Q2 2023 Rogers Communications Inc Earnings Call
Thank you for standing by this is the conference operator welcome to the Rogers Communications, Inc. Second quarter 2023 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.
Great. Thanks Ariel.
And good morning, everyone and thank you for joining us today I'm here with <unk>, 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 nation from which our actual results could differ. Please review the cautionary language in today's earnings report and in our 2022 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 and good morning, everyone.
I am pleased to report that Rogers delivered strong results in the second quarter, the seventh consecutive quarter of growth for the company.
These results reflect disciplined execution and healthy momentum in our core businesses against a healthy backdrop, our country continues to grow at a robust pace led by immigration and you see we're off to a good start in operating at a new level of scale the.
The second quarter represents our first full quarter since closing shot and we're very pleased with the quality of the Shaw assets and our early momentum.
They have a robust network and extensive track record in the west and an exceptional customer service team together, we now operate Canada's only national wireline network, passing $9 8 million homes with $4 8 million customers.
This builds on our Rogers <unk> wireless network, which supports 11 4 million mobile subscribers, the largest and fastest growing customer base in Canada.
In our industry scale and quality of assets matter with Shaw, we have both and we are already seeing some early successes and wins, we have seen market share gains in the west including double digit subscriber growth and we expect our share in the west to continue to grow in the coming quarters.
Earlier this month, we introduced Rogers Internet and TV services and shot territory, along with bundled services across our channels. The early uptake on these services is encouraging.
Although early days, we're encouraged by the strong store traffic as loyal Shaw and Rogers customers look to bundle more services, given our stronger value proposition in the west I expect this interest will continue as we made good progress on integrating our networks and systems to offer a seamless customer experience.
To support this customer experience. We've extensively trained our frontline teams are thousands of frontline employees are now able to see both Rogers and Shaw account information simultaneously. This team includes the repatriation of offshore customer care rolls back to Canada, making are.
Customer service team, 100% Canadian based.
We've also seen good uptake from the half million mobile customers upgrading to the <unk>. The Rogers <unk> network their feedback on the network shift has been very favorable and we believe we will continue to benefit from this going forward.
Overall in these first 15 weeks, we're tracking ahead of our integration targets and we continue to be impressed with the quality and commitment of the <unk> team.
Turning now to the quarter, we delivered strong results Rogers once again delivered industry, leading growth in wireless more Canadians continue to choose Rogers and you see this reflected in our postpaid mobile phone net additions of 170000 up 39% from one year ago.
Year to date postpaid mobile phone net additions are now at 265000 up 41% from the first six months of 2022.
This performance has been underpinned by two key factors.
First our superior distribution quality network and wireless value proposition is driving market share growth second we continue to execute with discipline and gain a strong share of the population growth opportunities across the entire country.
We're also seeing double digit growth in subscribers moving to Rogers unlimited plans as demand for data continues to soar today more than half of the Rogers postpaid base are on unlimited plans.
Despite rising prices in other sectors that July stats can index shows wireless prices in the country were down 15% year over year at Rogers, we're focused on growing customer data use on our network our value proposition is focused on giving more data at lowest lower prices.
On the country's largest and best network.
In fact, the latest study from <unk> the independent benchmarking organization of Accenture found Rogers to have the best and most reliable network in Canada. We're extremely proud of these results given our clear focus on network capital allocation and believe it is key to our continued future growth.
And cable as one National company, we see tremendous opportunity for growth and to provide consumers and businesses with much needed choice in the west in the second quarter cable service revenue and quarterly adjusted EBITDA doubled to over $2 billion and 1 billion respectively. At the same time.
Margins continue to expand with the synergy benefits, we are starting to see across the cable business importantly, we continue to gain momentum on subscriber growth more to do here, but the fundamentals are headed in the right direction.
Overall, I am pleased with our progress and momentum in Q2.
Let me now turn to our balance sheet and are delivering initiatives.
Given our strong financials Rogers is already deleveraging its business driven by adjusted EBITDA growth, which was up 38% in the quarter.
Importantly, we will continue to invest in our network and operational infrastructure our.
Our debt leverage ratio of five one times improved since closing the transaction.
We are targeting a further reduction to a debt leverage ratio of four nine times by the end of 2023.
We are pacing confidently to achieve our target to reduce leverage by $1 six times over 36 months, which would get leverage back to pre acquisition ranges.
Our de levering efforts will be further supported by our plans to sell $1 billion of noncore assets within the next 12 months.
Given our scale and financial performance. We believe these targets are fully achievable.
Finally, let me touch on our upgraded guidance for 2023.
Earlier today, we increased our full year guidance for free cash flow and adjusted EBITDA.
These increases are driven by strong execution in our underlying businesses and the confidence we have in our cost synergy plan.
