Q3 2023 Rogers Communications Inc Earnings Call
Thank you for standing by this is the conference operator welcome to the Rogers Communications, Inc. Third 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 <unk>.
Thank you 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 then zero I would now like to turn the conference over to Paul Carpino, Vice President of Investor Relations with Rogers Communications. Please go ahead Mr. Carpino.
Thank you Ariel and good morning, everyone and thank you for joining us today I'm here with our President and Chief Executive Officer, Tony Staffieri, and our Chief Financial Officer, Glenn brand. Today's discussion will include estimates and other forward looking information from which our actual results could differ. Please review the cautionary language in today's earnings report.
And then 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'm very pleased to report that we delivered industry, leading results in the third quarter, our seventh consecutive quarter of growth and momentum.
We also made substantive progress on integration and we are now tracking six months ahead of our synergy targets and deleveraging plans. Our team is clearly firing on all cylinders executing with discipline and delivering on our commitments.
Turning to results. We grew total service revenue by 40% and adjusted EBITDA by 52% in the third quarter.
Consolidated adjusted margin performance of more than 47% is 340 basis points higher than our competitor BC and almost 1000 basis points higher than tell us.
We are clearly delivering through a consistent strategy that focuses on the quality of our assets operational efficiency and disciplined execution.
In wireless we delivered industry, leading financial and operating results. We attracted 261000 mobile phone net additions up 40000 from a year ago. This reflects the best combined postpaid and prepaid loading in our company's history.
This phone only loading represents 94000 more than BC and over 100000 more than tell us.
We did this while growing our boot simply put we continue to out execute our peers and have done so consistently for the last two years.
We also delivered impressive financial results in the quarter Wireless service revenue was up 15% adjusted EBITDA was up 18% and wireless blended ARPA up 4%.
It's clear Canadians are choosing rogers more than any of our competitors.
In cable we saw market share gains have accelerated across the east and the west.
These gains are driven by our new bundled offers our network investments and our five G leadership.
In the quarter, we added 18000 internet customers well, we need to grow revenue we've turned the corner on subscriber trends looking ahead, Alberta, and British Columbia represent our fastest growing revenue markets and we see good growth opportunity ahead, it's clear, we're creating more competition in the <unk>.
West and Canadians are responding.
We also delivered cable margins of 54%. This represents a margin expansion of 650 basis points compared to last year, and clearly demonstrates our focus on driving profitable growth. Despite a highly competitive market.
Let me now turn to the shore integration.
Just passed the six month milestone and I'm very pleased with our momentum impressively at the six month Mark we are tracking six months ahead of our synergy targets and deleveraging plans by year end, we now expect to realize $600 million in synergies and reach a debt leverage ratio of 4.8.
Times are you.
You'll recall, we had planned to reduce our leverage by $1 six times in 36 months after close.
In just six months, we've already reduced our leverage by.
0.5 times well ahead of plan.
Operationally, we've achieved some key milestones, we introduced Rogers Internet and TV services, along with bundled offers we consolidated our retail footprint.
Branded our corporate retail stores and started selling both wireless and residential services.
In our retail channels importantly, we have largely integrated the two teams and we are executing with one clear focus and plant.
Overall, we've made significant progress in a short period of time.
In the third quarter. We also led the industry with new technology and more affordable services. In Q3, we were awarded the best and most reliable <unk> network in the country for the fifth year in a row, we launched five G. In the busiest sections of Toronto subway system.
And we are now upgrading the rest of the legacy network to five G.
Working around the clock our teams will expand the network to the remaining 75% of the tunnels, where no wireless network exists today.
We introduced new technology to help detect and prevent forest fires partnering with Spacex satellite connected sensors can better predict wildfires in remote areas without wireless networks. We're also deploying AI cameras on cell towers to detect smoke up to 20 kilometers away.
We expanded connected for success, our low cost Internet program to Western Canada, and we just introduced connected for success wireless across the country.
Available to two and a half million low income Canadians the.
The program builds on our commitment to make our services more affordable and accessible.
We also introduced 48 month device financing with zero percent interest and no mobile contract only on our Rogers credit card.
Rogers owned bank credit card platform.
As the monthly phone payments for our customers by 50%.
Beyond that the card offers a host of additional meaningful value add for our customers, including free roaming.
Starting this holiday season up to 3% cashback the.
The most valuable credit card aimed at rewarding keeping and attracting customers to Rogers wireless and cable services with.
With today's inflationary pressures were working hard to bring down prices and present more value for Canadians.
According to the stats can't consumer price index wireless prices have declined over 30% over the past three years.
Looking ahead, we will harness the power of Canada's largest and most reliable <unk> network to bring Canadians even more.
This along with our 10 G and DOCSIS four Internet roadmap will ensure we delivered the next generation of world leading services.
For Canadians.
Future isn't just about more speed, it's about the convergence of products and services across networks.
<unk> will bring multi gigabit speeds, along with reliability and low latency to deliver a seamless customer experience in and out of the home.
