.

That will start around this time and so so.

So I don't know that I'd characterize it as any necessary necessarily a pullback into the third quarter.

In terms of I think.

And just to finish your question Vince I think you asked whether the size of the market.

In terms of gross and net and how we're seeing that for the fourth quarter. It's still early but our early indications are we continue to see overall growth. That's in line with what we saw in Q3.

Thank you.

Thank you. Thanks, Dan next question area. Our next question comes from Maher Yaghi of Scotiabank. Please go ahead.

Yes. Thank you for taking my question.

I wanted to just follow on the question with Vince.

Ben's question about the market dynamic in the wireless and you you know you you indicated early on in Q3 the strength.

Tony in some of the conferences you did.

Now if you if you tried to split it and currently you know when you look at gross loading in the quarter very strong at 429 up from <unk> three last year.

Immigration is probably going to continue how about the addition to grow slowly coming from students that might not be.

Let's say in Q4, Q1, or QC I'm trying to just to get an assessment of your view about the wireless market has something different changed.

In the mobility and the on the corporate side that is helping this growth.

This growth.

Because we're seeing it in the U S business and enterprise growth is really very strong right. Now is this the case in Canada right now and just to follow on on the outage are you seeing any delayed churn.

From the outage on your business and enterprise market.

As these contracts come up for renewal.

Yes.

Thanks for two parts of your question. The first is the.

Relates to the elements of growth that we had been seeing and contributing to the overall wireless size of the market and how we see it into Q4.

There have been several factors that we've highlighted clearly immigration has probably been the single largest and if you look at the trends on that as we work throughout the various quarters, it's actually on the uptick as we look to Q4, and so that continues to grow rather than decline in total.

There is some seasonality to foreign students attending classes here in Canada and so.

As you would expect there is a bit of a slowdown in that.

And then on the business and enterprise side, there is a pickup in that space that typically.

Lags as we look at it historically lags the population growth.

As businesses grow to serve that and so we're seeing that picking up and that'll be a factor in the fourth quarter as well.

We continue to keep our eye on inflationary and recessionary pressures more broadly and whether or not that is having an impact and to date. It has not.

We will continue to to watch that closely.

The second part of your question Mary If you could just repeat it. Please yeah for sure. Thank you for answering my question first and I'm.

I'm looking to see if youre seeing any delayed churn impact on.

From the outage on your business and enterprise segments now.

Contracts come up for renewal.

What are the tactics you are deploying to keep those customers.

And not seeing them switch outs.

The impact of the outage on churn was very isolated and very specific if you look at our Q3 results, obviously very strong performance and that really reflects the strength of our wireless franchise.

And confirms that the impact of the outage was was very isolated.

As I said and as we look to particularly in the back half of the quarter, our gross ads and our churn is Glen referred to in his opening comments.

We were back on trends that we had prior to the outage as we look to the business sector.

In particular, we're seeing the same type of trend. So there isn't anything that is alarming or a concern for us.

And you ought to expect to see.

Good churn levels resume.

On a consolidated basis as we look to our fourth quarter results.

Thank you.

Thanks, Mark next question area.

Our next question comes from drew Mcreynolds of RBC. Please go ahead.

Yes, thanks, very much and good morning quick follow up.

From the last question just in terms of wireless activity.

I guess, Tony how much do you see in terms of.

I guess Canadians going from one to two devices is that a factor here and an above kind of prior years and then secondly.

Something we really haven't talked a lot about but.

You did allude to having the biggest unlimited.

Subscriber base in Canada, and obviously.

Through that migration and you've talked about the simplicity dividend. So maybe just speak to some.

Some of the characteristics of that simplicity dividend that youre seeing through the results today. Thank you.

Thanks Stuart in terms of.

Factors that are contributing to the increase in size of market for wireless secondary devices continues to be one of the factors.

You didn't mentioned it at the outset, only because relative to the other factors. It's much smaller, but certainly continues to be a factor to some extent what we are seeing is ah.

Bit of substitution and frankly, it's at the margin of secondary Sims on the same phone and that replaces the need for a secondary device, but again, that's very much at the margin and in early stages, but we expect that trend to continue similar to what you see in the U S market.

In terms of the dividends, we see from customers moving to unlimited plans.

We're seeing all the things that we expected and hoped to see when we launched the unlimited plan. Several years ago. In addition to improved <unk>, which is really driven on the back of increased usage and we shared some of the numbers on that.

Most of those customers are coming through with much better what I would describe as overall customer experience and cash flow performance. If you were to look at the number of customer outreach.

