Q2 2023 Quebecor Inc Earnings Call
Hello, and welcome to the it can be coffee incorporate its financial results for the 2023 second quarter Conference call May I have your name. Please.
Anybody on the line your mute button.
Yeah.
Again as anybody on the line.
Yes.
[music].
The conference is now being recorded.
Okay.
Good day, everyone and thank you for standing by welcome to cubic Court, Inc. Financial results for the second quarter 2023 conference call.
I would like to introduce <unk> Chief Financial Officer of <unk>, Inc. Please go ahead.
Ladies and gentlemen, and welcome to this kickoff conference call My.
My name as I said earlier is it's small I'm, the CFO and joining me to discuss our financial and operating results for the second quarter of this year.
Our president and Chief Executive Officer.
And he was unable to attend the conference call will be able to listen as usual, we're recording by telephone or webcast.
Access details are available on our website at Triple W Dot, Quebec, or dot com and a recording will be available until November the 11th.
As usual I also want to inform you that certain statements made during the call today may be considered forward looking and we would refer you to the risk factors outlined in today's press release and reports filed by the cooperation with the regulatory authorities I will now turn the floor to checkout.
F E M.
Good afternoon.
Everyone have a good morning.
Yes.
Hey, good morning, sorry about that.
Yeah.
Completely right away so I am.
Happy to report that in the financial and operational results.
Our first quarter of operations.
Validating the activity of freedom mobile.
As you know.
All of this very important transaction on April 3rd.
It has been hard at work to put in place.
Numerous key milestones and realignment needed to execute our carefully planned proof.
Crude for back to school season.
We are in.
The mix of it right now and I have to say that I'm very pleased with the engagement and performance.
Our team.
To further enhance market position and to reinvigorate the competitive dynamics in Canada.
As we have said many times before for us to succeed in our U N Beaver and for true wireless competition to succeed and last.
Canada, we need fair.
Oh, the homey and NPL rate.
Are in line with the government and CRT D C objectives.
In that context, we are pleased with the July 24th decision by the CRT D and the final offer offer arbitration process between Golar, and Rogers, which choose our position and setting the rates for access to Rogers wireless network.
The decision indicates that the Cit's E.
It's new leadership are committed to increase competition in Canada telecom industry, while encouraging network investments.
The race elected by the D C, which are in line with international rates will enable Quebec over and its subsidiary to offer plans that are more affordable accessible and competitive across Canada.
Benefit consumers.
We could not be more encourage and positive with the new competition.
Competition leadership at the C or D C.
Especially <unk>.
Compared with the previous one.
We sometimes add to wait two years or even more who added decision.
Nick.
Decision, making is clearly.
To the benefit of all Canadians.
That being said our negotiated sorry, our negotiations with.
Two other cabinets.
No surprise there.
We remain difficult and more agreement had been reached yet despite repeated good faith.
We have no other choices then to submit another request for final offer arbitration.
Afford to CIBC.
We have just recently started the ethylene process with bell.
In addition, it is essential that incumbents carriers you require.
Offered tpa services to aggregated F dth facilities.
They began a truly national player in wireless and wireline services and the rest of Canada.
There are no justifiable reason.
Slowdown access procedures.
Other than the inventory game is being played by the telco.
In comparison we.
And other cable operators as always diligently provide access to our coax network to TPI as even the ones wired.
At very cheap prices.
Yeah.
Quite simply.
We need to gain access to bell and other incumbents S. E T H compete directly with them and offer greater speed access.
Lower prices.
The only reason why bell offered the same one five gig at Eth at $90 a month.
To $60 a month in Montreal, well you have guests it is that <unk> and other adult access to a competitive price on STP.
Actually go.
Going by the regulated at Dth access rate of $129.79.
<unk> is selling at a loss.
All of them.
Wow right.
Inventory front I would like to add that with respect to the New Broadcasting Act.
Let's see.
The CRT and the government might introduce more regulatory flexibility and lighten a regulatory framework that it's to burnish them for us.
Net administrative and financial strength.
We must imposed on foreign platforms at contribution obligations.
Dedicated to Gilead in content graduated now I believe an obligation to our Canadian programming expenditures we preserved.
Competitiveness of Canada of.
Canadian companies and not accelerate the decline of our Canadian broadcasting system.
And to quickly remedy the procurement situation private division. It has incurred immediately withdraw advertising from all CBC radio Canada platforms to put in an unfair competition and grief for rail.
Earnings.
Finally, we welcomed the adoption of Bill C.
18 on June 22nd.
As you know following the passage.
And I haven't studied with block Canadian media content.
Facebook and Instagram platforms.
And as just recently started doing so.
And Google announced that by December of this year.
No longer offer news link in Canada.
In response.
That call with drew.
