Q4 2022 Rogers Communications Inc Earnings Call
Thank you for standing by this is the conference operator, welcome to the Rogers Communications, Inc. Fourth 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 Zero I would now like to turn the conference over to Paul Carpino, Vice President of Investor Relations.
<unk> with Rogers Communications. Please go ahead Mr Carpino.
Great. 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 or.
Our call today will include estimates and other forward looking information from which our actual results could differ. Please review the cautionary language in today's earnings report and in our 2021 annual report regarding the various factors assumptions and risks that could cause our actual results to differ with that let me turn the call.
Over to Tony to begin.
Thank you Paul and good morning, everyone. Thank you for joining us on this busy morning.
When I stepped into the CEO role one year ago, our performance had been lagging our peers and we had lost our leadership put in last year, we set a clear plan to reestablish our leadership position and to deliver sustained strong results. This included a renewed focus on the fundamentals and a significant.
Improvement in execution and short we set a plan to turn around our performance.
12 short months I'm pleased to share we have made significant progress and.
And we did it with a backdrop of a lingering pandemic, a new executive team and one of the largest proposed mergers in Canadian history.
Despite these challenges we did not get distracted and we remain focused on driving better execution across our entire business as a team we made tremendous strides, but we have much more opportunity in front of us.
I have to say I am pleased with the speed and magnitude of our turnaround.
Across critical.
Valuation metrics, such as financial growth and customer share gains. We went from consistently ranking second or third against our competitors over the past few years to now ranking first on the vast majority of these important metrics throughout the year.
Our turnaround wasn't about coming out of a pandemic. It was about instilling a performance based culture focused on our customers returning to growth and outperforming the market.
Yes.
In 2022, the whole market grew slightly more than prior years, but we grew even more in wireless we went from losing market share just a few years ago to now industry, leading share of mobile phone net additions.
The momentum you saw in the first three quarters carried through into the fourth quarter and continues to power forward into 2023.
Importantly, we met our upgraded guidance for the year and set a strong foundation for growth in 2023.
For the full year, we delivered strong total service revenue growth of 6%.
And adjusted EBITDA growth of 9%.
This growth in over a decade.
And the improvements we delivered in 2022 were reflected in our total shareholder return, which was up 9% by comparison, our two national competitors had negative returns of minus 4% and minus 8% and the T. S X and Dow Jones were down as well, 5% and 7%.
Respectively.
In wireless postpaid mobile phone net additions were 193000 in the fourth quarter up 37% from last year. The team executed exceptionally well in Q4, and we delivered the best Black Friday in our company's history.
For the full year, we added 634000 mobile phone net adds postpaid plus prepaid our strongest result in 15 years and the best performance in our industry.
In cable we continue to see very aggressive in market promotional activity from our main competitor and although revenue was flat.
We delivered positive adjusted EBITDA, despite investments in key areas, including customer service.
Here, we see opportunity to improve our customer share performance and we have confidence that our product set and in particular <unk>.
And television have a competitive advantage across our entire footprint and our recent heightened investments in cable will begin to yield market share growth this year.
In media, we delivered a strong fourth quarter and full year in.
In 2022, we grew revenue by 15% and turned $127 million of losses into $69 million of profit.
Our media performance clearly stands out in the industry, reflecting the quality of our assets and the team's execution capability.
Importantly, these results did not come at the expense of investment in 2022, our team invested a record $3 $1 billion in capital. The vast majority of which is now in networks in fact, a doubling of where we were several years ago and network investment.
Looking ahead to 2023, we continue to see healthy growth catalysts supporting our businesses from factors such as healthy population growth penetration headroom and the benefits our transition to <unk> technologies will bring.
And against this backdrop of healthy growth, we expect to continue leveraging our execution momentum to drive leading share of customer growth, which will fuel robust organic growth in both total service revenue and adjusted EBITDA. As you saw this morning in our full year guidance release.
You'll also see that free cash flow will continue to grow as well as we deliver another year of record investment in our customers and our networks and in fact in 2023, we've allocated an incremental $700 million of our capex envelope towards ensuring we continue to have the best one.
Ireland and wireline networks.
As I reflect on the year I am proud of our entire team for their relentless focus and disciplined execution and firm commitment to our customers and shareholders.
While there is clearly more work to do we have reestablished momentum.
Before I turn it over to Glenn Let me provide a brief update on shop.
As you heard last week, the federal Court of appeal reaffirm the decision of the competition Tribunal to federal courts have now unanimously and decisively ruled in favor of these pro competitive transactions, namely the sale of freedom to Quebec, or and the sale of Shaw to Rogers to.
The tribunal decision there will continue to be for strong wireless competitors in Alberta, and British Columbia.
And the decision goes further concluding that Quebec or will be a more disruptive wireless carrier and Rogers will inject a new and substantial source of competition.
Given the matter is before the federal government for final approval, we will not provide any further comment at this time.
Let me now turn the call over to Glenn.
Yeah.
Thank you Tony and good morning, everyone. Thank you for joining us. This morning, I know, it's a busy morning.
Rogers industry, leading fourth quarter and full year results reflect the company's commitment to better execution.
Combined with continued investment in our networks.
In wireless fourth quarter service revenue was up a very healthy 7%.
This reflected higher roaming revenue as global travel travel continued to recover.
As well as opposed to paid phone subscriber base, which has consistently led on market share and growth throughout 2022.
The wireless market in Canada is healthy and competitive.
And now we're better execution is allowing us to grow share once again.
Our loading was very strong as we added 193000 postpaid net additions.
Reflecting a 37% increase from one year ago.
Loading was particularly robust during the black Friday, and boxing week promotional periods and.