To us in terms of whether it's billing or any other issues.

There are more than half less than half of what they otherwise are for the entire wireless space. So very good customer experience from that standpoint, and if we were to look at cash flow in terms of those customers being on some type of autopay and or because they have very few billing issues.

Pay their bills earlier, and so that contributes to the overall cash cycle time, those would be the two biggest benefits a number of other ones that we had highlighted in terms of lower operating costs for those customers. It's really captured in those two fundamentals.

Okay. That's great. Thank you.

Okay. Thanks, Joe next question area.

Our next question comes from Matthew Griffiths of Bank of America. Please go ahead.

Oh, Hi, good morning, Thanks for taking the question I, just was hoping to get a little more color on the Internet net add performance in the quarter. Obviously, you mentioned impact early on from the outage our promotional intensity from a competitor but was I was wondering was a lot of the.

Diminished performance versus a year ago.

Do you do a change on the consumer side or was it more focused and isolated to the business side in this quarter any kind of color would be interesting. If you could give it and then just in the a M.

M. DNA you mentioned that you are.

Upgrade youre doing upgrades to your DOCSIS three one platform to evolve to DOCSIS four Plano. So I was wondering like what are you what kind of work are you engaged in to kind of prepare.

For the 4.0 upgrade down the road.

Yeah.

Thanks, Matt Let me, let me start with the first part of the question in terms of the you know.

The competitive intensity in the quarter and the net adds I think really the two things you saw are the obvious ones. There was the isolated impact of the outage, which was was maybe a little bit more pronounced for cable and wireless.

In terms of impact and I think that largely because of the second element, which is it was a very competitive intensely competitive market through the quarter and I think that was our national competitor being opportunistic.

With.

With the outage early in the quarter and working off of their platform of of heavy capital investing.

And in their footprint and so I think you saw both of those reflected in the quarter, we were measured in our response.

And and we're trying to balance.

The the attention to customer service holding our customers' <unk>.

Filling with the impact of the of the outage through that but also being mindful of the go forward with our margins and being conscious of the economics and so as I say, we tried to be measured and balanced.

That competition.

Is continuing.

Into the fourth quarter in terms of both companies actively pursuing customers but.

We're being we're being careful to.

To hold customers into compete for them as we go through the fourth quarter I expect we will.

We will have stronger results going forward.

In terms of the second part of your question Matt.

It's probably worth highlighting as we think about and talk about DOCSIS four <unk> zero, we really operate hybrid network, we've been deploying fiber and have accelerated our fiber deployment of late.

But we've been deploying it over the last 10 years.

And more and more of that fiber, we're moving to passive optical and that allows us to increase the speeds. When you saw us announce a gigabit speeds symmetrical.

And.

Thats example of what you see on the pure fiber network in places, where we have coax.

That's where we're performing the upgrade to DOCSIS four <unk>.

In terms of specific initiatives, we're working hand in hand, and in lock step with cable labs, and our peers in the U S and in the industry here in Canada, and what you see as part of that <unk> initiative or.

Our tests that clearly indicate the speed capability there it.

It's important when you step back and you look at our hybrid network, we're confident and proud of the leadership that we have across our entire footprint in terms of network performance.

Across our entire footprint, we offer a minimum of one gig of speed.

Lot of places that's one five gigs of speed and as I mentioned in some markets, it's even higher than that and so we will continue to invest in network and ensure we have network performance leadership that is not only competitive <unk> leading against our primary competitor.

But secondarily well ahead of the customer requirement curve notwithstanding those top capacity speeds that I've talked about the average.

Customer and our base sits at speeds of 300 Megabits per second and it's growing and we're prepared for that growth.

Alright, Thank you very much.

Thank you Matt. Thanks, Matt next question area. Our next question comes from Sebastiano Petti of Jpmorgan. Please go ahead.

Hi, Thanks for taking the question I just wanted to see if you can comment on the trends and cable EBITDA.

Obviously first quarter was very strong.

Second quarter as well, but if you look at the underlying EBITDA growth in the second and the third quarter as well as what you're guiding to in the fourth quarter would imply slower topline.

Versus what you had been seeing earlier on.

While higher Opex and you've talked about investing in customer experience for the better part of the year.

Not necessarily being as <unk>.

Promotional and maybe some of your peers can you help us unpack what is going on there.

First half was very strong, but it seems as though I wasn't sure. If there is any comps or anything we should be keeping in mind in the back half that will be that has been driving the lower underlying growth in that segment.