All advertising investment from a subsidiary and business unit on Facebook and Instagram.
And in solidarity with the Canadian media.
The Quebec government, the federal government numerous municipalities and organization.
<unk> suspended their advertising in midair.
Central organization that announced.
Redirecting their advertising investments towards the news media to the detriment of web Giants.
In our core as long argued that the.
To preserve the industry has been manifested.
And vitality original content from the various platform to be included in this bill.
Relation of a payment system is necessary in view of the web Giants market dominance.
These platforms use the content produced by Canadian News organization to generate a significant portion of the interaction of their network and must pay a fair price for.
Alright.
Before turning to our operational results.
I would like to highlight.
Give me a call on a consolidated basis.
And generated $455 million.
In cash flow from operation in the second quarter of 2023.
And an increase of 26% over the same quarter.
2022.
No Tom.
The addition of freedom improve its cash flow from operation by 25%.
$462 million and its EBITDA also by 25%.
$6 8 million in the quarter, while maintaining the best margin in the industry.
Cash flow performance.
As better than bell, and Telus and allow us to start paying down debt as opposed to borrowing to service our dividend policy.
I will now review our operational results starting with our.
Telecom segment.
And telecom this is our first quarter at the outlet of freedom mobile.
Our teams are focused on.
Delivering on our promises of more competition and lower prices.
Kenny.
Despite and situate efforts.
I can tell us to block the transaction as.
As we all learn in front of the competition Tribunal.
Remember that code named project Fox.
Where could that go with describe as a danger.
Well.
We succeeded.
With the support of broke competition policies of the government of Canada.
Determine law for Canadians.
Truly competitive in pricing.
Quite simply.
We have been doing.
Like we said we would with.
With the addition of 10% more domestic data.
All existing freedom subscribers and a price freeze.
Existing plans, where all current current and future customers.
We have also launched our <unk> services on July 27, and significantly improve the network connectivity to nationwide coverage seamless roaming and affordable International mobile plans.
Consolidation of freedom.
<unk> added over one 8 million subscribers.
Our wireless customer base.
In essence, doubling at $3 6 million Rgs.
Despite a second quarter characterized by intense competition and.
Quick.
Activity.
Managed a record 49000 wireless net adds in that period.
Churn rate on postpaid customers.
Increased <unk>, 2% this quarter.
Mostly due to the addition of freedom, where we were where we are determined to reduce churn with our <unk> network deployment and improve reliability and connectivity.
And affordable.
Affordable plants.
Seamless handover.
From one network to another.
Without interruption or dropped calls, which has a functional between freedom and Roger.
As has been between <unk> and Rogers and Quebec as part of our joint Network agreement now gives all carrier access access to essentially the same network.
So it is ironic.
Bell flanker brands Virgin Booth.
Boosting that runs on the network.
Larger and faster than <unk>.
Certainly not the first or the last.
We see the suitable ads.
Beth.
While we focus on re invigorating, our newly acquired freedom brand outside of Quebec, We did not take our eyes off of.
Our own market as shown by our 34% combined share.
Gross ads and Quebec fire two brands you do at home and fees combined okay.
Turning to our laser survey or.
Leisure survey by far the largest combined share of gross adds of all operators in Quebec in the quarter.
This clearly demonstrate.
The strength and complementary of our brands and without a doubt.
Confirm that you do a call as the leader in wireless services in Quebec.
Our lives our wireless EBITDA more than doubled to $251 million in the quarter due to the addition of freedom force as well as increases in service revenues and asset sales.
Wireless harpoon decreased slightly following the acquisition of freedom mobile as expected.
In broadband we posted 5300 net adds this quarter, excluding third party resellers, despite the increasingly competitive market environment.
Internet <unk> improved by 76, SaaS or one 4% over the last year again, resulting from pricing optimization and brand positioning, allowing us to overcome the dilutive effect of <unk> and lower plan.
Our plan mix.
True.
This optimization.
Improved brand positioning and management with continued mitigation of customer decline in traditional services.
Continuing to generate growth in wireline revenues and margin.
The market again characterized by ongoing cord shaving.
Cord cutting we managed to slowly trend down.
<unk> said before a fixed.
Segregate quarter by optimizing the positioning of our brands and the pricing of our ethical and <unk> platforms.
Thereby improving our.
This quarter, we reduced TV decline in subscribers.
15% and back to last year.
Finally.
We are reaching the end of the project.
Joan I speed and Quebec remote areas.
Which has now reached 96% of the total plan kilometers.
We expect to see continued increase in Canadian almost over the next few months.
Moreover, our <unk> deployment in the province of Quebec continued to stay on track.
James.
Operational sites deployed.
Turning to our media segment.
Despite advertising market conditions that remain challenging.
Especially in television.