And we achieved record black Friday loading with strength continuing through to the end of the quarter.
As we have seen all year, our results have been driven by better execution.
Growth in our unlimited plans.
Increases in immigration.
And the continuation of customers embracing the diversified value plans Rogers provides across Canada.
Through the very active Q4 promotional period postpaid mobile phone churn was also higher.
Again, reflecting a very competitive Canadian wireless industry.
With consumers very aware of the peak promotional periods and the available pricing and value alternatives.
As a result of this increased activity churn for the fourth quarter came in at 1.24% compared to 1.06% one year ago.
<unk> for the quarter was $58 69 up 1% benefiting from consumers continuing to travel.
We exited Q4 with roaming revenues at 140% of pre pandemic levels.
And we're just over 84% of <unk>.
Pre pandemic roaming traffic volume.
Wireless adjusted EBITDA was up a solid 8%, reflecting excellent flow through from our service revenue growth with adjusted EBITDA service margins coming in at over 63%.
Moving to our cable business total revenue was stable and unchanged from one year ago while.
While adjusted EBITDA was up 1%, reflecting tighter cost performance.
Cable adjusted EBITDA margin was 51%.
Which is up 60 basis points from a year ago.
As Tony has noted the fourth quarter continued to be a very aggressive in promotional intense period in the wireline market.
Led by our National peer.
We were largely measured and balanced in our competitive response matching competitive offers where appropriate.
While seeking to maintain underlying profitability wherever possible versus driving loading.
Gross ads remained strong while customer churn remains elevated reflecting that promotional activity.
The market is competitive.
On a product basis, we delivered 7000 retail internet net customer additions in the fourth quarter.
Down from one year ago, again, reflecting the highly promotional environment.
Additionally, we continue to make significant investments in our cable network spending $235 million in cable network infrastructure alone in Q4.
In our media business our results continue to reflect the quality of our sports and media assets with strong topline and bottom line results in Q4.
Revenue was up 17% driven by better content rates, our revenue distribution benefit for major League baseball and higher advertising revenue in the quarter.
This drove strong profitability with adjusted EBITDA of $57 million.
$83 million turnaround from the $26 million loss in the same quarter last year, which as Youll recall was affected by Covid on live sports.
Yeah.
At a consolidated level Q4 service revenue grew by 6% and adjusted EBITDA grew by 10%.
Capital expenditures were $776 million and.
And free cash flow, excluding Shaw financing costs were $644 million.
I should add our deposit interest income is roughly covering our four 2% weighted average coupon on our $13 billion cash held on reserve for the Shah bond financing.
We achieved our 2022 guidance range, despite the $150 million credits paid to customers in the third quarter.
On a consolidated basis for the full year total service revenue grew over 6%.
And adjusted EBITDA increased by almost 9%.
Capital expenditures came in at approximately $3 $1 billion and free cash flow for the year, excluding Shaw financing was $2.0 billion.
All meeting guidance.
This performance is a clear demonstration that we are growing topline and bottom line and reinvesting these profits aggressively and increasingly back into our networks for Canadians.
Importantly, these results also show we are in a strong position operationally and financially as we prepare to integrate with Shaw succinctly. We are ready for when we received the final regulatory approval.
Turning to the balance sheet.
At December 31, we had $4 $9 billion of available liquidity.
Including $460 million of cash on hand, and cash equivalents and a combined $4 $4 billion available under our revolving 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.
Yeah.
Our weighted average cost of all borrowings was four 5% as at December 31 2022.
And our weighted average term to maturity was 11 eight years.
Our debt leverage ratio at quarter end, excluding the Shaw financing was three one times compared to three four times at December 31 2021.
As previously discussed until we close the Shaw transaction.
We use adjusted net debt, which excludes the Shaw financing and related cash held in reserve.
To analyze our debt and calculate leverage.
The Shah related senior notes derivatives, and restricted cash and cash equivalents associated with the transaction financing.
Issued for the specific purpose of funding the acquisition, which of course is not yet closed.
In terms of our outlook for the coming year.
We continue to see strong momentum in our business.
And we have provided a robust outlook for 2023.
Our 2023 outlook includes includes strong top line bottom line and free cash flow growth along with continued emphasis on investing in our networks.
Focused in particular on network reliability and customer service.
2022 has been a year of remarkable turnaround, which will continue into 2023.
We are executing well and our outlook reflects this.
We anticipate total service revenue growth in the range of 4% to 7%.
And adjusted EBITDA growth in the range of 5% to 8%.
These growth metrics continue to build on the industry, leading organic growth we delivered in 2022.
We are also continuing with our commitment to invest in our networks in 2023.
Our anticipated 2023 capital expenditures, excluding Shaw integration costs will be in the $3 1 billion to $3 $3 billion range.
We anticipate free cash flow, excluding Shire integration will grow in 2023, ranging from 2.0 billion to $2 $2 billion.
As we head into 2023, we are monitoring the economic environment for signs of economic pressures.
But we believe our execution is sound and we are managing effectively through the overall economic and business climate.
Once we receive approval for the Shaw transaction, we will provide an update to our guidance, which will reflect the combination of these two strong and healthy organizations, but in the meantime, you can see that our underlying business is performing well and that we have not nor will become distracted.
In summary, we are very pleased with our results in Q4 and for 2022.
These results reflect the Rogers teams ability to make the necessary changes in the business and deliver better execution and.
And our teams did both of these very well without distraction 2022 was not perfect and we know we have more work to do.
But we have the right team in place and have established a much improved cadence for delivering more consistent and leading results.
Thank you for your interest and attention this morning, and with that Ariel can you. Please commence with the Q&A.
Certainly we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request.