Thanks for the thanks for the question, especially I know the I.

I think the.

Again, youre seeing us lapping as we move through the recovery coming out of Covid.

<unk> had had started before the.

We got into 2022, and so the first half of this year, we were lapping quarters that were maybe a little bit more affected.

And then coming through.

In the third and fourth quarter as we've as we've moved through I think you've seen a little bit more growth in activity.

And so there is some of that that's more pronounced maybe in wireless than in cable, but it affected cable as well as we went through COVID-19.

Some of the customer relocations.

Through Covid coming back as we as we move through the second half of 2021 and into 2022, and so youre seeing some of that you're also seeing a competitive market.

And so we saw more competition in the third quarter and that's continued in the fourth quarter from what we had seen in the first half of the year, we're responding to that.

But there were a few different elements at play.

On the on the margin I think I think there is still significant growth ahead, but you are seeing more tempered growth rates within cable certainly than youre seeing in wireless.

And just as a quick follow up sure, yes that makes a lot of sense. Thanks Glenn.

As a quick follow up to that.

Obviously lots of focus on the broader macro it inflationary environment you asked about it.

September conferences, but.

What if anything are you seeing in terms of inflationary pressures not only across the enterprise anything you can comment about.

Advertising and other kind of customer.

What kind of cost to service et cetera.

I think I think we're seeing.

Just broadly and some of this is anecdotal across the economy. Some of it we are seeing within the company, we see pressures on.

On on wage levels.

Within the economy certainly.

The impact of rising gas and food prices on peoples pocketbooks are translating as people.

Come back to the office.

We're seeing more gas consumption with commuting.

Although commuting is still a work in progress for a for us as well as broadly I think globally.

But there are some.

Inflationary pressures on wages as a result, we're.

We're not seeing it internally too.

Material extent sebastiano, but certainly we're conscious of of that impact on People's pocket books were watching the impact that has on.

Our receivables collections and in time to receive again the you know.

The signs of it so far have been I would say muted or very modest not material.

But we're aware of those pressures.

And I think as we move into the winter season.

And.

And the impact on gas prices that I'm expecting because of disruption in supply in Europe , and and globally, that's going to have a rising impact on gas prices, which will have a rising impact on on.

People's cost of living I think youre going to see those pressures continue.

We're managing them on supply chain side, we've been managing supply chain pressures coming up on three years now.

And it's you know it's an ongoing.

Balanced between price and schedule to delivery truthfully I'm, not seeing really a significant change in that from what we've been managing over the last the last couple of years.

Thank you.

Thank you next question Eric.

Our next question comes from Simon Flannery of Morgan Stanley . Please go ahead.

Great. Thank you very much good morning.

Concerned about the macro into next year, but how is the consumer at the low end in terms of payment patterns and so forth. What do you expect there and then on fixed wireless obviously, it's a different setup in Canada. The U S has seen some strong uptake there how are you thinking about fixed wireless as.

Atul and obviously, we're all areas, but also areas, where you don't have cable plant. Thanks.

Thanks, Simon let me start with the first and then Tony I'll take take the second part on fixed wireless in terms of of the impact on churn voluntary or otherwise, we're not really seeing an impact.

We are.

Yeah.

Been managing churn through.

Frankly, managing our improvements in customer service and so that's where we are focused there is really no impact on.

On involuntary churn as a result of any economic or otherwise pressures.

So I mean in respect to the second part of your question in terms of fixed wireless access the addressable for our market is much less than.

What it is for our primary competitors <unk>.

In the U S and the reason for that is given our dual network of wireless and extensive cable network, which I earlier talked about is fiber and coax.

We have.

Our competitive advantage in the markets, we serve with that type of network and so fixed wireless access is really.

On augment for largely for us rural areas, where we don't have network or don't have it yet.

<unk> talked about in previous calls about expanding and investing more into expansion of our network and that will substitute the need for fixed wireless access because it is more cost effective but for us for those reasons.

It remains.

Somewhat limited opportunity.

Great. Thanks, a lot.

Great. Thanks, Simon next question area. Our next question comes from Tim Casey of BMO. Please go ahead.

Yeah. Thanks, Good morning, maybe a couple of roadmap questions for me first one just following up on the DOCSIS four <unk>.

Discussion can you get any put any goalposts around when you think you might be putting that in service in other words, when when you think it'll be out of the lab and be.

And be ready for deployment.

And the other one would be on wireless.