We have continued to invest significantly in the production of unique.
Differentiate it and IV popular content to ensure continued leading ratings and maintain our position as Quebec.
Disputed destination or broadcasting information and ads.
Entertainment.
Our strategy was successful.
DDR still dominates its mark.
Increasing its consolidated market share by a <unk> four part to 42, 7% in the quarter.
Compared to that you can add 18, 3%.
And Novo bed media 19, 4% respective market shares.
<unk> also broadcasting for.
The five most watched television shows in Quebec include.
Including the daily show and he found out with an average audience of over $1 5 million.
Wow.
Local version of the voice.
And the new reality TV shows up in what you see.
As the local that designation of I am celebrity get me out of here.
That being said.
The economic and technological environments are profoundly transforming.
Barry Foundation, the broadcasting industry in Quebec and around the world.
India continued to generate losses in the second quarter.
As nothing unfortunately, pointing out to an improvement in these conditions, we must act and repay.
We operate these.
Yes.
Finally, our sports <unk> Entertainment Division maintain.
<unk> maintained its Q1 momentum.
The sizzling array of major shows in the quarter, including the patient mud. This third they go back.
And so now cleaned.
Second edition of our popular it's got at Festival Hall is already fully booked and the premiere of our new musical that I regard as a great success, which bodes very well for the upcoming 54 shows.
Government pepper.
Finally.
Hi, Paul.
And I apologize for that.
For our <unk> 1969.
Well that Memorial Cup.
The Seattle under birds and the Grand finals can lose.
Tapping a very successful year.
<unk>.
Good exiting.
I will now I'll, let you review our detailed financial results.
Yes, the discount so turning to our financial results Alright, Telecom segment generated $462 million in cash flow from operations of 25% increase.
And EBIT also increased as Scott mentioned earlier, 25%.
In the quarter and EBITDA margin stood at 51%.
Revenues reached $1 2 billion up 32% compared to the same quarter last year and while the addition of freedom mobile accounts for most of the revenue growth the videotron and fifth brands continued to deliver growth in wireless and Internet service revenues.
On the Opex side, the increase of 42% in the quarter compared to last year is due to the consolidation of course of freedom mobile.
As the cost containment initiatives under videophone and fifth sites continue to pay off translating into are increasing and industry, leading EBITDA margin on those brands.
Telecom Capex spending excluding the acquisition of spectrum licenses was up $28 million in the quarter as compared.
Last year solely due to our investments in freedom mobile in the quarter, we continued to increase our investment levels and on key initiatives such as LTE advanced.
<unk> network extensions and geographic expansion in all markets.
On a consolidated basis in the second quarter go backwards revenues reached $1 4 billion up 25%.
The news from our Telecom segment were up 32% to $1 2 billion.
Mainly due to freedom.
Revenues in the media segment decreased 4% to $180 million in the quarter, while our sports and entertainment segment grew 8% to $49 million.
Our adjusted cash flows from operations increased $94 million in the quarter, 26% to $455 million once again, demonstrating our continued operational and financial discipline. Adjusted cash flows from operations for Telecom also grew $92 million or 25 <unk>.
Went to $462 million.
That of course, EBITDA was up 23% to $605 million in the quarter, mainly due to the impact of the freedom mobile acquisition.
Telecom segment generated $608 million of EBITDA up $120 million or 25%.
Quebec or reported a net income attributable to shareholders of $174 million in the quarter or <unk> 75 per share compared to a net income of $157 million or <unk> 66 per share in the same quarter last year.
Adjusted income from continuing operations, excluding unusual items and gains or losses on valuation of financial instruments came in at $182 million or <unk> 79 per share compared to $162 million of 68.
<unk> per share last year for.
For the first six months of the year, Quebec quarters revenues were up 14% $2 5 billion and EBITDA was up 12% to one 5 billion.
EBITDA from our Telecom segment grew 14% to $1.08 billion for the period, an improvement of $134 million.
As at the end of the quarter, our net debt to EBITDA ratio was 352 times up from three to seven times reported at the end of the second quarter last year and has improved since the closing of the transaction.
On April three 2023 that you would try and entered into a new $2 1 billion secured term credit facility with a syndicate of financial institutions to finance the acquisition of freedom.
The term credit facility consists of three tranches of equal size maturing in October 2020 for April 2026 in April 2027 bearing interest at bankers acceptance rate secured overnight financing financing rate.
Canadian Prime rate or U S prime rate plus a premium determined by videotron is leverage ratio.
Available liquidity at $1 6 billion at the end of the second quarter and our growing free cash flows.
We'll be more than sufficient to fulfill our commitments and maintain a very strong balance sheet.
During the first six months of the year, we didn't purchase any class B shares.
And please note that the board on that topic upon termination of the August 2022nd program has approved the renewal of the program for one additional year.