If youre using a speakerphone please pick up your handset before pressing any keys to withdraw your question. Please press Star then kill we will pause for a moment of callers join the queue.
Our first question comes from Vince Valentini of TD Securities. Please go ahead.
Yeah, Thanks, very much the guidance, you've given looks impressive by the way in fourth quarter I should add.
Can you just clarify what you what you're doing with your wireless <unk> assumptions in there since you got a lot of moving pieces with roaming and and potentially new new competition.
Would you be assuming positive wireless ARPA growth within the service revenue and EBITDA.
Guidance you've provided.
You will see continued though slowing growth in <unk> coming from roaming you will see continued emphasis.
On or.
Our customers upgrading to unlimited plans and premium plans and so that will have a positive impact on our <unk> Vince.
So, yes, youll see that revenue growth.
We will also be flowing through our <unk>.
Cool and just to clarify Glenn <unk>.
The new guidance, assuming you get the deal done.
We have to sort of wait until your next scheduled call in April with Q1 results are you planning some sort of interim investor event to showcase what the pro forma looks like I.
I think Vincent in fairness, let me, let me not presume timing of when that will come in and get ahead of our skis.
We will be ready when we get clearance.
But but let me not guess when that will come relative to our next.
Next earnings release or prior.
I don't want to be presumptuous, and I don't want to speak on behalf of others that the files on their desk.
Fair enough. Thank you.
Yeah.
Our next question comes from Maher Yaghi of Scotiabank. Please go ahead.
Thank you for taking my questions.
And congratulation on the good results.
Especially for the guidance, which.
Is.
Within the current environment is impressive, but I I I did want to ask you a question related to the overall wireless market, we're starting to see.
Deceleration.
Our wireless service revenues and subscriber loading in the U S.
And some of that is coming from.
The reduction in enterprise and the business segment.
Now Canada is a different beast for sure we're seeing a lot of immigration, but can you talk a little bit about your expectation for wireless in 'twenty three.
And are you seeing any deceleration off your business segment, which could.
Put some cap on.
How much further growth we can see in our subscriber loading.
Thanks for the question Amir.
As you stated.
In your comments, Canada is slightly different than the U S macro environment, owing to a couple of things that have helped us on the wireless side from a market perspective in 'twenty, two which we expect to continue into 'twenty, three and we've talked about them before but notably.
The level and pacing of immigration continues to be strong when we look at foreign students and temporary workers that pacing continues to be strong as well and importantly, the penetration levels in Canada continue to have headroom and so as we head into 'twenty three we're not foreseeing.
Downward pressure on those and with respect to the business, what we have seen it.
Is proportionately the business segment and in particular small business has continued to grow in line with the consumer and those trends that I just talked about and so as we look to 'twenty three we continue to see a fairly healthy backdrop.
If you look at the overall wireless market total number of subscribers for the market seems to have grown in 'twenty two by just over 5% and one of the healthiest growth rates, we've seen in a long time and so our expectation is that we'll continue to see healthy growth.
In 'twenty three may not be as high as 22, because there is a bit of the post pandemic catch up we believe that happened earlier in the year.
But as we look for the rest of the year, we continue to see.
Opportunity for that that growth.
Thank you and then just.
Sorry, so sorry, Sir on the yeah on the guidance that you see it reflects that population growth you asked specifically about the business market is I think in the business market, we have an opportunity to continue to increase our.
Our share in that market, but I think if you look at our service revenue guidance of 4% to 7% is reflective of those general trends of population growth. So we're not we're not out of line.
Sorry to cut you off.
Thank you thank you for that.
Increased information, but I wanted to ask you in terms of the operational performance and Tony you know since you came in you implement the changes.
We're seeing.
Uh huh.
The benefit on the bottom line can you talk a little bit you know what's the what's the next step in your.
Overall view.
You know how to.
Keep improving operations, even further from here.
What should be looking for in terms of a change.
Changes that we could see at Rogers.
Beyond what's happening with the Shah you'll see.
So it's a good question there.
What you saw this year when I say this year in 2022.
Was a rebalancing back to the fundamentals of our business, which has been.
Quite frankly, let's ensure we have the best network and ramp up investment in our wireless and wireline network combined with improvements in the customer experience and as we head into 'twenty three.
And we look at the industry, what Youll continue to see as improvements in our network that are tangibly visible to our consumers and business customers that's important to us and secondarily. When we think about customer service, we think about the customer experience.
And as an industry as technology continues to evolve we see the opportunity to continue to make things simpler for our customers and continue on the agenda of resiliency and redundancy of our network and so they need connections. They can trust that are always on and those are the themes that youll continue.
To hear us focus on and we believe that's going to be the fundamental catalysts to continue to have leading market share.
As we head into 'twenty, three that will convert to the financials that you see it's as simple as that in our mind there.
Thank you.
Great. Thanks, Matt next question Arrow.
Our next question comes from Jeremy Mcreynolds of RBC. Please go ahead.
Yes, thanks very much good morning.
Just extending on the previous question, maybe starting with you Tony.
Typically on the cable side, I think everyone's well aware of.
The strategy, there and getting that segment back on its feet post outage.
So in anticipation of that.
Our broader transaction it could be in a transition just wondering what your expectations are on the cable side for Rogers Standalone.
As we at least start the beginning of the year here.
And then secondly for you Glenn just an update on my end on the balance sheet I'm, assuming the deal closes obviously there has been with the passage of time, some de levering, our evolving market conditions et cetera.
We'd love to hear how you're seeing do you believe rang post deal close over the next two to three years just relative to what.
Now what you've previously indicated if theres any change there. Thank you.
Thanks for the question drew in terms of the cable side of the business.
Think about it in two two points one is the backdrop.
We'll accelerate growth we saw.