It's a national cable operator that covers the majority of Canadian homes, we have a unique advantage, we don't have to rip out and replace our existing network or dig up neighborhoods with 10 G will easily and economically upgrade our network with little to no disruption for the customer.
Before I turn it over to Glenn Let me make a couple of closing comments.
Overall, it was a record quarter, reflecting a clear focus and consistent execution.
We delivered industry, leading results exceeded show integration targets and delivered industry, leading innovations to Canadians.
We have momentum and we are winning in the market.
We could not have done this on a consistent and sustained basis without the commitment tenacity and ingenuity of our Rogers team and for that a big Thank you to the most talented group I've ever worked with well done <unk>.
With that I'll turn it over to Glenn.
Thanks, Tony and good morning, everyone. Thank you for joining us today.
Rogers third quarter results reflect strong disciplined execution.
Driving growth and accelerated delevering of the balance sheet.
Six months into coming together with sure we are doing what we said we would do.
We have grown consolidated EBITDA by 52% year over year, and we have reduced leverage by a half turn through 2023, roughly six months ahead of schedule.
In wireless our third quarter service revenue was up 15%, reflecting strong execution and healthy underlying organic growth.
Excluding the $91 million customer credits from last year wireless service revenue growth was up 9%.
Postpaid mobile phone customer net adds in the quarter were 225000.
Our strongest postpaid mobile phone loading on record and an impressive 37% increase year over year.
Coupled with our positive prepaid loading total mobile phone net adds this quarter was 261000.
40000 year over year, and the strongest loading ever by a Canadian wireless company.
We have welcomed approximately half a million new postpaid mobile subscribers to our network year to date.
Reflecting 64% more subscribers than our next closest rival.
All while delivering growing EBITDA and <unk>.
Our leadership in wireless is clear we have consistently led our peers in wireless loading for two years now with Canadians choosing Rogers wireless more than any other carrier.
Wireless <unk> for the quarter was $58 83, which is up 4% year over year.
The 4% increase reflects the prior year's $91 million and customer credits.
Which in turn was partially offset by the absorption of the shop mobile customers in this period.
After adjusting for the integration of the shop mobile customers combined with removing the prior year's 91 million dollar customer credits change ARPA was once more up slightly year over year and we expect this momentum to continue.
Postpaid mobile churn in the quarter was 1.08% up slightly year over year, reflecting a competitive market.
Wireless adjusted EBITDA was up 18% and our adjusted EBITDA margin of 64% was up 180 basis points year over year.
Excluding the credits from last year underlying wireless adjusted EBITA growth was up an impressive 9% year over year.
We are gaining subscribers at all segments of the market and in all regions of the country driving sector, leading financial and operating performance on the back of disciplined execution and a healthy growing market importantly sector competition remains vibrant and strong as ever largely centered around VAT.
<unk> service quality and multi service bundling discounts.
We are encouraged by our sustained wireless performance and we will look to continue that momentum in the quarters to come by delivering exceptional value and service quality to Canadians.
Moving to our Internet and cable business, we delivered strong profitability, despite intense competition and promotional pricing from our national peers.
Our integration of Shaw and driving cost synergy targets are both well ahead of plan.
We have largely completed our integration of Shaw's departments and employees into our combined and state driving significant cost synergy savings and we are seeing strong revenue synergies with our cable and wireless growth in the west.
Cable revenue for Q3 was up 104% and cable adjusted EBITDA was up 132% reflecting.
The addition of <unk> operations as well as the prior year's $59 million and customer credits.
Excluding the impact of the customer credits total revenue was up 93% and adjusted EBITA was up 106%.
Impressively our work on driving efficiency across our national cable footprint has delivered EBITDA margins of over 54% or a 650 basis point improvement from last year.
Organic revenue and adjusted EBITDA growth across the combined operations was negative, 3% and plus 8% respectively.
Cable is growing customers in every region Internet loading was 18000 up from 6000 last year and video net additions grew by 23000 compared to an increase of 7000 in the prior year.
The wireline market remains very competitive in the east and West and we continue to balance subscriber growth with disciplined financials.
Six months into coming together with Shaw, we are very excited by the shore opportunity.
It is reinvigorating growth across our national cable footprint.
And finally, our sports and media business has also seen continued growth and improvement in our financial performance Sports and media revenue was up 11%. This quarter as a result of higher sports related revenue, primarily driven by the Toronto Blue Jays, and Roger Sportsnet and we delivered adjusted EBITDA of $107 million.
<unk> up a very strong 41% year over year.
On a consolidated basis Q3 revenue was up 36%.
While service revenue grew 40% to over $4 $5 billion.
Consolidated adjusted EBITDA was $2 $4 billion in the quarter.
Up a very strong 52% versus prior year.
<unk>, our adjusted EBITA margin by 500 basis points to 47, 3%.
Excluding the impact from customer credits last year total revenue was up 31% and adjusted EBITDA was up 39%, reflecting strong disciplined execution on driving the Shah cost synergies and competing for leading market share.
Q3, adjusted net income increased by 56% to $679 million, reflecting the flow through of higher adjusted EBITA.