We thank you for your attention and we'll now open the lines for your questions.
Alright.
First question comes from Maher Yaghi from Scotiabank. Please go ahead.
Exit of Leukemic gift channel.
Good morning.
To ask you.
As you indicated it looks like Videotron Ensign has continued to have strong results on the gross loading in Quebec, but I was wondering if you can share with us.
Initial views on the performance of our freedom.
In Ontario, and Western Canada since you acquired the business.
What are the key highlights that you found so far in terms of the relaunch and maybe.
How is the loading.
Behave since you acquired the business.
And just a follow up on that.
During the acquisition review you indicated that.
Offering a bundled wireless Internet service is essential to reduce churn.
The freedom brand.
I assume that you don't need access to fiber to the home to launch Internet because you have access to the Rogers network. So should we expect this service to be launched shortly or this is it will take some time to see you guys offer.
Bundled products in the marketplace. Thank you.
Thank you ma'am, so tied to it.
Sure.
Efficiently as possible.
We all saw.
That you know.
Market became suddenly more competitive.
And Ontario.
No.
I guess that we should not be surprised.
We're looking to move ahead, we were looking obviously also to respect the conditions that we agreed upon with.
With the government as well.
Yeah capacity to take over freedom and.
Prices reduction was announce.
We were not even there.
<unk> brands.
Our competitors have been kind of this you know we're in the market.
Much slower pricing will discontinue well I guess you know the landscape is changing dramatically.
Yes. This is probably why.
Doing any politics here, but if I am.
We would certainly consider this.
This possibility that adding a fourth national player will certainly have this resolved.
This is basically what we took place.
Since the closing of the transaction.
So.
Sure.
Ken completely.
Anticipate what will take place in the future.
Right.
This is certainly you know where we are today.
A different world in a different landscape.
So we will continue to offer and as you probably saw we're moving one step to the other.
Announced new pricing, we announced nationwide, 10% more data IMG.
IMG.
We can and obviously you know you will easily understand that will not give you details for competition reason as you.
Can anticipate that there is other things to come.
And it will be known in the marketplace.
In due time, but this is certainly not the end of the competitive environment I would say, it's probably the opposite at the beginning.
More interesting thing.
All the <unk>.
Regulations, and thinking of legislated or government and Administrated on already.
Australia.
Sure.
To get.
This activity more competitive.
Not only have wireless.
Anthony It's telecom activity. So you need to include other things.
Which is certainly something that we've been doing in Quebec, and we'll have the capacity of doing so elsewhere.
The acquisition of the media was.
And.
The anticipation of getting in the wireless business outside of Quebec, and it fits with our marketing strategy moving forward.
I don't know if you have anything.
Yeah.
No.
In terms of loading is as you know the checkout.
<unk> said this was that this was our first quarter and also certainly.
No we haven't.
We have been fully rolled out the plan, but that was referring to is the various.
Steps that we had referred to earlier so.
We will see that we are in the midst of that.
Back to school and let's.
Let's see how the.
Uh huh.
It comes around but man.
I'll give you guidance on the certainly on loading but.
It's to be expected that Q3 will be more will continue to be more just as competitive in.
Q2 was probably more activity.
I was writing to our employees and the thinking there.
Nathan.
Definitely the achievement that we've been able to realize.
Since the inception of the transaction.
It was and it's finished by stay tune.
Exactly.
And as to your second question in terms of bundling.
This is something that is part of the the various steps that we talked about that.
That's another one that's coming.
It will be as we said it'll be we're staging these things as we go along and it is to be expected over the next.
Weeks and months, but.
We won't give you a specific timing as of this morning.
Great. Thank you and best of luck.
Thanks, Matt.
Alright next question comes from Jeremy <unk> from Baird.
Please go ahead gentlemen.
Now samples will come on but thanks for taking my question. The first one is on is on wireless I just want to make sure that I understood right that the wireless EBITDA in the quarter was $251 million.
And is this is this coming with some sort of a.
Higher spend that we should expect in the third quarter given the launch of <unk> and then maybe a step up in advertising how should we basically model.
These margins going forward.
Yes. So first of all yes 251 million is the wireless is the consolidated wireless EBITDA.
And I think it's fair what you said it is a fair.
Portraying us.
The coming quarter with.
As we've said it'll be you know the fall is seasonally.
More.
More active and more promotional so are there I think it is to be expected that we will invest a little bit more in advertising and in the end.
And branding so so I think yes, I think your expectation is.
Is there.
It still looks like a very strong margin in the second one is.
I'd, just like you to expand a bit on your position on the TPI a review.
Obviously, you're targeting more bundling and the rest of the country outside of Quebec. However, the bulk of your EBITDA is still coming from your from your broadband business in Quebec and that could potentially be affected by by lower TPI rates. So.