Collectively the quality of our now combined Shaw and Rogers assets, the strength of our underlying business momentum and the confidence we have in the growth opportunities position us well for near and long term growth.
I would like to thank the entire Rogers team from coast to coast for their continued commitment to our customers I am very proud of our team's accomplishments and our performance in the second quarter.
With that I will turn the call over to Glenn.
Thanks, Tony and good morning, everyone. Thanks for thank you for sharing your time with US This morning.
<unk> second quarter results reflect continued sector, leading operational and financial performance driven by strong execution by the Rogers team, which now includes the integration of our former Shaw communications employees, making us stronger.
As well our second quarter results incorporate for the first time, a full quarter of <unk> financial results.
In wireless our second quarter service revenue was up a very healthy 7%.
This growth has been driven by sustained and consistent sector, leading growth in our mobile phone subscribers combined with careful management of our pricing plans.
Postpaid mobile phone customers grew an impressive 170000 net additions in the quarter, reflecting a 39% increase from our prior year's second quarter as Canadians continue to choose Roger has more than any other wireless carrier.
For seven consecutive quarters now Rogers has led wireless market share growth and delivered healthy financial results and our strong wireless market.
Through the first half of 2023, we have added 265000 net wireless customer additions year to date.
622000, net wireless customer additions over the past 12 months far outpacing our peers.
And reflecting a 6% increase in the customer base over that period to be very clear, that's the organic growth over and above the 5 million mobile customers. We've added with the Shaw acquisition.
Our postpaid mobile phone churn performance remained healthy at under 1% coming in at <unk>, 87% for the quarter.
Wireless <unk> for the quarter was 50 679.
Down 3% from last year as we welcome Shar mobile customers from Western Canada.
Into our subscriber base.
These subscribers are on discounted, but high value bundle wireless and wireline plans and remain a key priority and our integration with Shaw.
Excluding the impact of these discounted customers the underlying wireless ARPA across all brands remained consistent year over year.
Wireless adjusted EBITDA was up a solid 9% and adjusted EBITDA service margin came in at 64%.
Solid increase of 120 basis points from last year.
This increased margin reflects the strength and quality of our service revenue growth driven by leading market share and stable <unk>.
Combined with our continued emphasis on cost efficiency.
Moving to our wireline Internet and cable business with the closing of the Shaw transaction, we have doubled the size of our wireline business on every key measure, including revenue adjusted EBITDA homes past and wireline customers.
Total revenue for Q2 was up 93% to just over $2 billion.
Reflecting approximately $1 billion of new revenue related to our acquisition of Shaw.
Adjusted EBITDA was up 97% to just over $1 billion this quarter and margins were 51% or a full 100 basis points higher than a year ago, reflecting the integration of Shaw and our continued drive for synergies and other cost efficiencies across cable.
From our Kpis standpoint, Internet loading was 25000 with positive contributions coming from both the east and West.
Video net additions reflected a strong turnaround performance in the quarter.
With positive net additions of 12000.
As well ARPA grew by an impressive 5% to $1 $39 68.
Reflecting prudent attention to pricing plans, while driving positive customer net additions.
We are just getting started on our integration efforts to grow this business through improved execution increased network investment and leveraging our national wireline reach together with our World class <unk> wireless network to capture market share and enhance bundling opportunities from coast to coast.
Moving to our sports and media business, our assets and results continue to stand out relative to our peers with positive revenue growth and sustained profitability.
Sports and media revenue was up 4% for the quarter driven by higher sports related revenue, primarily at the Toronto Blue Jays, Despite 4% higher expenses, primarily associated with player payroll sports and media adjusted EBITDA grew year over year and was positive at 4 million.
On a consolidated basis.
Q2 service revenue grew by 32% to just over $4 5 billion.
While adjusted EBITDA was up 38% to approximately $2 2 billion.
This EBITDA represents a strong start on driving the integration with Shaw, reflecting early success on cost synergies and improved margins.
During the quarter Rogers continued to invest in networks for Canadians.
Capital expenditures were $1.08 billion or up 39% in the quarter.
Reflecting added capital expenditures from the Shaw transaction and continued investment in both wireless and wireline networks to drive growth.
Despite the higher Capex after tax free cash flow was $476 million.
Up 38% year over year, reflecting strong flow through.
Finally.
We also returned $252 million in dividends to shareholders. This quarter and we declared a <unk> 50 per share dividend on July 25 2023.
In the third quarter, we intend to amend our dividend reinvestment program or drip.
To provide to provide for a small discount on the dividend reinvestment share price.
And to allow for the nominal issuance of treasury shares for the settlement of the drip dividends.
Turning to the balance sheet at June 30th.
We had $5 1 billion of available liquidity, including approximately.