Good growth in the market size in wireless and it's there's a bit of a lag as that translates to new home construction and homes passed in our cable business. So we see.
That fueling our growth in homes passed and that'll be combined with additional investments we will put into homes passed so we see the opportunity and high likelihood for the size of the market for us to continue to grow and as we retool some of the fundamentals in that business.
This our expectation is you will see.
Largely in the back half of 'twenty three.
But starting to see early signs in Q1 and more so in Q2 improvements in subscriber market share you see in the fundamentals retooling of the business in terms of.
Bringing in simplicity in our operations, we've actually invested more in customer experience.
Then we have in any previous year, yet our overall cost structure has come down for cable and that's really a reflection of that.
Transformation two the fundamentals in that business. We've also at the same time and we've talked about this on previous calls our re indexing from our flanker Fido Internet back to the Rogers main brand, it's a much better customer experience in terms of a better modem.
And a whole bunch of things related to that.
And you see that when we look at the churn in the flanker product versus our main brand.
Rogers Internet has substantially by a wide margin lower churn than fido Internet. So what you see us is trying to move to.
The more value add brand for us of Rogers and we've been making that change in the short term. Our main competitor has launched I would describe aggressive.
Competitive promotional pricing.
Especially in the higher tiers of one gig.
Above which is fine we will compete with that but as Glenn said in his opening remarks, our response to that will be very measured at the right time in terms of compete.
Competing on that basis.
But right now there were a few things we wanted to focus on in the fundamentals.
In that business and so that's what you're seeing play out and how we think about our outlook for this year.
And then drew in terms of the Shaw transaction and our balance sheet.
When we received the regulatory approval and close on onshore I'll start with we have all of the permanent funding in place to close we have $13 billion in.
Cash held in reserve from the proceeds from our $13 billion in bond issues from last March 2022.
That those bonds as Youll all recall.
Our in place and extended out through two being available through to year end 'twenty. Three so we have plenty of runway. There. We also have $6 billion in.
Committed bank term loans.
With terms ranging from three to five years.
Led evenly across three four and five years.
So that takes our cash funding up to $19 billion available.
And then there is a portion of the purchase price of course its done in shares for the Shaw family.
And then finally, there will be proceeds that come in.
From the transaction into Shaw Communications before we close from Shaw sale of freedom.
<unk>, Quebec, all and so.
All of that netted together, we have all of the funding in place to close the transaction and meet all of our liquidity needs through the year without touching the $4 $9 billion of liquidity I mentioned that we had on hand at year end.
So the balance sheet is strong in terms of corporate funding.
We will meet all of our maturities and and and.
Rogers specific commitments as well as being able to close onshore without needing to come back to the capital markets.
In terms of where we will be on leverage when we close we'll be right around five times maybe.
A tick over five times when we close.
Depending upon timing, we've taken advantage of the time that we've had to.
Sure.
Our strong organic growth within the Roger Standalone business, we have had some.
<unk> expenses come in along the way, which we now have to cover on our balance sheet not the least of which was the cost of extending those those bonds. Because we did not close in 'twenty two even with those added expenses coming in.
We will still be closing right around five times low five times when we close on the transaction I anticipate and then going forward, we haven't given a forecast as to scare.
Schedule around delivering but.
If you look at.
At where our Abbott rolls up with Shaw as Abbott.
And then you you look at where our path is on synergies I think you'll you'll see through earnings growth alone.
We we generate some significant de levering on an annual basis.
I don't know if youre looking for a rough rule of thumb think of it in the range of probably point forward to 0.6 times, depending upon the year, depending upon how much of the year we have.
Left in 'twenty three once we close.
But if you were to try and model it along those lines drew I think you'd probably be in the ballpark.
And then free cash flow in the in the outer years, maybe not in the first 12 months, but we will have available free cash flow to nominally pay down debt as well.
That's about as fulsome as I Wanna get right now, but that'll give you an idea of how to model it.
That's great.
The ROE answers. Thank you both.
Thank you <unk> next question Ariel.
Our next question comes from Sebastiano Petti of J P. Morgan. Please go ahead.
Hi, good morning, Thanks for taking the question just sticking with the cable network investment and competition theme you did mention in your prepared remarks that the fourth quarter was aggressive in promotional intensity.
From your national peer, but at the same time I think Tony you mentioned that you expect perhaps market share trends to improve in <unk> and <unk>. So on a near term basis, if you could maybe unpack.
Some of the drivers there that you expect.
Within the first and second quarter team could lead to the better subscriber market share that would be great and then maybe a longer term question.
In the U S you're seeing.
Your larger peers charter Comcast talk about DOCSIS four Plano upgrade path. Obviously, you are largely going to follow the Comcast paths, but they've outlined a goal to get the DOCSIS four plano by 2025 pretty much ubiquitously across their footprint.
What does that mean for Rogers.
While market share trend may improve over the next couple of quarters here relative to belt. They are continuing on their fiber path.
The transactions with shock closings here shortly obviously tell us pretty formidable in terms of fiber overlap as well can you just maybe give us a view on how Rogers is thinking about the long term.
F C DOCSIS four Plano upgrade path.
We're maintaining.
Competitiveness relative to your fiber peers. Thank you.
Thanks for the question Sebastian <unk>.
Two parts to your question. The first is as we look to 'twenty three and I just wanted to clarify as we talk about market share improvements.
I just wanted to reiterate and level set expectations that it will be a progressive ramp in 'twenty three.
A little bit in the first quarter ramping to the second quarter and then into the back half.
And so I just wanted to.
Just make sure we're not getting too far ahead of ourselves in terms of the fundamentals get us there.
We're very focused on.