I just want you to expand a bit more on the on your positioning on that are on that front. Thanks.
Maybe I could then.
You mentioned again that we've been always offered offering tpa as in fact, we were the biggest provider of outside.
Outside connection to <unk>.
Most of them.
Tpa as in Quebec.
If you know historically, we went to restore a little bit.
Landscape in Canada.
It was.
The area, where you would get the highest penetration of tpa as compared to whatever Ontario.
On the western side and.
As naturally you know they were considering.
At cable.
Or the coax.
Hybrid it would be the best that network to deliver either broadband or TV.
This is <unk>.
Technically.
On top of which that.
Go with Dth Jess.
Don't think about it it was not acceptable.
First bell will give any sorts of reason to forbid access and if you are to achieve after effort. It's an effort and efforts and efforts you will have a price which.
No offense.
To offer a.
<unk>.
Broadband.
Pricing offered.
Below $120, where.
The retail price was let's say between 15 and 17 so.
This is the environment that we've been living so we are used to compete with DPI. As we are used to offer different kind of marketing approach and we are to use also to generate revenues from in our networks.
Sources.
All that we will be able also as DPI.
As we work.
This is interesting as you all maybe I would like to add.
Repeat that for some of you.
Forgot it but Neil Bell at a monopoly in the Abitibi area, where they own the telecom business.
And the cable business capable of vision.
We decided to offer of services there as the TPI.
You can imagine in fact in order to fund the tribunal, because so long to get access to their network and now we get spot. It's an issue of having access to the polls and went up the same the only ones that are having problems.
Access to the pole, but we started as of TPI Yang.
We succeeded pretty quickly.
Adding a significant market share. So then we are all we decided that we will build our own network. After our customer base is justifying it.
So all of those things is that our experience and propose us certainly a learning curve.
What we will do in the future. So we move forward, who have access as quickly as possible.
We feel that again, the CRT seeing witnesses Oh competitive all we'll see we'll accelerate our capacity to have the T. T access and then being able to offer a bundled services.
Great very helpful.
Alright next question comes from Vince Valentini from TD Securities. Please go ahead.
Yes, thanks, very much let me start with that.
Couple of balance sheet and cash flow questions just to make sure. We're all on the same page.
That seemed to come in lower than than I thought and I think many people thought.
Post paying for freedom.
Are there any significant restructuring or transaction costs.
Not incurred in the second quarter that maybe the cash may go out in third or fourth quarters instead.
No no no.
There is our transaction fees are all in this quarter there were a few actually in the previous quarter, but the rest of it is in this quarter about $12 million. So that's a that's all in there.
Okay.
And how about capex related, especially related to five G. We've all seen that you.
Launched the <unk> network in several cities. So I assume that money got spent in the second quarter or is there somehow working capital thing where you you you got to your equipment from vendors and didn't have to pay for it.
Till later or is there any cash impact potentially timing issues there.
No no no there are no timing issue then.
If anything our business it is a little bit the conversation. We I think we had had in the past, saying you know one of the positive surprises I think when when we got to when we finally got our hands on freedom was how advanced they were in terms of almost being ready to turn to <unk>.
In many markets and also a lot of that investments had already been made so we.
The rest of this quarter and we're in a position to launch in the in the main market. So but no to answer your question specifically there are no there are no ah.
You know Theres no mountain coming in front of US there are no surprises coming in front of us, though okay. Yeah. No I. Appreciate the answer you just you know when we see such.
Such a big variance versus our estimates, but I just want to make sure we're not missing something.
Cash piece of this my question is just on the lease liabilities than we see in your statements.
Gone up about $220 million.
From the end of Q1 to the end of Q2, it doesn't there's not as much as we expected.
Is there any risk that the rating agencies S&P.
<unk> would have a different way of evaluating the lease liabilities. So that they may come up with a different leverage ratio than than 352.
Slightly yes.
And yet you know that you see that in their reports you know theres always a little bit of a of a tweaking and although we're hardly ever exactly certainly not to the second decimal equal to the leverage between the various calculations of S&P or Moody's or actually even between themselves are slightly different so.
Theres, probably a little bit of tweaking, there, but but nothing major.
We've already been through that with them and it is it's not going to be major.
The main difference that youre, referring to is obviously the way Shaw used to value leases as opposed to how we value leases and videotron and that explains the difference from what you were expecting to what we ended up putting on the balance sheet, but as you know again. This is all accounting right I mean at the end of the month, we're still paying these leases and.
I'm going on with that okay.
Yes.
Changing topics to operating cost just to follow on drums question a little bit.
Marketing and advertising costs, probably go up.
In the third quarter and the fourth quarter as you wrap up and then they are busier promotional seasons that seems clear I'm wondering on the other operating costs.