$4 billion in cash and cash equivalents and a combined $4 8 billion available under our revolving bank credit and other facilities.
Our weighted average cost of all borrowings was four 8% at June 30.
And our weighted average term to maturity was $9 nine years.
That's down slightly from earlier maturities as a result of the impact from the <unk> transaction.
Nonetheless, it 10 years and with a weighted average cost of borrowing below 5%.
We are very comfortable with our financial position.
Our adjusted debt leverage ratio at quarter end was five one times.
That's improved by 0.1 times from leverage at the transaction close.
Notably this leverage is calculated using a full 12 months trailing adjusted EBITDA of $8 7 billion.
For Rogers and Shaw combined as.
As if the Shaw transaction had closed July one 2022.
Effective this quarter, we have made a relatively minor adjustment in calculating adjusted net debt to better reflect the hedged value of our U S dollar denominated debt at the hedged FX rate.
We previously included the full value of our net debt derivative assets without adjustment.
Which also included the valuation of our interest coupon obligations.
The coupon obligations are recorded on our income statement through finance costs, rather than as part of the principal repayment on our balance sheet for U S dollar denominated debt.
So we believe this change in this presentation more accurately reflects the economic obligations on this debt.
Yes.
To meet our stated objective of returning our debt leverage ratio to approximately three five times within 36 months of closing the Shaw transaction.
We intend to manage the decrease in our debt leverage ratio.
Through combined operational synergies organic growth and adjusted EBITDA and debt repayment as applicable.
For the nearer term our target to further reduce leverage by at least 0.2 times to four nine times by the end of calendar 2023 remains unchanged.
To further support the de levering process, we anticipate we will sell up to approximately $1 billion of noncore assets over the next 12 months.
Merrily consisting of surplus real estate.
Reflecting our continued strong execution through the first half of 2023.
Growing markets across all business lines and expanded footprint in the west.
We have increased our full year 2023 guidance ranges for free cash flow and adjusted EBITDA.
We have increased our adjusted EBITA growth outlook.
233% to 36%.
Up from the prior 31% to 35% outlook.
And with a half year's results now complete and a very solid start for cost synergies from the Shaw transaction in hand.
We have increased our 2023 free cash outlook for free cash flow outlook to between $2 2 billion and $2 5 billion.
Up from the prior 2.0 billion to $2 $2 billion outlook.
We are reaffirming our anticipated 2023 capital expenditures outlook.
Which remains unchanged in the $3 7 billion to $3 $9 billion range.
And we are reaffirming our 2023 service revenue growth outlook of 26% to 30%.
The increases in our outlook for free cash flow and adjusted EBITDA are driven by strong operational results organic growth and our continued push to drive cost efficiency throughout the operations.
In addition, the increased guidance outlook also reflects the company's confidence in realizing at least $200 million of cost synergies in 2023 and.
And the annualized cost synergies of at least $600 million.
Within the first 12 months of the <unk> acquisition.
The company's integration with Shaw is proceeding well and ahead of plan in Q2s results reflect approximately $48 million of cost synergies, having been identified and realized in quarter.
Or roughly 25% of the $200 million synergies expected to be realized in calendar 2023.
Sure.
In summary, our second quarter results reflect the start of a new era for Rogers and for the telecom industry in Canada.
We are just at the start of capturing the efficiency synergies and revenue growth opportunities from the combination of these two iconic companies.
We are encouraged by our early success and very excited for what's ahead.
As I've heard Ted say many times before the best is yet to come.
Thank you for your interest and attention this morning, and with that Ariel can you. Please commence with the Q&A. Thank you 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 you are using a <unk>.
Our first question comes from Vince Valentini of TD Securities. Please go ahead.
Yes, thanks, very much I have a two pronged question coming out of the <unk> decision on Monday related to the arbitration on the NPL rate.
First Josh do you have any updated thoughts on how this could impact.
Competitive gymnast of freedom mobile.
In Quebec, or do you have any incremental concerns coming out of that decision about.
About what they might do in the market, especially as we head into back to school season. So maybe just your comments on sort of.
On the wireless competition environment in the second.
See any read throughs youre too.
Other decisions I mean, it seems like a one off file.
Wasn't the <unk> setting a rate and we're just picking one of the two range that was proposed to them and obviously the <unk> regime as a temporary regime as opposed to TPI A&H that's more permanent.
So just thoughts on the broader.
Implications potentially of the way they were denied.
Thank you.
Thanks for the question Vince.
And we received the <unk> decision at the end of day on Monday, and we're reviewing it.
As you would expect we are considering next steps, including potential appeals and so theres not a lot I want to say on this call for obvious reasons.