The customer experience and are they getting reliable internet at speeds that they want.
We're less focused on a price battle, what we do know is you can sign on a customer at a very low <unk>, but in the end if theyre getting experience. They are not happy with then that is the primary reason for change we continually look at the market reasons for customers come.
Onboard reasons for customers, leaving.
And across the industry and that's true both Canada and U S.
While prices always important or more important factor is the internet reliability and that's because we just.
Even in the consumer space with a lot of work from home. It has become so critical and so those fundamentals around customer experience is what we believe will in the long term continue to drive the right gross add.
And the right churn fundamentals.
So that's 0.1, the second point relates to DOCSIS four let me be clear, we do not have a competitive disadvantage in our internet business. In fact, we see it as a competitive advantage in our footprint, we've been deploying fiber all the way to the home all the way to the business premise.
For over a decade, and so we have robust complete fiber to the prem.
Throughout our footprint.
And where it isn't and we still have coax in the last mile. We're in the fortunate position that coax in the last mile continues to deliver speeds that are well beyond <unk>.
Customer demand at this stage we're offering.
At least one to one and a half gigs across our entire footprint.
99% of our footprint is capable of those speeds and in many areas. That's now two and a half gigs and growing rapidly.
The migration to DOCSIS four.
We will only enhance the top end of those speeds and we expect that to come as a fast follow if not in line with where you see our U S peers going on DOCSIS four <unk>, the biggest limiting factor and you've heard that from from them I suspect are the chipset.
That support the DOCSIS four.
But we're extremely comfortable that as we look to 'twenty four 'twenty five deployment for DOCSIS four <unk> that will still be well ahead of where the market demand is so we have plenty of capacity plenty of headroom.
To meet.
Customer expectations are.
As we move to DOCSIS four but again that's for that portion of our network.
Where the cost effectiveness of coax in the last mile continues to be very compelling.
Okay.
Great. Thank you.
Okay. Thanks, <unk> next question area.
Our next question comes from Dave Barden of Bank of America Merrill Lynch. Please go ahead.
Hey, guys. Thanks, so much for taking the questions.
So I guess, Mike I wanted to talk a little bit about the merger.
And congrats on getting this far in the process.
Hi, there.
The first question would be given that it's been probably a year longer than we thought given what we've watched happen.
With at least down here in.
Charter in L T.
And their response to fiber overbuild.
Or are the synergies of this merger that you articulated two years ago at $1 billion you'll wheel.
And how do you think about the <unk>.
Capex requirements.
Absorbing Shaw in the future.
That'd be one and then the second one would be not to put you in a tough spot but.
Really to put you in a tough spot which is.
You're making the argument that.
Kevin core and whatever you've done.
In your agreements with them, it's going to make them more effective competitor.
In the Canadian wireless market, which sounds like a terrible thing if you're an equity investor and Rogers can you square that.
For me and in the market like why why is the net of these two things what <unk> given up to create a better competitor and Kevin quarter.
Less than the benefit that I'm going to get.
The investor in the benefits of the Shaw cable merger synergies.
I just needed a refresher on how this all makes me.
Excited about the Rogers transaction.
I'll start and Glen will fill in on.
On some additional points, but as we look to and we've continually assess.
Throughout how our investment thesis on the Shaw transaction compares to what we thought and I think theres two things.
With that I would describe at a macro level firstly on the cost synergies. The additional time has allowed us to as I mentioned earlier make progress on retooling our own shop, and so we will be entering.
That transaction from a position of greater clarity on our cost structure and our cost roadmap and so a very macro level, we have heightened confidence.
The synergy benefits the second piece and we haven't talked about it.
Much.
If at all are the revenue synergies on this and the time, we did the deal we look at the Canadian population in particular, where I'm sure has its primary cable markets and that growth.
As more than we had expected when we looked at it two years ago, owing to those factors that are driving our own cable market growth.
I mentioned earlier.
A number of other factors as well, but if we step back and look at those two primary.
Factors.
The investment thesis not only continues to hold but in our view continues to improve.
With the passing of time.
The second part of your question relates to having a fourth wireless competitor we have three.
Thrived in a competitive landscape.
In the past, including in 2022.
We've entered into transactions that will allow the buyer of freedom to enhance their competitive ability and it's over to us and we are confident we have what we need to be able to compete in a four player market just as we've done in the past.
And it's all going to be about relative share.
And in a four player market.
There are a number of dynamics in.
So when you talk about the impact.
It isn't necessarily anything that a fourth player picks up is at the expense of Rogers.
There are dynamics in market share and we're comfortable as I said that we have what we need to be able to compete for share in that space.
And then and then Dave maybe if I could just add in a little bit more on you asked on synergies and capital expenditures.
As Tony has mentioned we've had more time to look at the synergies we remain committed to that so Tony touched on that the capital expenditure piece.
We've the the plan the model the forecast Hasnt changed from from our initial evaluation of the transaction I think fundamentally if you look at Shaw communications and how it operated its wireline in its wireless business over the last few years a significant.
<unk> of its capital spend has gone into the wireless side of that balance sheet and investing in there they're the buildout of their wireless infrastructure, we have a strong national wireless network that we already have well in hand in terms of investing our acquisition of Shaw as an acquisition of.
The wireline side of their business, we will take Shaw Communications' annual capital spend.
And devoted to wireline assets in the West succinctly and so if you. If you work on that premise you can you can I think.
<unk> are up to what that.
That business plan looks like and how it forecast so but.
That's in a nutshell, that's how we prepare for taking in Shaw and the capital spend related to sure. It will be focused on wireline investing in the west.
To go along with what we're already doing in our core business today.
I think Tony answered the rest of it.
Alright.