Net loss for the quarter was $99 million, which included a onetime noncash $422 million loss recorded on a future obligation to purchase at fair value. The Noncontrolling interest in one of our joint venture investments.
The Q3 net loss also reflects higher depreciation and amortization finance and restructuring acquisition and other costs primarily related to our Shaw acquisition.
Capital expenditures in the quarter were up 17% year over year to approximately 1.0 billion.
With roughly half of that invested in cable.
Notwithstanding this increase average capital intensity declined in the quarter by 330 basis points to 20% predominantly split across cable and wireless.
Despite the increased investment we were able to more than double our free cash flow in the quarter delivering an after tax free cash flow of $745 million.
And finally, we returned $264 million in dividends to shareholders this quarter.
Starting with our October dividend payment, we have amended our dividend reinvestment program or drip to introduce a small discount on the drip share price and to allow for the issuance of treasury shares to settle the drip dividends.
With that change on October three 2023, we issued $1 5 million class B nonvoting shares or $74 million worth as partial settlement of the dividend payable on that date under the terms of our drip.
Reflecting our participation rate in the drip program of 28%.
On an annualized basis that translates to a dividend cash payout ratio of approximately 30% of after tax free cash flow.
Turning to the balance sheet in September 2023, we issued $3 billion of Canadian bonds across 357, and 10 year maturities.
As a result at September 30th we had over $7 billion of available liquidity, including $2 $5 billion in cash and cash equivalents and a combined $4 8 billion available under our bank credit and other facilities.
Our weighted average interest rate on all borrowings is four 9% and our average term to maturity is 10 years.
Our adjusted debt leverage ratio at quarter end is four nine times and by year end, we will have taken a half turn off our leverage roughly six months ahead of schedule.
We anticipate leverage will continue to sustainably declined by approximately 0.1 times to 0.2 times each quarter going forward.
Early on after coming together with Shaw, we had targeted reducing leverage by approximately one five times over 36 months, we are well on our way and pacing ahead of schedule to achieve this target.
For our 2023 guidance targets, we anticipate free cash flow coming in at the middle to upper range of our guidance of $2 2 billion to $2 $5 billion.
As well we are reaffirming our 2023 guidance ranges for service revenue growth of 26% to 30% adjusted EBITA growth of 33% to 37% and reaffirming that capital expenditures will be at the upper end of our guidance range of $3 7 billion to $3 nine.
Billion.
And finally, our integration with <unk> with Shaw is running smoothly and ahead of plan.
Our Q3 results reflect approximately $140 million of cost synergies realized in quarter building on the $48 million realized in Q2.
This brings the year to date total to $188 million realized year to date well ahead of our previously stated $200 million in synergies realized by year end.
We now expect over $360 million in synergies to be realized in calendar 2023.
Which is 80% higher than previously guided and we expect to be at our $600 million annualized synergy run rate by the end of 2023.
Again, roughly three to six months ahead of schedule.
I will close by saying that our third quarter results reflect disciplined market leadership operational excellence and strong financial results across all business lines.
Our <unk> integration is proceeding extremely well and our investment thesis becomes stronger with each quarter.
We have never been more excited about our future and we are encouraged for what lies ahead.
Thank you for your interest and attention this morning, and with that Ariel can you. Please commence with the questions and answers. Thank you.
Thank you 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.
You are using a speakerphone please pick up your handset.
Before pressing any keys to withdraw your question. Please press Star then two we will pause for a moment as callers join the queue.
Our first question comes from Jim Mcreynolds of RBC. Please go ahead.
Yes, thanks, very much and good morning.
So much to dive into a very good results obviously.
Limit myself to kind of two areas here.
So first just with respect to.
The synergy realization, obviously being well ahead, so great to see.
Glen can you give us any sense of.
Without obviously, giving guidance I'm presuming the cadence of kind of what you expect on the synergy realization as we go through 2024.
And milestones that investors should be kind of looking for there.
And if you are able to.
We do more than $1 billion.
I think so much speculated and then the second area just on the wireless momentum.
And unbelievable Q3 for sure as you're looking at Q4, what are you seeing so far in the quarter.
In terms of the environment and what would be your expectation.
Late in the quarter. Thank you.
Yeah.
Thank you drew on the on the synergy target.
Target, we're still targeting the $1 billion I'm, not I'm not going to start.
Targeting a larger number and I think once we've worked through those targets to get to the $1 billion the exercise than simply turns to win and we will turn through that to really what's our year over year growth rather than trying to continue to do the.
The accounting on where would our costs be without Shaw as we move forward that exercise becomes more and more difficult to try and.
And spin and so we are still focused on driving the $1 billion synergy cost reductions.
The progress to date has very largely been on the departmental and employee integration.
We have essentially or largely very largely completed that part of the synergy exercise well well ahead of schedule. We were first expecting that to run into 2024.
That is largely complete as we've closed out the third quarter and so that's most of the gains that we've made to date. We are though also bringing in synergies from some of the vendor contract negotiations and rationalizations or combinations.