What I will say in the overall scheme of things, we're not going to be distracted and are going to continue to manage our business and investments accordingly, I come back to at a macro level, we announced today, we are increasing guidance and that's after a very thoughtful review.
All of the risks and in particular opportunities in front of us and so.
You ought to think about the decision in the context of the overall business.
That we have in front of us in the back half of the year I will say Vince I did see your note.
And I think you've got it right and I'll just leave it at that.
Thank you.
Thanks next question Arrow.
Our next question comes from Sebastiano Petti of Jpmorgan. Please go ahead.
Hi, Thanks for taking the question I just wanted to circle back on the wireless <unk>.
Glenn in your prepared remarks, you mentioned, excluding the impact of the discount of customers <unk> has remained.
I believe this is a term year over year, just any update or how should we how we should be thinking about the puts and takes on an organic underlying basis in wireless <unk> for the balance of the year, obviously, we have the <unk>.
<unk> impact from the network outage, but how should the team how should we think about it over the next couple of quarters here as you are integrating.
Well.
Yes, I think thank you so best Jana for the for the question I think.
When we look at ARPA you.
You can see.
The growth in service revenue and the growth in our margin our network customer additions are coming in strong.
<unk> levels and contributions I expect that to continue through Q3 as you've acknowledged in your question, we're flat year over year in Q2 on <unk> when you pull out the impact of the Shaw customers coming in.
There was a little bit lighter roaming revenue on a year over year basis in Q2 in terms of growth.
Everything I'm seeing and hearing reported in the media is that the travel season in the third quarter is expected to be strong and so I would anticipate that to roll through.
In Q through roaming as well as a busier travel season, I think overall the trends that you've seen through the first half of the year I expect to continue adjust of course for the for the credits that we had through Q3, but other than that I anticipate continued strong market share strong revenue contributions coming from those new customers.
Added in the third quarter as well as the customers that we've been adding over the last seven quarters. So.
I think those trends will continue into the third quarter.
Great and then just.
Quick follow up as well just thinking about the synergies and integration efforts pacing ahead.
$48 million.
Dollar synergy realization, thus far in the second quarter.
Okay.
Yes.
Obviously, the dance around this several times over the last couple of quarters.
I mean is there conservatism baked into that synergy guide, obviously, it's great to see the overall outlook.
Proved.
Which implies.
Implies better organic trends, but <unk>.
As we're thinking about the integration efforts and synergy realization within the balance of 2023 is there any puts and takes there any yes.
I think Tony described hiccups that perhaps might be baked into that that we should be thinking about.
The dis synergies.
No. Thank you know I think I think we're we're three or I guess now four months into.
Post close driving the synergies.
I'm a cautious individuals were a little bit ahead of plan, but four months isn't something to start.
Pending trends on and so we're being.
Conservative.
Perhaps but I think if you look at that $48 million the synergies identified in quarter and realized in quarter in Q2.
Those are sustained synergies those will carry on we'll build on them through Q3 and Q4.
We're reaffirming the guidance around the $600 million run rate within the first 12 months I anticipate achieving that in early 2024.
I'm comfortable with where we're pacing I am comfortable that were a little bit ahead of plan and we're not letting up on it. So no don't read anything more into it than we're satisfied with where we are.
And driving to to build on that.
Thanks again.
Thank you Scott Thanks for that yes, our next question area.
Our next question comes from Tim Casey of BMO. Please go ahead, yes.
Yes. Thanks.
You alluded in your comments that you're encouraged by what <unk> seen out West I know, it's early days, but could you talk a little bit about what youre hearing and seeing from shell customers and your ability to retain them in as well.
Migrate them up into better plans or things of that nature.
So the question Tim a couple of things one is as I said in my comments we are.
Very encouraged by the quality of the asset we're seeing I'll talk about the wireline side of it.
In the first instance.
What we're seeing is a very good quality network and I'll come back to some of the the initial pre closing thoughts around lack of investment what I can tell you is the.
<unk> Shah team had continue to invest robustly in the quality of the network not just in node segmentation, but more importantly in mid and high split contributes two terrific network performance on Internet.
And resiliency and so what you see is a portfolio of cable customers with extremely solid and low churn and so we're very encouraged by that and it's clear to us.
The work, we need to do around cable network, which is more about expanding the network as I've talked about before particularly around our recently developed areas that we think are opportunities in terms of homes passed and the penetration.
Within that footprint and so very pleased with with the quality of the network and what we're seeing as a result of that.
And given the brand of the Rogers <unk> network in the West is very good uptick in interest and this is all organically in the first 90 to 120 days and when you include.
The month of July of interest of customers walking into our stores <unk> stores, which are now fully branded as Roger stores looking forward the bundle and <unk>.
That was.
Good to see and we were very encouraged and as I said that was without us necessarily promoting and exciting the base in doing that it was all happening organically.