Thank you mentioned, you'll have 3500 deployed across.

35% of the population by the end of this year just wondering if you could expand on what your targets would be beyond the end of this year and.

And how we should think about capital intensity and in with respect to that rollout.

Is it in the envelope or are you going to you know should we expect a little higher intensity.

As you finish up 3500 thanks.

Thanks, Tim I'll start on the second part.

The in terms of the rollout youre going to see a continued pace of rolling that out and.

I would say balanced or measured manner or not.

We're not rushing this out there to try and.

To try and do anything other than prudent investment and so youll see a continued pace through 2023, I'm not going to put any intensity or guidance around that for our 'twenty three capital spend but.

We've been rolling it out.

On a balanced approach to starting with the busiest markets and.

And just scheduling the resourcing. Its ongoing this is a long term rollout not one that we want to be there by a certain quarter and 'twenty three or otherwise so it'll be measured will continue a pace as we move through 'twenty three.

And then.

In terms of remind me on your first half.

The emphasis for us.

<unk> four I think again.

I'm not going to predict the timing that we'll roll that out with the.

With the developments.

It's coming in the next year or so, but we will make sure that the technology is working our plant works extremely well now our hybrid fiber coax.

We continue to upgraded ongoing.

When DOCSIS four comes out say in the coming year or so.

We will roll that out when it's proven and deliver it to our customers but.

No specific timeframe on it we continue to invest in fiber and cable uplift in.

Servicing our customers and in investing in customer service.

Our plant at one gig is far beyond the 300 Meg.

Service that most of our customers are taking on average and so we've got plenty of headroom to roll that out as capabilities.

And opportunities present.

Thank you Tim and answer your 3500 question.

I'd summarize glens covered off the points on DOCSIS, four but expect us to continue to do.

Be at the same pace as our U S cable peers.

And if anything fast fast follow only because of the CPE issues and supply constraints that are out there for CPE that again are at the margin, but it'll it'll be in line with the industry and as I said in my previous comments well ahead of.

What the market needs in terms of competitiveness, so comfortable with that roadmap and then the second piece relates to wireless 3500 deployment will continue we were very aggressive to deploy it as soon as it became available this year and as we deploy it into the fourth quarter and 23, you can expect us to continue.

To push hard in terms of that deployment keep in mind on 3500 for maximum effectiveness. It's a combination of deploying small cells at the same time and so I would say, it's it's the spectrum deployment and the small cell deployment that are on a rapid pace and as Glenn said not something we necessarily wanted to.

Provide an outlook on.

But you'll see it in our Capex trajectory.

And that's one of the primary factors that of where that money is going.

Where there is strong emphasis is on devoting our capital intensity in our capital spend directly to network infrastructure.

To expand service and improve.

The capacity and capability of the networks and so more of that capital intensity.

Is being devoted specifically to wireless and wireline network infrastructure across the board.

Yes.

Thank you.

Next question area.

Our next question comes from Stephanie price of CIBC. Please go ahead.

Hi, Good morning, just going on Tim's question on that 3500 deployment, just curious what you've seen in terms of an uptick in customers moving to higher tier plans.

Three five spectrum.

Two class.

I think I think the uptick is ongoing in terms of what you see in customers signing up for unlimited plans, whether or not it specifically.

Our result from the deployment of 3500, whether or not it says people leave their home Wi Fi environment and come back to work come back to school. There are a few different causes I think.

We are putting it out in our busiest markets first.

That's also where you would see a higher uptick first.

But theres, a theres a blending of cause and effect there.

That's fair and then just to follow on on the demand environment. Just curious have you seen any retreat from iPhone sales are quite shootings that could suggest more of an uncertain economy and customer spending pattern.

No I think we've seen a busy third quarter, we will see a busy fourth quarter competitive and busy.

The the economic.

Headwinds that we see in the media we are aware of them were watching for them.

Certainly from a treasury standpoint, we manage foreign exchange risk, we manage interest rate risk.

But you know from from the the actual economic impact Youre seeing businesses here that are growing.

And we are investing in the growth and so we're aware we're watching.

But no there is no no read through in terms of.

Any particular.

Device or <unk>.

Activity level not to this point.

Great. Thank you.

Our next questionnaire.

Our next question comes from Jerome deferral of Desjardin. Please go ahead.

Yes. Thanks for taking my question. The first one you know there have been reports on delays for the iPhone.

This year I know it seems that we've had similar headlines in the last few years with limited impact on your business I was wondering if you're seeing anything on that front at this time, if we'd been possibly be seeing an impact.