The two largest buckets then remaining are for the third party vendors, just a general category as well as media content costs.
And we are leaning in on those and I expect that those will.
We will come up come to plan at least on pace, if not also being maybe a little bit ahead, but we have synergy cost well in hand, we'll be at a $600 million run rate as we closed the year.
And Tony on the wireless side drew with respect to second part of your question a couple of comments when I would say the macro environment for wireless continues to look strong.
We exited Q2 as an industry with growth in wireless subscribers of over 5% and we continued to perform well in terms of market share on that backdrop.
The growth in the industry.
Of course, better penetration rates, but importantly, the continued growth in the new to Canada category continues to see strong even as we exit the third quarter and into October and November now that category continues to grow and we do.
Well in terms of market share in that category.
And so from abroad environment.
We continue to see.
Good health in the market.
As we went through back to school as you would expect competitive intensity picked up and.
Really pleased with the way we executed in that competitive environment to look at value propositions beyond price.
And utilize our industry, leading channels, particularly in retail to execute strong market share performance.
And as we exited.
Q3, and are now into an approaching black Friday, we continue to see.
Good healthy competition and our execution in that backdrop continues to do well so.
Continued strong environment and performance in wireless for Q4.
Thank you both.
Thank you drew.
Next question Arrow.
Next question please.
Our next question comes from Sebastiano Petti of Jpmorgan. Please go ahead.
Hi, Thank you.
Just wanted to unpack.
You are guiding to the higher end of the free cash flow range EBITDA being unchanged.
It seems a little bit conservative, particularly in light of the higher.
Our expectation for synergy realization in the quarter.
In <unk> and exiting the year anything to Untack, there or is that just a bit of conservatism related to just the overall operating environment and maybe some or is it perhaps investments related to shop.
And then Relatedly on the second question.
On the cable revenue side.
Good color on Alberta in D C revenue trends.
And Tony I think you said overall strategy our expectation goal is to drive.
Revenue growth in cable.
How does the east compare perhaps to what youre seeing in the west and maybe help us think about some of the levers you can pull to get to.
Reinvigorate the cable gross revenues.
On.
Sorry, <unk> had on the.
Free cash flow guidance, we will.
We will come in at the mid to high and we're not.
<unk>.
<unk>.
Dampening that at all.
We're on a fairly.
Flat run rate or constant run rate in terms of our capex through the year.
The EBITDA guidance, we raised.
Earlier in the year in terms of the tightened the range and.
I think if you if you roll those through will be in the mid to higher range higher end of that guidance range on free cash flow I'm satisfied with that.
Somewhere in the range of 242 $5 billion of free cash flow that is a plenty of.
Of leeway for us to to work on our Delevering plans and so on.
I'm satisfied with that progress and are pleased with where we've come out on that.
Scott on the second part of your question our cable revenue.
I'll start with it really comes down to the fundamentals and with.
With the coming together of sure we took the opportunity to reset our value proposition. So is much more consistent across the entire footprint of Rodgers together was shot and so what you see is us leveraging what has always been our compare.
The advantage on internet with leading speeds and reliability across the entire footprint.
So that we could offer at a minimum one and a half gigs of of speed and Thats always have done well for us.
We then combine that with.
A repackaging of the video product to make it much simpler.
And a real value add for customers, which has started to resonate well it's early days.
But it started to resonate well and you'll see that with the increased video subscribers.
There as well as part of that value proposition, we also leaned on.
Looking at everything else that was of value to customers and not just focus on price in various markets and so what you see is year on year, even after adjusting for last year's credits.
In the cable business, you see ARPA actually increasing year on year.
So youll see coming together, a good increase in subscriber performance and a good increase in ARPA and those are really the fundamental ingredients.
That will continue to push on that.
Due course, we will see revenue start to climb in cable as well.
A couple of things I would say you were specific about Houston West and I would say what we are seeing is good growth in both of those segments. So so really pleased with the way that's going the bundled offers are also hunting well, particularly in the west which is a new category.
For us in terms of bundled and so we're really pleased with both wireless and cable market share gains that we're seeing in in those markets. So it's a combination of a few fundamentals combination of focused execution on a market by market basis.
To ensure that we're getting the share gains that we need to eventually translate that to growth in revenue.
Thanks again.
Thank you Sebastian next question Ariel.
Our next question comes from Vince Valentini of TD Cowen. Please go ahead.
Yes. Thanks.
Maybe clarify on that last point and then and then another question.
When you're talking about market share gains Tony.
Nearly 18000 Internet ads compared to what we saw from Bell entellus. It doesn't look like on an absolute basis year youre gaining market share there.
Are you talking more holistically at wireless subs in a bundle as well as Standalone Internet when you talk about market share.
Yeah, two things Vince thanks for the opportunity to clarify one is we do talk about it in terms of a bundle and the other is given the differing size of footprint. We look at what we're doing with respect to penetration rates of homes passed.
And so what we see is contrary to prior quarters, where we had a decline in penetration rates were starting to see those penetration rates start to improve so that's how we think about it.
Okay.