And so the willingness of the customer to bundle early days, but is as I said very encouraging on the shop mobile customers. We've been actively moving them up to our <unk> network and ideally getting them onto higher price plans and I would say that migration.
<unk> has been going extremely well as you would expect they very much welcome the opportunity to get onto the Rogers <unk> network.
And the quality of that network, particularly in BC.
And Alberta.
Is it worth calling out in terms of.
Your early subscriber performance.
Any dramatic changes in terms of regional.
Our strengths.
I guess, what I'm getting at is Ontario is still the main growth driver.
Are you are you seeing already any any shift out west.
The growth comes from across the country, but I would say we continue to perform strongly in Ontario, but.
But importantly, what we have seen is a very good shift in market share in the west, particularly if you look at BC and Alberta, what I can tell you without getting into too many details on a regional basis.
Is that our market share gains on a net add perspective is up double digit in terms of points in each of BC, and Alberta and Thats for a number of reasons that I just talked about in terms of not just the bundling opportunities, but as we focus on new to Canada. The primary.
Areas are clearly focused on banks.
Bank Hoover and Toronto is the major destination markets.
And those are two strongholds that we do particularly well in that segment and so we're pleased with the share that we're getting on new to Canada.
And that's distributed amongst those two and so we're pleased with the results we're seeing there.
So again just to reiterate it's happening in all the key markets and we continue to be focused in managing our business.
In that way.
Thank you.
Thanks, Tim next question Arrow.
Our next question comes from Dave Barden with Bank of America Merrill Lynch. Please go ahead.
Good morning, guys that Matt sitting in for Dave Thanks for taking the question.
First on the wireless net add performance, obviously very strong in the quarter I was wondering if you could give some additional color on the split between.
I think you alluded to doing well with new Canadians between kind of.
Net adds that are needed the market versus your ability to win those who are switching and maybe if you could.
Provide some color among the in the past you've talked about kind of those three buckets, where youre going to be focusing your synergy efforts people contracts and content.
I was wondering if you could kind of give us an update on <unk>.
Where the early dollars are coming from and where they are.
Where we should see maybe an uptick as we move through the year.
I'll start with the first part of your question and Glenn will talk to the synergy realization part of your question in terms of the wireless.
Loadings that youll see in the strong performance there its really attributable to a number of factors. If you were to look at the segments and I'll start at a very macro level, we continue to see population growth in this country.
Leading amongst the developed countries and so we're very focused on the share we get there and that continues to be majority share and very strong share performance. So we arent seeing anything changed there.
As you would expect that's a good part of.
The growth in the industry. If you look at last quarter now that everyone's reported what you saw was a continuation of postpaid.
Mobile base for the country that is growing in and around 5% depending on what you include or exclude which is very healthy and a continuation of what we saw in 2022 as we look to the second quarter our sense is the.
The market continues to grow at that size. So it's a very healthy pace again immigration is part of it but the continuation of penetration rates in Canada, which lagged the U S. Still is the second growth opportunity for us and so we continue to focus on both of those in terms of segments.
If you were to look at new to the category.
Of course, you can't build a business just based on new to the category and so as you would expect we continue to do well on not only the porting.
Customers among.
Amongst the players in Canada, but thats combined with continuation of low churn overall, while it's up slightly year over year, that's just really attributable to the competitive dynamics that.
We've been playing in and are doing well.
So it's a combination of all those factors Matt.
And then Matt on your on your question on synergies those three buckets that you highlighted those remain.
The.
The broad categories across which we're driving the synergies it's early days.
I would say that we've realized the efficiencies across third party vendor spend.
As well as early efforts on removing duplication and driving efficiencies across our our in house operations and so.
That I don't want to give any more clarity or granularity to the $48 million.
We're four months and three months reflected in these results and more to come.
Okay. Thanks, so much.
Thank you.
Our next question area.
Our next question comes from Jeremy Mcreynolds of RBC. Please go ahead.
Yes, thanks very much.
Thanks for taking my question two housekeeping and then a little bit of a bigger picture maybe for you Glenn on the housekeeping working capital outlook for the year.
Can give us.
Little bit of help on that one as well as the cash tax rate and then on the bigger picture one.
We've obviously seen a lot of increase in monthly data that's available to Canadians right across all of the pricing umbrella is can you comment on.
Where we stand on data usage per months and.
Whether we're at the point where.
Justin so much data offered on a monthly basis that it's less of a kind of an incentive for migration as it once was maybe that's not the case, but if you could just provide an update there that'd be great.
Thank you drew on the on the working capital.
We're.
We're working through the impact of rolling in Shaw, and so youre going to see.
The usual seasonal measures going through our working capital from from quarter to quarter I don't anticipate that to have a material impact on our debt or our leverage our leverage.