Thank you Paul I appreciate it thanks, Dave Thanks, David next question area.
The next question is from Tim Casey with BMO capital markets. Please go ahead, yes.
Yes, Thanks, a few for me.
One just a clarification Glenn just on that Capex comment are you.
Implying that you will spend the $1 billion a year in western Canada, or the seven Notionally the 700.
They've spent on wireline.
I'm not going to get into into.
The clothes specifics yet Tim.
We're in 2023 Ive given our guidance for 'twenty three stand alone, we'll see when we close the transaction before I start.
Telling you what numbers, we're going to spend on Shaw in year, but yeah, we were.
We'll invest.
In the wireline networks two to invest in customer service.
Ross our entire footprint once we take ensure that entire footprint will will go from coast to coast will invest as needed and that'll be an investment program that's done over years not over over months. So understood. Okay got it.
Okay, a couple of questions for Tony and one for you Glenn just Tony could you talk a little bit about.
On the wireless loading dynamics in the quarter.
The outlook.
Then you had a very successful loading quarter, but you know our proven churn did.
Did.
Were affected.
It is.
More active on the flanker brands, perhaps in anticipation of.
Our freedom at Quebec, or can you just talk about the competitive dynamics within the brands in the quarter.
And then just curious if you could comment on some of the media signaling coming out of.
Chairperson in each of these of the CRT C focused on pricing again.
Just wondering if you've had any dialogue or any comment.
Many of US have heard this kind of signaling before just would be interested in your perspective.
And lastly, Glenn just.
A clarification on the media number it looks like there was a onetime dam contribution in the fourth quarter. It could you confirm that and perhaps quantify it. Thank you.
Thanks, Tim for the questions.
Couple of things is just to give you some context on the fourth quarter quite a bit of a competitive intensity in terms of promotional activities not just on the price plans, but to some extent on the handsets as well.
So what you saw play out and we were largely more reactive in terms of the.
The flanker in fact, when you look at.
Over the course much like on a home internet, we'd been re indexing back to our premium brand and if you look at the rate of growth in the fourth quarter of Rogers vis vis fido.
What you see is a significantly faster.
Faster rate of growth on Rogers.
And so we're pleased with that on balance so notwithstanding that competitive intensity.
We continue to make good traction on re indexing back to our premium brand and something we've been on.
Throughout 2022, and we will continue to do in in 'twenty three.
But no doubt some of the value out there and it's just a reflection of the market there was good value for consumers.
In the fourth quarter and the.
The overall impact on service revenue was.
Was offset by share gains, which is important in a market where the rate of growth is accelerating and so we're always trying to balance off both of those.
And I think we we are striking the right balance between.
Market share gains and and <unk> growth as well.
And so that's what really reflected the heightened churn that you saw in Q4.
For us and the industry.
In terms of your your second question.
On pricing.
Yeah.
Theres not a lot I can say with respect to.
The new CRT Sea chair, we look forward to working constructively and proactively.
At the right time.
With the mandate of the CRT C. As we would with any other regulatory body.
What I will say is.
We feel good about the market dynamics and the value add that the industry and Rogers is bringing to customers.
I continue to highlight it.
Against the backdrop of <unk>.
Increasing inflation in a number of parts of the sector and consumer goods are industry and Rogers continues to reduce pricing.
If you were to look at it over the last several years and in particular over 2022, one of the few if not the only sector that actually has price declines in.
In the marketplace and that's owing to the the competitive intensity that's out there and frankly as I've said in other forums, our intent to continue to figure out ways to bring more value add too.
Two two customers.
And then Tim just quickly on your question around the MLB proceeds I, it's not my transaction to to release the details on.
So I can't I can't give you a specific amount.
It does relate to MLP, having sold the minority interest.
And the remaining minority interest it held in one of its properties and then the distribution to each of the teams.
And so that was our we recorded our share of it in the quarter.
Thank you both.
Thanks, Tim. Thank you Tim next question Arrow.
Our next question comes from Simon Flannery of Morgan Stanley . Please go ahead.
Great. Thank you very much good morning, you talked a little bit about revenue synergies and one of the things we're seeing in the U S is the rise of the double play the Internet plus wireless bundle and.
The triple play bundle kind of declining over time, perhaps you could just give us a little bit of a sense of how you see that in Ontario, what sort of top.
Performance, you see having being able to offer that combination to your customers what percentage of your cable base does have your wireless product and.
How do you see the opportunity to bring that playbook crowd to western Canada.
Thanks for the question Simon I'll start.
And Glenn will pick up but at a very macro level.
We've been watching that trend closely in the U S and Canada.
Because we've had a I would say more experience at it having been a cable and wireless operator.
In significant parts of the country for.
For a long period of time in terms of the bundling, it's largely been a price dynamic in terms of enticing the customer to it when you look at the actual buy dynamic.
In many ways the channel distribution is different and how the customer buys.
And a number of other factors in terms of the decision making.
<unk> criteria.
And how they think about them and so other than promotional incentives to bundle them.
The fundamentals of the business seem to be.
Continue to be.
Somewhat separate and so we will continue to capitalize on that coming together at the right time.
But price alone isn't the answer long term and it really gets back to.
The the comments I gave earlier with respect to long term cable.
Turn rates.
So we continue to watch that trend and certainly it's an opportunity for us in terms of bundling, we don't disclose the specifics of.
Within our footprint what that.
It looks like in terms of bundled offering for competitive reasons, but.
But I would say it.
Is growing but perhaps not as much as you might think.
Then maybe the only the only thing I would add to that Simon is our.
Ignite.
Offering is a particularly attractive as people's viewing habits turned toward streaming too to help still provide a base upon which to sell.
Our video service product. It has a very strong offering that allows people to access streaming as well as you know.