Deal benefits that you negotiated with Rogers things like roaming and backhaul.
Did you achieve a full three months run rate of all of those savings in the second quarter or is there any potential.
Improvement in the pace in Q3.
I think the answer to that Vince is that theres going to be some puts and takes you know I don't think we have that will be certainly happened.
Really.
<unk> all of the various synergies are positive.
Opex savings that we will get from the various.
Deals that we've made or the various.
Changes in that.
We're putting in place at the same time, there will be probably on the other side a few other investments that'll be needed so it'll be.
I think theres more positive ahead of us and then the negative certainly, but there'll be puts and takes on the on the Opex side.
We can say that we will.
We were really at the beginning of the integration process.
That will certainly other savings that will show up in the future.
Yes.
And the last question I have hopefully if you peer Carl but you feel free to jump in if you want.
The pace of customer ads at freedom, you've already been asked about it a couple of times I wanted to ask just in a different way you seem pretty happy with how things are going in.
Maybe it's a bit more of a.
A marathon than a sprint and you're gradually rolling out all of your new tactics, we obviously havent the bundling isn't there yet we haven't seen the phase brand yet so theres, obviously more things to come in the future So given where youre at in the evolution are you satisfied with the.
Number of customers you are adding on a weekly or monthly basis or are you looking at the team in Shanghai. This this is not good enough we need to be doing a lot more sub adds admission and the freedom territory.
I would say.
We are and I am very satisfied with what we've been able to achieve in the.
Short period of time.
Archie you are certainly some things.
Net as certainly something that we watch on a daily basis.
But you know as.
Actual results and the free cash flow you know we were just buying company.
You generate significant free cash flow after paying the interest.
You need to pay on that debt load for financing this transaction.
This is the equation right now and there is no real reason to think that it will.
Change in the future so when.
When we see our competitors.
Oh.
Buying companies.
Buying TPI as at Crazy prices buying customers in buying revenues not being able.
To achieve EBIT.
EBIT.
Increase.
There are that is increasing in their leverage is deteriorating.
We basically accomplish the complete opposite so in terms of large use we will continue to work very hard we would take that.
At many other tools in our basket, which we use in the future we do not.
Specific target because we don't know how the market will react, but we will certainly react according to the market. So we see the future.
It's very positive.
Wonderful thank you very much.
Thanks, Ed.
Right.
Next question comes from Matthew Griffiths from Bank of America.
Please go ahead.
Thanks for taking.
On the <unk> deployment.
I was wondering if you could talk about how much.
Hum.
What the timeline is to complete it obviously you've listed the cities, where you've already launched but say you know what do you think the timeline is to get through that and on the radios that are being deployed today also.
Accommodate the C band spectrum.
Sorry, we actually that we add your second your second question wasn't very clear can you repeat it Matt Yeah sure on the radios that you're deploying for <unk>.
Does it operate do they also operate in the guide.
<unk> eight gigahertz spectrum band.
Okay.
With the acquisition of additional spectrum down the road necessitate a revisiting of sites.
Yes, maybe we will get you and also additional thing.
They get worse I mentioned Matthew.
Uh huh.
So we.
We're not go again, we mentioned it earlier, but we were not completely surprised that.
The company was well advanced.
Oh, yes.
<unk> deployment.
As you can imagine you know we are in this business though.
We work with all the suppliers.
Yeah.
<unk> give us the capacity to understand where they are on top of this is also public information there are some maps.
<unk>, which is managed by the.
Government, which are also available so.
Deploying it was.
Something that.
It was easy to do and therefore, we did it.
<unk> is of importance, but you certainly is yes.
This is what youre doing.
Your day job following the industry.
We've been seeing Ericsson and Nokia.
Samsung are.
Slowing down in terms of revenue of <unk>.
There was a lot of people two years ago or three years ago as the <unk> will be the end of the world.
A lot of success.
And I would be the possibility to monetize.
The Mexico Raj.
We were prudent.
Regarding this.
Yeah.
<unk> semantic.
And.
We certainly considered that spike because of the importance of this is why you know.
Invested.
The business as well.
Alright, and good position. This is also why we bought spectrum in the 3500 and what we're having now for freedom and under Quebec or with the <unk> 3500, and the spectrum freedom already.
Had piece of it.
<unk> spectrum.
Spectrum in that previously was sold.
Some do at home from giving a call to work.
Sure.
We are.
A very interesting range of spectrum.
Moving ahead and new auction shortly.
Our relationship with our suppliers.
Give us many alternatives and dual band and equipment, where the mill.
This is quite an interesting also what we're seeing.
Is.
Equipment moving.
The right pricing direction for us.
Not something that is going.
Scott did you remove I think it's still are seriously reasonable and then therefore for us.