I do anticipate that.
Quarter after quarter, we will see.
De levering as the quarters go by.
Increasing in terms of actual debt repayment.
But then the de levering, particularly being driven by earnings growth in.
And you've seen that already in the first quarter.
There's not really anything to call out on working capital with the size of our balance sheet the size of our investment and the size of our free cash flow. It's all manageable within that envelope. So unless there is anything particularly you want me to look at we're managing inventory levels were managing receivable levels, we're not seeing any undue pressure.
From economic pressures or anything within our receivable base.
Our experience around credit collections and.
And bad debt reserves remained stable.
And so nothing to call out there.
And then on on the.
Cash tax rate.
On a on a base of.
Eight five.
Billion.
Of annualized.
<unk>.
Youll see a free cash flow a tax rate of roughly 6% on that base.
So if you run the math Youll see that comes in and around $5 billion or so use that as a broad broad measure for you that should help you with the modeling.
The second part of your question drew in terms of.
What we're seeing in data usage it continues to grow at an even faster pace.
Average usage is now sitting at.
Just under 10 gigs per month, so it's a very healthy usage growing at a pace of.
In and around 50% year on year, so a very healthy clip.
And.
Notwithstanding some of the promotional data buckets you see we just look at.
What the customers are telling us and as I said in my opening comments they continue to flock to the unlimited plans and the value that offers and we saw in just this quarter.
Loan double digit growth rates.
And the number of customers coming on to the unlimited plans.
In the quarter, you would've seen that we launched on <unk>, but kept plan, which offers great value.
Healthy data bucket size and for a certain segment that is a great value proposition to move from a flanker into the <unk> network and it's done what we expected it to do in terms of Upselling.
From lower <unk> plans with very minimal downshifting, the attractiveness of the worry free unlimited continues to be compelling in and that's what we're seeing customers do sure.
That's great color. Thank you.
Sure next question.
[noise] scenario.
Our next question comes from Maher Yaghi of Scotiabank. Please go ahead.
Thank you for taking my question.
Maybe I'll start with just a quick housekeeping question and then I'll follow up with.
My real question so on the housekeeping can you.
Help us understand what the organic EBITDA growth was for wireless and.
Cable.
Maybe cable it's easier to calculate but just help us understand the organic excluding that.
The mobile customer acquisition there.
And.
The question I wanted to ask you is.
On churn, we saw an increase in churn.
<unk> in the quarter year on year and sequentially.
But more importantly year on year so.
Probably a lot of things going on with the freedom, sorry, with the Xiaomi mobile customer acquisition can you help us understand what drove the increase in what's your expectations are.
Going forward, one last but one last thing I wanted to mentioned thank you for talking about the deleveraging process. Its a point that comes up a lot with discussion with investors.
You talked about the divestiture.
About $1 billion of assets can you help us understand what's in there and.
The timeline thank you.
Thank you mayor on.
On the organic EBITA growth the wireless EBITDA growth of 9%, but really is very predominantly organic.
There is there is some some impact that comes in from rolling in the $5 million Shaw customers.
Mobile customers and so you can reflect that and thats.
That's a portion of the 9%.
The increment on that as well.
Probably in the range of.
Three or 4%.
And then the rest of it is organic.
So think of it in the range of.
5% or 6% growth on wireless without the addition of that mobile business coming in within cable.
I think we're looking at growth of probably somewhere in the low single digit range within cable.
When you when you work through the roll into the the acquisition. So cable is up year over year as a result of driving the efficiencies.
Even prior to the acquisition on EBITDA.
Notwithstanding the revenue.
Decline on the top line.
Then that gives you an idea of where the level of <unk>.
Growth is on wireline.
On the on the deleveraging for the $1 billion.
Predominantly.
<unk> plus real estate.
It's.
I think a timeframe of somewhere over the next six to 12 months.
In terms of striking deals some of those will close quickly some of those may take a little.
A little more time to close but it's very predominantly real estate, we have some additional business operations, which im not prepared to.
To announce that we're looking at whether or not they are.
There is an opportunity there but nothing.
Nothing, particularly material certainly in terms of our EBITDA.
And Don I don't want you to turn your attention to our sports and media assets or are.
Sports franchises and.
Start thinking about those these really are.
Assets that we simply don't need for the core operations of the business.
On your question about churn if you look at churn in the second quarter, it's up slightly year on year, but frankly, it's not inconsistent with what you would've seen over pretty much almost the last year.
I think what you're seeing play out is against a very healthy growing market is as we all look to capitalize on on that growing market that there's healthy competition for existing customers.
So that's driving it up slightly.
It continues to be well under 1%.
So it isn't anything that we're concerned about in fact, given the success, we're seeing in the pork markets.