Question I had was just on the noncore asset sales.
Quarter, I think or maybe it was the conferences in September.
You were seemed reasonably confident there can be some announcements before the end of this calendar year.
We're mid November almost so I'm just wondering if theres any update on that you're still confident on that Franklin.
Thanks, Vince Yeah, we're still working through a process on a few.
A few different exercises and still confident on the timeframe of of hopefully, having having announcements in year end and closing.
So again still still looking to close if not in year. This year certainly first half of next year for a.
A number of those.
But obviously when you say four eight times target for the end of the year for leveraged youre not factoring in any of those assets. That's correct that's correct.
That is just straight from the synergy and organic growth we have in the business and the use of free cash flow.
Thank you.
Thank you Vince.
Next question Arrow.
Our next question comes from David Barden of Bank of America Merrill Lynch. Please go ahead.
Hey, guys. Thanks for taking the questions I appreciate it.
So.
Well done on the loadings this quarter.
You know if if if.
One way to.
Critique yet.
One might say that some of the pricing actions that you took during the quarter impacted your ability to take share.
And if when extrapolated from that one might imagine that pricing in the industry is a little less stable than than people would hope.
And that in reaction to your very strong loadings in the quarter. It's an inevitability that other competitors are going to have to come back.
With their own pricing actions and I was wondering if you can kind of extrapolate a little bit or elaborate a little bit on on that dynamic in the market in the Canadian market and then <unk>.
Second.
If you could share with us what you think.
The impact and the import of the.
The new CRT see interim regulations on wholesale pricing for broadband are for for Rogers and in the industry generally thank you.
Okay.
Thanks, David.
Two parts.
So on the first part of the question with respect to pricing I'm.
I'm not sure I follow the logic and the fact that Youre looking at just to put in perspective, we've been clear in terms of our strategy of focusing our brands.
And brand evolution on the Rogers brand and so what you saw us do earlier in the year is.
Expand the Rogers value propositions to include capped plans not unlike you see in the U S. All focused on the Rogers <unk> brand and our competitors.
<unk> decided to expand their value offering in the flanker brands different strategy.
And we will follow our strategy and it seems to Honeywell in the marketplace.
I think we talked about it on the last call but for clarity.
The intent of introducing capped plans at the $55 entry point was clearly intended to provide a path for customers on flanker for G to upgrade to the <unk> experience.
With a nominal increase in price and <unk> and so what you saw is actually in.
In our opinion.
You creation for the segment and you see that for us in the organic <unk> growth.
That we have and so, albeit it mild it nonetheless is on the positive side of growth. When you look at the <unk> and so we're pleased with.
So our sense is that the strategy is working not only for Rogers, but frankly.
<unk> for the industry.
Here in Canada so.
So we're pleased with the trending that we see on that and as we look to Q4 and we're about midway through now we continue to see again positive momentum.
In terms of attracting customers that are coming in year on year higher in terms of <unk> and when you look at the combination of our targeted approach across the brands and the various what I would call value segments that ladders up nicely too.
A good and solid.
<unk> trajectory and of course.
That's all wrapped together in the revenue growth that you see translated to a very good flow through rate significant flow through rate and strong strong margin expansion and performance.
Hopefully that provides the color around that.
Second part of your question relates to the recent CRT.
<unk> decision.
Not a lot to say on that.
I would say a couple of things one it's good to see that it levels the playing field we have been.
Required to wholesale under the regulatory regime high speed Internet for quite some time.
And so it's good to see a level playing field and two when we look at the.
Rates.
Have applied they're not that different than the rates the wholesale rates that we've had for our network over the last little while and we continue to improve our performance.
In that regulatory regime regime, and figuring out the right value proposition to.
To perform and as I said in response to the earlier question.
Stabilize and start to improve our market share performance.
Alright, Thanks, Tony.
Next question Arrow.
Our next question comes from Maher Yaghi of Scotiabank. Please go ahead.
Okay.
Great. Thank you for taking my questions guys. Good good job on the quarter congratulation looks very strong I wanted to ask you. If you can maybe just for housekeeping a help us understand what was the organic.
Revenue growth and EBITDA growth for both wireless and cable that would help a lot.
Uh huh.
Now on the synergy is definitely.
Tracking above and faster than expected.
Can I ask you and maybe how are you.
Handling the organizational shift as you said you had a lot of employee.
Employee.
Changes restructurings departmental changes.
How are you, making sure that our paths and the momentum that you have in the marketplace can continue.
With the significant changes happening inside the organization.
And maybe just one last point on the.
The west.
When you look at the market share gains that you talked about in the wireless Tony.
What's the path you know how much more what's the you know the.
The market potential for you there to keep gaining market share in wireless and who are you taking share from in your view. Thank you.
Thank you mayor I'll start with your question on the growth rates in wireless if I remove the impact of the prior year credits.
Sure.
Pro forma service revenue and EBITDA growth, both would have been up 9%.
And in cable.
If I that's also.
Within cable factoring in the prior.
Prior year credits as well.
The pro forma.
Service revenue growth would have been down 3%.