<unk> with higher end customers were to not update their devices and then the second one.

As an update on <unk>.

You know there's debates on the top line impact, but as you roll out 3500.

Mostly interested in the cost side of the equation. If you can provide more color on this are some of the learnings you.

You have made in the recent past regarding the cost savings related to <unk>.

Thanks Jerome.

On the first one just to.

I'll be very clear on it we have not had iPhone supply issues to any material extent, so our demand and our drive on unlimited has not been hampered by.

Device limitations and so I think that's that's good and that continues as we look to the fourth quarter and our expectations. We don't think thats going to be a factor then in terms of <unk> cost.

You think back to several years ago on the rollout of <unk>.

I think as you look to the cost structure in absolute dollars I don't know that I would necessarily suggest that it's a material come down what you do see is.

On a cost per transport or cost per gig to transport. It certainly is materially coming down so for the same money you carry a lot more data and other functionality in terms of latency and a few other things and that's the real benefit of it and so when you marry that with <unk>.

Slight cost increases.

For a number of factors combined with how we are seeing and expect to see it to continue to drive our <unk> I think it suggests a very robust model for wireless financials.

Thank you.

Great. Thank you Jerome.

Next question Arrow.

Our next question comes from Arvind <unk> of Canaccord Genuity. Please go ahead.

Good morning, Thanks for taking my question I was just follow up on that up to a point that you just discussed.

You know, obviously outgrew the industry continues to be quite robust.

I wanted to get a sense of how you see the the the.

The outlook from here on roaming maybe if you can just touch on how much more running room. There is in terms of tailwind there.

That you're already well above our pre pandemic levels and then more broadly.

You know I know that early in the year there was some price adjustments in an inflationary.

A backdrop do you feel that you would have a little bit more leeway in terms of adjusting our pricing.

Positively as you look to 2023 as well.

That can potentially supplement said at the outset that sharing up that you're seeing because of <unk> and so forth. So that's on <unk> really quickly on the cable Capex I just wanted to come back to that so any kind of commentary that you can provide onset a bit longer to a Microsoft cable capex. It sounds like you want to kind of maintain a ci.

That's sort of the mid to low twenty's levels, but what other product.

Maybe tapering.

Tapering that down into the teens is that maybe more than a couple of years away.

Arvind why don't I start with.

Your question with respect to price dynamics and the contributor to <unk> and you had specific RFP in cable capex that Glenn will pick up on.

I would say in terms of some of the factors I think what you were suggesting is given the inflationary environment environment.

Is there the opportunity for price increases.

I just come back to the fundamentals that are wireless industry here in Canada is extremely competitive and price increases just to be practical I just don't see it as.

Something that we can look to it's interesting when you look at CPI here in Canada.

Wireless.

<unk> is one of the very few that was not a contributing inflationary factor in Canada and so.

What we're focused on is trying to drive <unk> through real value delivered to the customer and so and we've talked about the reasons for that data usage has one and they'll continue to be more evolution of the value proposition for the customer.

But we're looking to earn that <unk> growth through that value proposition.

And then specifically on your question around roaming.

And the path for any further growth there there's two elements to the roaming we're sitting at about 130% of the pre pandemic similar Q3 levels on roaming revenue.

130% is made up of volume, where we're still running below the travel volumes the roaming volumes that you would've seen pre.

Pre COVID-19.

We're running probably at about 80%, primarily consumer travel through the third quarter the business travel and you've heard me say this.

Previously our agenda, but we're still trying to figure out how to come back to the office, let alone get back on airplanes, and so business travel relative to pre Covid is still muted consumer travel. There was there was a busy summer season, and that's reflected in the third quarter.

You also see the impact of price increases that we had brought in.

And changes to the plans in terms of.

Of how those are rolling through that's that's the second part of that 130% of revenue going forward Youre going to see a continued.

Growth in business travel.

Thank you probably also going to see in the coming quarters, some impact from the economic headwinds that will temper.

Business travel over a longer period than otherwise.

And we will probably temper some of the consumer travel.

Overall, though I think youre going to see roaming continue to.

To have a favorable impact on.

<unk> you also see the impact of larger unlimited plan being sold.

And that rolls through as well, particularly as people leave their Wi Fi.

Come back onto.

To the office or school.

On our cable capital intensity, we have focused two key priorities and setting our capital spend levels were prudent in how we count and how we manage the capital.