We see it as an opportunity and so.
Our approach is to make sure on balance we're doing the right thing in terms of churn of our customers.
But ultimately it's how we're doing in the net ad market.
That we hold ourselves accountable to and that continues to to be leading in the industry.
And we will continue to focus on that formula.
Thank you.
Alright. Thanks, Matt next question. Our next question comes from Arvind <unk> of Canaccord Genuity. Please go ahead.
Good morning, Thanks for taking my questions I'll, just start where you left off there on wireless churn.
Obviously, not surprising to see an uptick there but.
I wanted to get your thoughts on.
The impact do you feel that.
Youll more aggressive and more I.
I guess more.
More focused bundling strategies would have on wireless churn going forward, obviously on one hand, youll have the competitive environment pushing that up but to what extent do you think that your assets in terms of wireline wireless bundling, but that would say that I have.
One more after that.
Well as you would expect urban.
Sean bundling is giving customers a very simple value proposition that is going to give them internet solution in and outside of the home or in an outside of the business on a combined basis and if we continue to do our job right and having the best most reliable network.
And then what we do see in <unk>.
Our base is customers that are choosing to bundle have a much lower churn and so as you would expect intuitively the the direction is to continue to.
Make it a compelling value proposition make sure it's backed up with the right network performance the right customer service and that will continue to drive down churn in both wireless and wireline.
So that is the direction of travel and the thesis and it's playing out in.
And our execution.
Thank you and just on the synergies I mean, as you sort of integrate the assets.
And you talked about the integration going ahead of expectations.
Is there anything incremental on the Capex side I am not looking for numbers, obviously at this stage, but is there anything incremental in terms of sale.
Savings on the Capex side that you feel could that you could.
As you integrate these assets.
Thanks, <unk> I think yes, we will see efficiencies on the on the Capex side, just as we do on the Opex side.
Don't want you to think of that as being a source of cutting back on our investing in our network infrastructure, that's what's going to drive revenue growth as we.
Improve our and grow our footprint and our coverage, both wireline and wireless and so.
<unk>.
Think of that as we can do more with what we're investing rather than looking to try and pair back either on the guidance, we've given or as you move your modeling out.
But yes, we will see efficiencies on the on the combined spend where we're a larger buyer and that we have.
We're already seeing the effects of that in and the orders, we make we get more certain supply and we get them at better prices.
I'll add to that.
When you take that question arlinda with some of the others on the call. We're squarely focused on the cost synergies.
Whether it's opex or capex, but we haven't lost sight of the thesis of the <unk> acquisition, which is on the revenue side, one plus one how do we make that three and so we have not started to talk about or.
Show you in our results the revenue synergy upsides that we see.
But that's something we continue to be focused on.
More to come on that but the synergies that youre seeing are net of the investments, we're making to ensure we capitalize on that revenue upside.
Yeah.
Thank you.
Okay. Thanks.
Our next question Ariel Our next question comes from Stephanie price of CIBC. Please go ahead.
Good morning, I had two questions as well.
On Internet service, which were which were solid in the quarter.
Just wondering if you can talk through what you're seeing in the market any particular areas you can call out any color on west versus east performance within cable.
I'll start with that Stephanie.
What we are seeing.
Is the beginning of the size of the market continuing to grow so the what's contributed to the.
Healthy wireless growth in terms of size of market and new to Canada category.
That's translating.
As fastest homes can be built.
Two.
An uptick in homes passed and so when you combine that with some of the things we're focused on in terms of getting our penetration up in both east and West what you see with 25000.
Net net adds in the second quarter is the beginning of that pacing of.
Focus on increasing penetration so.
Early days in a growing market. So we like what we see we continue to see an uptick in the speeds that.
Customers are looking for which plays to our sweet spot given that we have ubiquitous competitive advantage across the entire footprint now in both the east and the west.
100% of one gig or more of speed and so that's starting to play well also and in terms of the relative performance. It's on both.
I talked earlier about wireless uptick in the west, but what we saw in the first 90 days in Q2 is a return to growth.
Of penetration in what was the Shaw cable territory and so.
We're seeing the improvements come on both from a geographical perspective.
Thank you and then on the wireless side, just hoping you can talk a bit about your thoughts on the sustainability of service revenue growth as we head into the second half just curious how you think you might in a more competitive back to school and holiday periods here.
Okay.
Okay.
As we look to the back half starting with back to school, we fully expect not unlike any other year.
It's going to have healthy competition.
Not only amongst the four players, but amongst the multiple brands that each of us have and so we're prepared for and.
We have our plans in terms of what we expect to do and so we fully expect its going to be.
A healthy backdrop for more competition.