And the EBITA growth would have been up 8%.
That split obviously reflects the largest part of the cost synergies going through cable <unk>.
Some go through our corporate offices most of them are going through the cable operations.
In terms of the second part of your question and synergies as we execute through lose mirror.
It starts first and foremost and I've said this in the past.
We are extremely pleased with the set of assets and in particular the team that has come together with Shaw.
[laughter] excuse me in terms of the talent the commitment and as I said in my comments the tenacity of this team and desire to do the right thing for our customers. It's just phenomenal and so as we come together.
Been focused on a few.
A few messages that will leave with you one is let's keep it simple for the customer and let's keep it simple for US we have a very clear focus on the things that are going to matter most.
And we try not to overload, our execution agenda and stay focused on outcomes.
What you see is that coming together in both the west and the east and so we're really pleased with the way that's come through in <unk>.
Look to our performance in this fourth quarter now that we're midway through.
We continue to see.
<unk>.
Good continued momentum on the synergy execution.
In terms of the question on the West end, where we're getting market share from.
I would say a couple of things, we're very laser focused on the brands and as I said on the earlier question, we very much focus on a market by market and segment by segment basis.
To ensure we've got the right value proposition and the way, we carry that through and in our channels.
In terms of where it comes from I would say its coming from first and foremost the growth in the market and then secondarily in terms of.
Which competitors are being impacted I would say it's.
Probably over to them too to talk about it now that you've seen all of their results.
So it it comes from a number of different areas, where less fussed about where it's coming from and more focused on what's our relative share performance.
In total and for each market.
Great. Thank you very much thanks.
Thanks, Dara Thanks, Matt next question Arrow.
Our next question comes from Tim Casey of BMO. Please go ahead.
Thanks, two for me.
Glenn just revisiting the.
The notion of keeping your EBITDA guidance unchanged, but the progress you've made on synergy targets in run rates there.
Once again, just or are you being conservative about.
The macro environment or Black Friday promotions.
Just curious why you.
You wouldn't bump.
<unk> guidance up a bit for Q4, given the progress you've made.
And second on the synergy progress at <unk>.
Do you still have any heavy lifting to do in terms of consolidating billing systems and customer support systems. I know there was a lot of work with Oracle that it has to be done there just curious if that's behind you or if that's still on the come. Thanks sure. Thank you Tim on the first one the you can you can appreciate when we set our.
Guidance, we set a range around expectations for the different categories that go into it the same is true of synergy.
I can be conservative and I can also be optimistic when I set those ranges and so.
Sure you that.
If you look at the at the dollars we had we had.
Telegraphed that.
Guided that we would achieve $200 million of cost synergies in year I'm now guiding over $360 million, it's a significant acceleration.
And significant progress on a timeline to get to those but in the consolidated whole, where we're running a business that's now.
Essentially they didn't have to $9 billion of EBITDA one.
$100 million of progress.
It's one in our.
Input range.
Or variables that that we used to go into the guidance and into relative to the $9 billion.
It's a it's a fairly small change and so it doesn't cause me to want to bump the EBITDA guidance range, Tim that still applies.
We did tighten it when we came out earlier this year, we tightened the range for the EBITDA growth will be in that tighter range and.
Nothing more really to say on that.
On the.
On your question around the billing or or other.
Other platforms, we have that project.
It's particularly our enterprise.
Resource planning or ERP program Platts.
Platform that is underway in terms of consolidating across the two companies.
That is progressing well it's on plan.
Ron schedule.
We've had a couple of modules that we've released we have a couple more still to come.
As we move into and through 2024 and in fact that will roll into very early.
<unk> thousand 25, potentially to complete and Thats really reflecting the fact that.
It'll either and just before or just after a holiday season next year and you don't do anything with ERP or.
Our systems, while you're entering into that key period and so on.
Unplanned with those.
Pleased with progress so far we've we had an important release.
Just over the past couple of weeks in terms of our.
Financial systems, and what have you, it's it's gone well.
And so I'm pleased with the progress there.
Thank you.
Thank you Tim.
Yeah.
Next question Arrow.
Our next question comes from Arvind <unk> of Canaccord. Please go ahead.
Good morning, Thanks for taking my questions and congrats on the quarter from me as well.
A question on wireless and then a clarification on wireless.
We see very strong loading.
We know that historically barrages instead of five.
Being quite dominant in terms of new Canadians on immigration.
The focus in that area, even greater than it was at an industry level than in the past can you maybe talk to how you how that.
Dominant and saw that.
Hi, sure has set a sustained.
Over the last several quarters when immigration numbers have been going up and tracking to volumes and then secondly classification for Glenn.
Thanks for the the organic numbers I just wanted to clarify the cable EBITDA growth of 8%.
Obviously includes most of the 140 and synergies it does kind of back out to perhaps a high single digit decline.
And Roger has cable organically I know you don't get too deep into that but I just wanted to understand if there was anything there that that needs to be highlighted.
Our window in the first part of the question.
The new candidate category continues to be strong as I've said earlier on the call are performance and dominant market share in that segment continues to be strong as well.