Maintaining.
A normal curve in terms of investment nothing that we need to rush.
I mentioned in my speech that you know, we believe that we share completely the perspective of the Tories Ware.
<unk> is available only for the.
Companies that.
Participate in the auction.
For the auction if you buy spectrum.
You need to build in seven years down there. So you have access to and knowing you have access to roaming, but you have an obligation to do so we have in front of those years, which we will use.
To make sure that our network.
No.
With the way that we will service our customers as I will admit that I described earlier regarding the abitibi area or region, where.
At one point it.
Certainly more profitable for you and.
Investing and then avoid a roaming that you need to pay when you're on another operation network.
Other operations competitive network.
Thanks, Dan.
No.
Follow up.
See if I can get some more detail after the call, but maybe I can just ask one other question. Just you mentioned, how you're staging these initiatives as you launch as you kind of take the brand and enter the market or reenter the market as freedom.
Was just curious.
I'm not asking about the timing or what the initiatives are but what is the work. That's being done is it are you still working on the systems side are you working on the sales and distribution side like what what is.
Where are they kind of me hurdles.
But for certain things get launched thinking about you know phys and you've mentioned a little bit already about.
Bundling Internet. So just if you could give any details on what the work is behind the scenes.
That would be helpful.
Okay, well I will try.
To give you you know what the detail that youre looking for Matthew but.
We have a difference of DSS system and another one that we use we're using them to do at home.
But there are also things that are cognizant so.
Yeah.
Try to answer your question I guess that we're going to be there for the rest of the day.
Obviously as you can imagine this is a complicated.
And so.
The specific question you know, we will try to do our best with the question that you can right for us.
Alright, thank you.
Thank you Matthew.
Alright. Our next question comes from David Mcfadden from core Mark Securities. Please go ahead.
Alright, Thank you a couple of questions.
Could you talk about the 49000 wireless net adds I was wondering if you can give us.
Write downs.
And the longer that the breakdown between video, calling and then freedom and then can you give us the breakdown that Sunday, how many of those subscribers on the wireless side in prepaid.
No David we.
Decided not to not displayed obviously for competitive reasons as our competitors do not.
Between between the various regions, where and if we did that obviously, you know videotron and freedom being on mutually exclusive regions. You know that would be fairly easy to us to drive certain information on the on Quebec versus the rest of the country. So we're not going to do that in terms of the prepaid and postpaid <unk>.
Pat.
Perhaps a heavier proportion of prepaid than we would have expected or liked it to be to be quite honest with you.
Our view is you know that that is partly the impact on our view that.
We're living through.
But.
Our focus really for US is to grow both as you know you know for US I mean prepaid and postpaid are are of interest and.
And.
We will continue and will continue to work very hard at it.
Building, both but that being said, we don't intend to at this time too.
You know to just put them out any further than that sorry, sorry, David.
Okay.
Can you give us an update.
Capex in the air and sort of like sort of a range as to what you're expecting now that is on freedom, a fair amount of that and then secondly.
I was wondering if you could comment on how freedom.
Plans are resonating with consumers, particularly the one that offers roaming across Canada and in the U S.
How they're performing I am not sure I understood. Your question to your second question.
You're asking how the plans are performing with respect to roaming in the U S.
Patrick and European.
I'm just wondering if you're getting a lot of consumer interest consumer uptake on those plans that include the rumbling across U S and Canada, because that's me I'll narrow line width traveling to the U S roaming bill can be quite expensive.
One of them, what kind of uptake you're getting on that.
Well, we are we're seeing very favorable market reactions on this.
So that was clearly that's something we felt was a was a plus for us and and it's working out well you know so certainly in line with our expectations there and.
And this is the season and also did I think it was a it was timely it was a timely introduction for us and it's.
Actually the interest is quite is quite significant so I have to say that that that's performing very well and at the right price of course, making sure that this is something they didn't have it before and that's certainly enhances.
The brand value for us and I think it's working out quite nicely.
In terms of Capex that your first question no change in terms of Capex, the expectancy or guidance.
Obviously this.
This quarter.
What was I think it is fair to say probably lower on the on the freedom side, but that will certainly.
Change or increase over the next few quarters, so that should get back in line with our with the guidance that we gave you know about the 200 ish.
Yearly guidance that we talked about last time, so no no no I expect to change there.
Right.
Okay, no okay, sorry, I didn't mean to cut you off.
Okay. Thanks.
And Steven.
Alright. Our next question comes from Stephanie price from CIBC. Please go ahead.
Good morning, I wanted to touch on the strategy for regions not currently covered by the Freedom network.
So it sounds like the MD now under that agreement you're able to start rolling out the offers for these regions today, but as you think about building at the National Network would you initially focused on improving the coverage area or the network quality and capacity there.