The traditional channel lineups very conveniently so that does help.
Help as well.
Great and what is there anything to call out on the video.
The numbers in the quarter.
I think I think we've we've touched on on what I think the priorities were it was a it is a very competitive market. It remains competitive going into 'twenty three.
And I.
I don't think Theres really anything more to call out than that.
Great. Thank you.
Thank you Simon.
Next question Arrow.
Our next question comes from Stephanie price of CIBC. Please go ahead.
Good morning.
Five gene can you talk a little bit more about the <unk> rollout and the <unk> mid band coverage targets you have.
And what you've seen in terms of an uptick in customers moving to higher tier plans to deploy that.
And then finally, how do you think about network cost right.
In the near term.
Thanks for the question Stephanie.
In terms of <unk> rollout.
As you saw on previous calls.
Were very quick out of the gate very early in the year to deploy.
On the mid band spectrum as you referenced a very quickly.
As of today, we're sitting at approaching.
Approaching 85%, we're at about 83% today in terms of <unk> coverage.
And so we continue a very aggressive ramp.
And you can expect that as we had.
Towards the end of the year that will approach 90%.
So we continue to deploy that spectrum very quickly.
And.
And in many markets you will.
Youll see the banner <unk> plus much like you do in the U S.
That will continue to be.
At a very rapid pace as well so that's all proceeding well I think in terms of the of the network costs, Stephanie think of it in the context of the the higher band spectrum carries more data.
The <unk> service users consume more data on a on a per gig basis, you need the mid and higher bands.
And we will need those as we move into the years to come to carry the data, but it's really it's.
Capital investment in that spectrum and getting it into our towers.
Think of that as being the network costs associated with five G. Their fixed costs largely there the capital spend that we put into spectrum into infrastructure.
And those are the fixed costs that you don't see in the margins you see them below the EBITDA line in terms of our capital spend.
Once we get them out there, we deploy them and we can run services out to our customers.
Great. Thank you very much.
Next question area.
Our next question comes from Jerome deferral of D. Jordan. Please go ahead.
Hey, good morning, Thanks for taking my questions. Two from me. The first one is on cable I would like to get an update on the percentage of your cable network that overlaps with the fiber to the premises and then second question on the wireless a great postpaid adds again.
Would you agree that now a larger proportion of our wireless subscriber growth comes from from a bit of a lower end of the market and if yes, what does that means.
Terms of the strategy to adopt to our go to market. Thank you.
Okay.
Thanks for the question drew almost start with the second part.
And then Colin I'll come back to the cable question.
In terms of.
The wireless as you think about new <unk>.
<unk> to Canada, as well as a student migration certainly that segment would index first to <unk>.
Flanker brands.
And we're certainly seeing that and is.
So I would say in the near term there is a slight indexation to that but at the same time, what we're finding is a very good and healthy migration to the Rogers brand, especially as a result of as we've talked about our focused efforts on.
On that migration within our base.
And so.
I would say it continues to be balanced.
<unk> like it always has been and so I wouldn't overstate that the the market is moving to in a big way to the flanker as I said I think it's slight but theres more.
Then enough offsetting.
In the base and the rest of the market to get the right mix to the premium brand.
And Jerome in terms of of the percentage of our network that we have fiber to the prem.
Without without seeking to frustrate you with my answer.
We were opportunistic with it.
Atlantic, Canada is an overbuild or a rebuild of our of our network facilities, because Atlantic Canada is primarily aerial over the air.
Transmission and pulls are simply easier to run fiber.
Then varying and replacing plant that way on a cost per home passed basis, we can be opportunistic and run fiber through Atlantic Canada.
New construction build when the trenches are open we're putting in fiber to the Prem we're opportunistic with it but don't think of it in the context of they've done X percent and still have 100 minus X percent to go.
Our hybrid fiber coax has a long long 10 year is still to run DOCSIS four <unk> will be.
Yes.
Entirely competitive with with whatever we can deliver over our fiber to the prem plant as well there'll be comparable.
And we will be competitive with our with our peers, where they have fiber to the prem over our hybrid DOCSIS or sorry hybrid fiber coax plant. So.
Think of it in that regard.
Great. Thank you.
Next question area.
Our next question comes from Arvind <unk> of Canaccord Genuity. Please go ahead.
Good morning, Thanks for taking my question two for me one just to go back to wireless churn.
Obviously, we're seeing an uptick which is obviously a natural constraints that have direct China foot traffic and so forth, but maybe.
Maybe Tony you can talk about your expectations over the medium to longer run I mean, there's always been a case to suggest a day is that that can be structural decline in churn, which would obviously help margin.
Assist the broader model.
For all the reasons that have been cited for family plans to sort of the lifecycle of the device I wanted to get your thoughts on how you see that.
You know that that that thesis in light of sort of what we're seeing right now most of the companies are coming in with what Ty.
Our wireless churn.
And then.
Perhaps I'm Glenn on the free cash flow guide.
I did notice that cash taxes, while materially lower in 2022, I wanted to get a sense of size.
Is there any color you can provide on what you're building in for 2020 that with respect to cash taxes.
Arvind.
First part with respect to our thoughts on wireless churn.
The implication of it certainly as you said the industry is traditionally thought of lower churn.
As a better enabler because you save on the cost of acquisition.
I think what we found was.
In particular, when you look at the fourth quarter and the competitive intensity there.
I would say the general principle.
True lower churn is always better and we're always focused on making sure we try to keep as.
As many customers and losing one is always too many so that that fundamental doesn't change but at the same time.
Cost of acquisition, if you looked at the industry.
Overall over the last three years to four years hasnt been coming down and so notwithstanding the.