<unk> said that we expect to continue to perform well on two fronts not only the subscriber share front across all categories everything from prepaid to the premium, which we continue to score well on.
In terms of leading share and we're pleased with that and our expectation is we will continue to do that as we lean on.
What is our competitive advantage, which in wireless really comes down to network.
In distribution.
Are the two and when you combined with.
Our value proposition that resonates and Thats, what we will always keep.
Bobbing and weaving to make sure we get it right for the customer for that moment in time.
That's what we're focused on so we expect to continue to have strong share performance in the back half of the year.
And on the <unk> side and as Glenn outlined we have stable <unk> on a year on year basis, when you take out the noise.
And our expectation is that will continue with even a slight increase as we look to the back half of the year.
In that our underlying subscription <unk> and so that's the way we're thinking about it and so you put the two of those together in terms of subs in our booth.
Mostly on subs, we continue to see healthy growth for us in the back half of the year and Thats really what ways into the increased guidance that you saw us put out. This morning. So it's all part of that that view and confidence that we have and the performance.
Alright, Thank you very much.
Thanks, Stephanie we have time for two more questions.
Certainly our next question comes from Jerome deferral of Deja Dan. Please go ahead.
Yes, thanks for taking my questions. The first one first one is on the increased competition in wireless.
Your lowered price for the entry plan on the Rogers brand.
Wondering if you can share the percentage of upgrades versus downgrades.
That you have been seeing in that particular plan since the beginning of May.
I think the Romo I'll answer the question by starting off with where you started in terms of increased competition I don't know I have been watching some of the.
The comments on the industry here in Canada, and I wouldn't describe it as heightened competition at all it's always been healthy competition I think each of us are doing different moves on what we want to do.
And how we want to get share in our focus and we've been very consistent over at least the last year were on our brand consolidation strategy and.
We're focused on making sure that when you look at the Rogers brand.
Have the premium unlimited plans, but how do we widen that and give customers in the flanker category, whether it's with us or with others an opportunity to get onto a <unk> network at an entry point.
That really hits, the sweet spot as we've said in the past between the 45 to $65 entry point.
And so what we're seeing is.
As I said early earlier, what we wanted to see on that and so I'm not going to share the specific stats on that for competitive reasons, but as I said the vast majority are.
Either net new to that category from our competitors or new to Canada, as I said, but a healthy uptick from the Fido brand with.
With very minimal.
Marginal I'd almost put it in the category of immaterial downgrades from.
From the unlimited plan. So the impact is having exactly what we expected it to be.
But.
I do want to deflate this notion of our concept that somehow.
Market has lost its way here in Canada. It continues to be healthy and you don't maintain stable <unk>.
Unless it's.
Unless that's not the case, so I'll just leave it at that Jerome.
Interesting. Thanks, and then second question for me would just be a clarification on the $1 billion.
<unk>.
Non core assets.
Yes.
Already know the answer but just wanted to be sure that this doesn't include.
Anything in terms of macro towers.
No.
It doesn't alright, thank you.
Thank you Joe Thanks.
Thanks, Joe Thanks.
Final question area.
Final question comes from David Mcfadden of Caremark Securities. Please go ahead.
Thanks for asking this again.
Two questions just when I look at the.
Video net additions seems to imply that.
Video losses generates or maybe they're in neutral.
Just wondering if you can comment on that that would be driving that.
Actually then chartered history been losing subs every quarter on the cable video side and then secondly, when you talk about $1 billion in asset sales are you contemplating sale leasebacks, which will have an.
An application for EBITDA or is this purely redundant real estate.
Maybe if I could start with that one first because it's a quick short easy answer. This is not financial engineering. These are straight sales of surplus assets that particularly in the real estate side that we don't need. So so no any comments I make around de levering and raising proceeds.
Financial engineering like sale leaseback doesn't help me. So these are straight sales.
Yes.
And on the first part of the question David in terms of what we're seeing on the video side of things I talked about internet in the west, but it's really about bundling.
Wireless Internet and video and so it's early days, but we are.
Once again reiterate very encouraged by.
The loyalty and commitment.
And interest.
Consumers are shown on a bundling value proposition in the west.
And as I said, that's without really exciting the market, we want it to be very paced and measured about it until we had.
A more seamless customer experience.
So that when they called in or walked into our store, we would have the ability to see their combined.
Combined bills.
Both are at Rogers, and Shaw perspective that only launched.
On Canada day.
So what you see happening in Q2 really as organic.
And so that's why I reiterate we are very pleased and encouraged.
Bye bye that propensity of the consumer and Youre seeing it in Internet and video I Should've mentioned that as well thank.
Thank you David Okay, alright, thanks, so much guys.
Thanks, everyone for joining us and if there is any additional questions. Please feel free to reach out to us.
Thanks Al Thank you.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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