Well I mean, yes.
Yes.
It's for US it's important at this point for us to continue to grow and to expand our network of course, and so that certainly is the is the way we're going I mean at some point as Scott mentioned. This is this is obviously this is obviously linked with that.
An undertaking of.
Of.
And in deployment at some point so you know.
At the right time, we will have to make the right economic decision as to whether certain areas are.
There are worth pursuing from an mbo standpoint, or not so, but we're not quite there yet I mean at this point that we're going in both directions that you mentioned at this point too.
To expand our our network coverage and we.
We will see how.
We'll see how the business goes in the various regions and then make that decision when the time comes.
Okay. Thanks, and then just circling back on the ask GTH wholesale access.
Curious around how important that access is for you just given the preferred rate you have with Rogers.
Is there a significant percentage of the wireless subs that maybe it would.
With that lockers cable footprint here.
Well, it's important because obviously you know we know that.
This is certainly.
So some.
Competitors would say that nowhere, where the owner of ft th.
The cable companies already also have some fiber and this is not something unique.
We all know that.
This is <unk>.
A.
Technological power.
Powerful we you know too.
Move forward that doesn't mean that it is.
The historical networks are not good.
Don't worry the cable industry also is moving forward with the technology.
But then you know.
To answer specifically the question is because.
The wire are there and the density.
Something of importance you know, there's a CEO in.
Central Office, you know as we call them.
Telecom and street located in Toronto at the we call it and do a delegate Adelaide I'm sorry.
Is the more dense.
And Kevin So we would not.
We would like that access.
The CEO to be able you know to have access to the largest amount of people to our CEO .
Is it did as this important yes. It is.
Is that what we've changed dramatically the things that if we were not to add access no, but I would say that its not fair or any alternative carrier to do not have access to.
Through this.
Specific network, whereas the cable industry had been always.
Force and have lunch and we did it also as a revenue source of Albania to other carrier.
It's a question.
Uh huh.
D R.
A fairness yeah fairness.
Okay. Thanks for the color.
Thanks, Stephanie.
Alright, and the last question comes from drew Mcreynolds from RBC.
Yes, thanks, very much and good afternoon.
Just back to <unk> question.
I think a little confused on that and the price tag.
Was public through that process for freedom and I can't.
Really reconcile.
That west what's either going through your financial statements or what's being assigned to capitalized leases.
Certainly take this offline, but can you at a high level explain.
How you could value capitalized leases, perhaps are different than how Shaw was doing it.
Just some clarification there would be helpful. Thank you.
Yeah, I mean drew its space.
Basically I mean.
He says are you know are valued different ways by different by different operators from an accounting standpoint, now we're talking about accounting right, let's let's be clear on this I mean leases are basically and we continue to pay leases obviously every month.
And we are paying what we were expecting to pay with respect to these leases that are both.
Network leases are or retail.
And a related leases.
From an accounting standpoint, though.
Sure. We we were expecting the the number we had in mind when we when we referred to earlier.
At the time of the transaction to a $2 8 billion transaction with roughly $700 million of leases for a net $2 one.
The purchase price.
And that $700 million was basically valued according to shores.
The valuation leases, which well give you. An example included renewals for most of them.
And we value the same leases. According to video trying to hit our historical way of valuing them, which which is that turns out to be to be quite different and that explains the difference between the two but at the end of the day. This is you know this is the this is the accounting valuation that goes on the balance sheet.
And due to the new Ifr S regulations as you know, but at the end of the day and.
And operating costs that are that keeps.
Going through the P&L and debt.
And that you know.
We will continue to show up obviously, as we go along and restructure and and streamline and optimize these these leases as we go along.
Thank you.
Thank you Andrew.
Oh, I'm, sorry, I cannot.
Just ignore.
I had on my desk earlier.
Okay.
It's not from the equity side, it's from the debt side comes from Oh, That's a B mall Nicolas Ken.
It's six lines.
I'll go shortly with that we continue to view, Quebec or has the most underrated Canadian telco credit.
Offering.
That's been great quality credit exposure I yield spreads with the small near term.
Investment grade crossover potential and upside potential.
When should get significantly tighter with IAG.
For perspective give that color.
I mid double B.
Three five leverage while Rogers is rated.
Low triple B with five one.
Bridge Alistair.
Alice is rated mid Triple B.
$3 seven leverage.
He is really good I triple B three.
Three five leverage.
Oh.
I would be not ours.
Just not mentioning it.
Sleep badly Tonight.
So thank you all.
Being with US this morning, and look forward to talk to you at our next conference call have a nice day.
Yeah.
Everyone. This concludes the cubic core inc's financial results for the 2023 second quarter Conference call. Thank you for your participation and have a nice day.