And that's.
Across the country as you look to to those numbers. So we're pleased with the performance there I'm not going to get into the tactics that.
We used to get there for competitive reasons, but.
But overall pleased on pacing of it in.
And our relative performance in that category.
And then <unk> on the the organic growth within cable.
I think we've said consistently that.
Cable is a work in progress in terms of turning around the decline in revenue and we are on that.
And that will obviously help lift obviously stronger growth in EBITDA as we are successful in turning that around.
Youre right a significant part of that 8% is the impact of the.
The cost synergies, that's a strength of our business, though that's that's now embedded in our business will continue to grow on that.
As well as continuing to grow as we turnaround our revenue.
I haven't done the math in terms of whether or not if I pull out this and pull out that would it be.
<unk> are down.
The simple truth is we've we've done some heavy lifting and removing those costs permanently removing those costs.
And you see notwithstanding what has been a 3% decline in revenue organically.
We have had a very substantial 8% growth in EBITDA.
As we turn revenue around that's going to be a pretty powerful.
Business case, and I'm looking forward to that.
Yes.
Thank you.
Thanks, Aaron next Questionary L R.
Our next question comes from <unk> <unk> of UBS. Please go ahead.
Great. Thank you.
One on Capex.
This year coming in at the high end of the guidance range should we assume that's pulling forward some of the spending for next year or can you provide some general color on the Capex trends for next year. Thank you.
Thank you for the question I think that's not pulling anything forward, that's carrying on with our current run rate.
In closing out the year I think.
Very broadly rounding now but.
I think we've been fairly consistent through the year running at.
At or around a $1 billion a quarter.
And so if we sustain that pace through the fourth quarter recognizing that there is a holiday period in there and.
Some of that spend tends to slow as we move into the winter months.
That would that pace would take you to the upper end of the guidance range.
Going forward in 2020 for the combined operations, we haven't guided yet, but we're not pulling anything forward and.
We'll come out with our guidance early in 2004.
Okay. Thank you.
Thank you next question Arrow.
Our next question comes from Stephanie price of CIBC. Please go ahead.
Hi, good morning from me.
First is you mentioned strength in bundling and the what.
Hoping you can dig a little bit more into what you're seeing in terms of bundling in the western customer base.
So how would you think about upside from revenue rich.
Sure.
Then secondly, just kind of grow the wireless handset market strategy.
Got it.
Clearly the revenue trend Peter you bought it.
I'm just wondering if the ability to finance handsets are dealt with rockets bank card.
Thank you.
Thanks, Stephanie for the question.
Just let me unpack that I'll start with the last part of the question in terms of the.
The longer term financing under the Rogers credit card. It is early days.
And the customer.
Take up in interest in that has been very strong.
Not surprisingly I mean, the value proposition is to amortize the cost of the phone over double the period.
When it's on the card.
So the total quantum of financing doesn't change, it's just over a longer period of time and the construct while there is no contract. The construct is such that the value proposition makes it compelling too.
<unk> and stay at Rogers customers and that's the way we've designed that value proposition unimportant Lee it dovetails with what we're seeing as the longer life.
Of the mobile devices.
Consumers.
And businesses continue to hang onto the bases longer and we're seeing that.
Over the last several years as a trend and so dovetailing that longer life with.
With a longer amortization period makes it makes a lot of sense.
But again, it's it's early days and we're looking forward to how thats going to play out over the holiday season.
In terms of bundling our bundling opportunities in the west.
Specifically.
The coming together with Shaw, where you had customers that were either shop mobile <unk>.
<unk> home product.
Customers.
And Rogers wireless customers, what we saw is.
<unk>.
As you would expect customers that were already.
Clients of Rogers, and Shaw coming together and trying to understand how that coming together into one bill I was going to impact them.
We got what we expected on that and that was good but more importantly, what we're seeing our customers that.
Had one product set but not the other looking to simplify things and.
Bring together their product suite and so.
Again, it's.
At the end of Q3 six months into it but it was more demand than we expected. This early in the process. So we're pleased with the market trend.
And appetite of customers to put together products between wireless and cable.
And then the last piece is revenue synergies and.
How that's coming to some extent the bundling that I just talked about.
Is one aspect of it and as I said, that's that's coming in better than we expected. This soon in the process of a second piece is that we've talked about is on the enterprise and in particular, the mid to small business and what we're seeing there is.
Same thing very good appetite of business customers.
To look to alternatives.
That they previously didn't have in the west and being able to combine those many of the product sets on the business side more and more converged and so to the extent that they have one easy experience.
Between.
Are there businesses inside as well as when they're outside of their business.
That seems to Honeywell and so as we streamline our product set.
In that segment of the market, we're seeing very good traction there.
Hope that covers it Scott.
Yeah.
Thanks, Stephanie next question area.
Our next question comes from Simon Flannery of Morgan Stanley. Please go ahead.
Great. Thank you very much good morning.
I wanted to talk a little bit about capex, if I could I think one of the opportunities you saw in the west was to extend our network to MDA use that had not been connected can you just update us on that and just give us a little bit more.