And and monitor those those capital intensity levels, but we are focused on improving customer service and investing in network infrastructure. So you are seeing us move more to investing in hard infrastructure with our capital spend both wireline and wireless.

Yes, you've seen.

That capital intensity levels stay up in the low to mid <unk>.

20% range.

Through this quarter and and I expect you will see that for some quarters to come.

That will temper over time, but we have some significant investment to make still in our wireless and wireline assets, we will be making investments as we come together in Shaw with the integration of that we'll be mindful of how that is spent and it will be dedicated to as they say come.

<unk> service and the strength of our networks and the resilience of our networks and so that will that will continue.

For a bit yet.

Thank you.

Thank you I have into area, we have time for two more questions.

Certainly our next question comes from <unk> Levi of UBS. Please go ahead.

Great. Thank you a couple of follow ups can you talk about if youre seeing any change in customer demand for bundled wireless and broadband products, maybe driven by promotional savings or convenience for the customer.

Secondly, you alluded to it a little bit but wanted to ask it directly as you think about your cost structure. Both in terms of Opex and Capex is that any residual impact from the outage that should drive higher expenses as you plan for next year. Thank you.

Two parts to that I'll start with your question on what we're seeing in the market in terms of bundle I would say there is no material pick up in terms of bundle consumers for the most part are choosing their wireless and cable or wireline products separately.

There is always there always has been and continues to be a bit of that but we don't see any material change in terms of bundled contracts in the market.

And when it's there it's largely driven by promotional incentives only.

From a product standpoint, theres little what I would call product integration is still in the market and so that's one of the primary reasons that continues to be somewhat separate.

And then but yeah on your question on Opex, and Capex, and whether or not theres any pressures from the outage on those the outage impact on our on our revenue and Opex from the customer credit standpoint that that passed early on in the quarter.

And was isolated to that point.

As I've mentioned in my earlier comments.

It is a competitive market, particularly in wireline, where we are seeing.

Petition coming from our national peer and so.

That's ongoing we intend to compete for market share I believe just as we do in wireless.

And.

But that's that's different from from the question you've asked is not outage related it's market related.

And and it's seasonal and it's ongoing and they've always been competitive markets on capex pressures.

We have.

Some as I've said, we have increased.

Emphasis on network resilience and infrastructure in our capital spend but it's within our capital spend envelope.

We manage as we have previously were not adding material amounts to our capital spend two to create that headroom.

<unk> year on year ROE, we set our priorities and so our 2023 levels without giving guidance for 2023 years, but you will see that that balance continue where we will have priorities emphasizing our network infrastructure network resilience and customer service and how we prioritize the 2023.

Spend.

Got it thank you.

Thanks, and last question area.

Our final question comes from David Mcfadden of Korman Mark Securities. Please go ahead.

Oh, great. Thanks for squeezing me in.

Okay and on the roaming Ravi.

And that the roaming revenues about 130% of what it was pre COVID-19 volume that 80% I was wondering.

If you could give us what the volumes are for consumer versus business.

I don't know I think that you know.

You talked about there could be a reduction in the consumer volume just due to I think there was pent up demand for travel this year and maybe some impacts from the macroeconomic environment I was just wondering where.

Where do we stand on the volume with respect to consumer and business.

Sure David Thanks for the question I think take my comments as being more indicative of of presumed.

Direction, rather than any themes that we're seeing we we have been through a couple of busy quarters of pent up demand on the consumer side.

I think everybody was as we came out from Covid was screaming for the doors trying to get out from their house and so you saw some of that on the consumer side.

I suspect there were other cfos out there like me that on the business side I was quite comfortable with the lower travel and entertaining expenses over the last couple of years and I am looking to sustain that a little bit longer and so it's it's a theme that's more on the margin rather than then.

Deep seated there is.

More business travel in this quarter than there was in the prior quarter there will be more in the fourth.

Quarter than it was in Q3, there will be more in Q1, and Q4 I suspect other than seasonal differences.

And so it continues to build and grow as we come out from Covid I do expect that the economic headwinds again, we will have some directional impact, but we're not seeing it really we saw more business travel in this quarter as I say and so.

The.

The.

The signals, we are seeing is growth in consumer and business.

Consumer responded earlier than business doesn't mean business is not growing it just means that there is.

There was a little bit of a lag.

<unk>.

I'll leave it there.

Okay alright. Thank you so much thank you David.

Thanks, David and thanks, everyone for joining us on the call today and if there's any follow up follow ups. Please reach out to us. Thank you.

Thank you Ralph.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

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