Slightly heightened churn that you see in the fourth quarter you continue to look at our margins sitting out of.
Strong performance, there and it's actually up year on year. Despite the increase in churn and so when you look at the fundamentals of it.
I would say our thinking on this is sort of real time matured so that we get the right balance.
Ultimately, it's net mobile phone market share that we stay focused on.
And the churn aspect is one piece of that formula on a secondary metric basis hope that helps.
And then even on the on the free cash flow.
And the cash taxes.
There is not a material difference from year to year really.
Youll see some difference going from 22 to 'twenty three as a result of the quarterly timing of some cash taxes that were paid in 'twenty, two but it's not.
It's not a.
Thematic Lee material number from one year to the next.
Okay, great. Thank you.
We have time for two more questions.
Certainly our next question comes from Betsy <unk> of UBS. Please go ahead.
Great. Thank you can you provide an update on how we should think about the synergies maybe merger integration costs after the deal.
And the second question on what Youre seeing in the business market than what could be the opportunity asking you closed that deal. Thank you.
Good morning back to you and thanks for the question.
With the second one.
And Glenn will come back to the first question in terms of the overall business market as you heard in my opening or on a previous question the.
The population growth.
And the contributors to overall market growth.
That I talked about is certainly helping the consumer side and as you would expect we see a very quick follow on lag in the business market. So the size of the business market.
<unk> is improving as well while at the same time, our penetration rates in business and in particular.
Small business continues to improve and so the growth that we're seeing is.
I would say slightly more indexed to small business.
And that continues to be an area that we're quite quite pleased.
With our our performance in that and continue to see more opportunity for heightened penetration there.
And then back to you on the on the cost to achieve the synergies I think as a rough rule of thumb, if you think of it as well.
Driving at a $1 billion a year of synergies. So think of it is likely a one times turn on that in terms of our cost to achieve that will give you a rough rule of thumb to work off of.
Yeah.
Okay. Thank you.
Thank you.
Last question Ariel.
Our final question comes from David Mcfadden of Cormack Securities. Please go ahead.
Yes, Thanks for squeezing me in.
So just looking at the guidance obviously the guidance looks quite strong I was just wondering if you can get an update on our revenue sorry revenue volume versus <unk>.
Revenue in the fourth quarter, and then sort of what your outlook is for next year.
And then the second question.
I know that some of that car.
Are you seeing are comparable to Dallas.
Dallas fiber offering but.
But how do you explain the fact that they keep putting up very strong internet net adds particularly now.
And then when you add up all the other cable competitors.
Footprint. It seems like you are taking share there. Thanks.
Thanks for the question Dave.
Again, I'll start with the second one and.
Glen will come back to the first one as I said on the.
<unk> subscriber share on the Internet side on cable.
It's not lost on us in terms of our.
<unk> on customer share and so it's something we've looked at very closely and as I said.
Our response will continue to be very disciplined and measured.
And.
What you see there is not.
Capability.
Discrepancy, but all you're seeing play out is pricing and.
As I said I think we've got the right approach on this and we're playing the long game and so.
Didn't confuse short term promotional pricing with the long term health of that business and the fundamentals in that business.
I continue to reiterate that.
Capability speeds on home Internet continue to far outpace where customer demand is.
And so average speeds would sit in the 300 megs and so when you compare that to.
Top end speeds that are available in the marketplace, we're well beyond that by a factor of approaching 10 X.
So that's why I say network capability.
It is not at all an issue and in fact as I said, we think of our network is a competitive advantage when you look at Internet and our TV product combined.
Across our footprint and so so that's what you see playing out in <unk>.
Our view, it's as simple as that.
And then David on on roaming.
Succinctly were running at about 85% of roaming volume relative to 2019 pre COVID-19 levels.
And we're sitting at we've ticked up to about 140%.
Revenue comparatively against 2019 pre COVID-19.
Revenue volumes or revenue so.
We've seen that tick up from Q2 and Q3 travel remains.
Ongoing.
And so we're we're through largely through that cycle of getting back to where we were maybe a little bit more room.
But in terms of volume, but we're.
We've ticked up a little bit I would anticipate that roaming revenue to temper, a little bit youre not going to see that necessarily grow.
Much more than than where were sitting other than filling in the rest of that volume.
Well, maybe I can just just to follow up on that because.
I'm just wondering how you explain your roaming metrics like 85% of 140% of revenue and when you look at now they announced today that the volumes flat from Covid in our revenues and then 12% so youre ramping substantially more than theirs.
And your volumes lower which implies you have some more upside on roaming the navy. So how do you explain just wanted to get your comments on that.
So without getting inside their numbers I cant.
I got a reserve my response to mine I'm confident in where we are these are rough rules of thumb.
The 85% from month to month, maybe its five or 10 different here and there there might be a little bit of rounding I think I think generally you can see it in the airports the airports are busy.
<unk> is back business travel is lighter than it had been previously.
Consumer travel is probably a little bit heavier business travel a little bit lighter than where we were.
Going through Covid.
If airports are able to get their flow sorted out I think you'll see continued growth in travel.
We're coming up on March break it'll be interesting to see what those volumes are I think I think <unk>.
Let me just respond by saying the roaming growth.
Is relatively mature relative to where we were.
Two years ago, one year ago, and so we've seen some sequential growth from Q2 and three into Q4, we've ticked up to 140 versus 130 <unk> great.
I think if we hold that grow at a little bit as as more business travel comes back.
There's still a there's still room for a little bit of growth.
And.
It'll be what it'll be a pause there.
Okay, alright, thanks, so much thanks David.
Thanks, everyone for joining us today and if there's any follow up please feel free to reach out to us. Thank you.
Thank you all.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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