Sense of the timing, where you are on the DOCSIS Coronado upgrade.
What should we expect in 'twenty, four and beyond to move that to completion.
On the thank you Simon on the.
On the capital spend specific to wiring up <unk> in the west it's.
We are it's underway.
Early days, where we're six months in through the third quarter and halfway through the fourth.
Those are those plan.
<unk> planning schedules are well underway in terms of getting permits and what have you.
In some cases, we have started some of that build in other cases still to come but we're about where we would expect to be.
And so so happy with happy with that.
The second part of your question Simon.
On the <unk> DOCSIS four road map, where we're at on that.
<unk>.
As you would expect a fast follow extremely fast follow relative to where our U S cable peers are.
So the work with respect to mid and high split not to get too technical is well underway and our expectation is that.
The bigger lift on that is in the east.
And that work is progressing nicely.
In terms of it and so as we look to the CPE and the chipset availability.
We will have that.
Much along the same timelines that you are hearing from U S cable operators.
So look too.
The back half of 'twenty four.
As is the beginning of.
What youll see in terms of customer experience improvements.
Alright, Thanks, a lot.
Thanks, Aman area, where we have time to put in the squeeze in two more questions. Please.
Certainly our next question comes from Jerome deferral of Desjardin. Please go ahead.
Hey, good morning.
You've been great to provide detail details on synergies, but it's not necessarily easy to figure out on top of what exactly we should but the $1 billion or so.
I know, it's not the kind of questions management teams like but.
Given the forecast that we see out there and do you think it's likely that your cable margins could be around 60% in 2025.
Thank you for the question Jerome and I Love your optimism I'm not going to start guiding 24, let alone 25.
This morning.
We we are.
Let me answer it this way we've got.
Too capital intensive businesses and wireless and cable with strong margins wireless right now is 64% cable is 53%.
And they are both growing or expanding as you would expect for a business that has a larger scale, we have essentially doubled the size of cable.
With the <unk> acquisition that brings some economies with it it brings some additional capital spend with it.
Wireless is margins cover its investment in infrastructure as well as the investment from time to time and spectrum.
And so very satisfied with the balance across all of that particularly as a result of halved.
Having increased the scale substantially for cable to now roughly match, where we are with wireless in terms of national breath.
And size of EBITDA and revenue so.
Do I think Theres room for further growth in cable on its margin yes.
We have posted the margin we have this morning on the back of a small decline.
Decline in revenue year over year in the quarter, that's a pretty strong performance.
There's more opportunity ahead, but im not going to guide beyond beyond that Jerome I'm sorry.
Yes, that's understandable thanks.
Alright. Thank you thanks, Jerome and last question area.
Our final question comes from David Mcfadden of Carmack. Please go ahead.
Thanks, guys for squeezing me in just two questions just on the mobile phone net adds obviously very strong just kind of wondering how many of those on a bond on specifically in the last because it looks like you're starting to nearly.
Drive some revenue synergies I'm not sure acquisition and then secondly on the leverage you talked about your <unk>.
The case in transit dropping by one <unk> times current quarter does that factor in the drip participation that you talked about an issue stock from treasury and what's the participation rate.
David I'll start with the first one in terms of.
Mobile net adds and the extent to which they are coming in on the bundle not going to disclose that type of granularity, but to put it in perspective I would say.
In terms of product convergence and therefore, the bundling it's early days and so while we're seeing good success in the overall scheme of total wireless loadings.
It's still.
As the minority not the majority to be clear.
So I just wanted to put that in perspective.
And.
It's disproportionately.
Better in the west only because.
We now are in alternative in the west and so we're new to the category of being able to bundle and so we're seeing very good market acceptance there.
In the east we have always been able to offer that bundle opportunity and that continues to do well in the east as well. So that's how you ought to think about the trends on that and the relative size.
And then David on the on the Drip program, we launched that as I said for the October.
Quarterly payment.
And the take up rate with the first payment that it was available was 28% very pleased with that take up.
And so at a 30% run rate.
That would translate to.
Roughly $300 million a year of cash savings.
I'll, let you all know why.
I understand and acknowledge that that does not mean, the dividends didn't get paid they got paid with our most expensive capital and shares.
But thats how these programs work and that is how we will preserve.
Just that much more of our free cash flow to to nominally pay down debt and de lever as well as by de levering through earnings growth.
We do factor that in Dave.
It's.
It's one of many variables that we will factor in as we go forward.
But but yes. That's that's included as I say when we I expect we will come down by one to two per quarter, roughly a half a turn a year.
And.
We're on track for delivering exactly that keep in mind from time to time, there will be spectrum investments made and and so in one particular quarter here or there they may be on the lighter side of the 0.1 or two but.
We are delivering very strong earnings growth and very strong free cash flow generation to continue that pace to de lever very satisfied with where we are on it.
Okay, alright, thank you so much.
Thanks, Dave and thanks, everyone for joining us today and if there's any follow up questions. Please reach out to the IR team. 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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