Q4 2023 BCE Inc Earnings Call
You are in listen only mode. If you wish to ask a question dial Star 123 results and 2024 guidance conference call I would now like to turn the meeting over to Mr. Faithfull Topless. Please go ahead. Mr. Fotopoulos. Thank you Matthew and good morning, everyone and thank you for joining our call with me here today are miracle, Beberg, Bce's, President and CEO and our CFO Curtis.
Thayne Fotopoulos: Thank you Matthew and good morning everyone, and thank you for joining our call. With me here today are Mirko Bibic, BC's President and CEO, and our CFO, Curtis Millen. You can find all of our Q4 disclosure documents, including our safe harbor notice concerning forward-looking statements for 2024, on the investor relations page of the bc.ca website, which we posted earlier this morning. We have a lot of material to get through on the call, but before we begin, I want to draw your attention to our safe harbor statement on slide two, reminding you that today's slide presentation and remarks made during the call will include forward-looking Results could differ materially from those projected.
Faithfull Topless: Millan you can find all of our Q4 disclosure documents, including our safe Harbor notice concerning forward looking statements for 2024 on the Investor Relations page of the D. C. C. A website, which we posted earlier. This morning, we have a lot of material to get through on the call. However, before we begin I want to draw your attention to our safe Harbor statement on slide two.
Mind, you that todays slide presentation and remarks made during the call will include forward looking information and therefore are subject to risks and uncertainties results could differ materially we disclaim any obligation to update forward looking statements, except as required by law. Please refer to our publicly filed documents for more details on assumptions and risks with that mark over to you.
Thayne Fotopoulos: We disclaim any obligation to update forward-looking statements except as required by law. Please refer to our publicly filed documents for more details on assumptions. With that, Mirko, over to you. Thank you, Thane, and good morning, everyone.
Faithfull Topless: Thank you Thad and good morning, everyone.
Mirko Bibic: Our quarterly and full-year financial performance demonstrates the stability of our business and our proven ability to execute under any circumstance. The Bell team takes pride in delivering what we promise, taking the necessary near-term action, including driving costs out of the business and balancing growth with profitability to meet our commitments to our customers and to our investors while at the same time putting in place the technology, product, customer service, and cultural foundation that we know will drive growth in the medium to long term. Our results for 2023 validate this fact, as we achieved all our financial guidance targets and maintained a stable EBITDA margin, even while facing significant media advertising headwinds, unsupportive government and regulatory decisions, and a macroeconomic environment marked by higher interest rates and sustained inflation. We also made tangible progress on our key strategic imperatives in 2023, showing that the investments we've been making across every part of our business since the onset of COVID are working. And these priorities will remain the foundation for Belk's future success.
Speaker Change: Our quarterly and full year financial performance demonstrate the stability of our business and our proven ability to execute under any circumstances the.
Speaker Change: The Bell team takes pride in delivering what we promise taking the necessary near term actions, including driving costs out of the business and balancing growth with profitability to meet our commitments our commitments to our customers and to our investors while at the same time, putting in place the technology product customer service and cultural Foundation.
Speaker Change: We know will drive growth in the medium to long term.
Speaker Change: Our results for 2023 validate this fact as we achieved all our financial guidance targets and maintained a stable EBITDA margin, even while facing significant media advertising headwinds unsupportive government and regulatory decisions and the macroeconomic environment marked by higher interest rates and sustained inflation.
Speaker Change: We also made tangible progress on our key strategic imperatives in 2023, showing that the investments we've been making across every part of our business since the onset of Covid are working and these priorities remain the foundation for <unk> future success.
Mirko Bibic: We met our broadband fiber build-out target, and we surpassed our mobile 5G and 5G Plus coverage objectives. In fact, we now offer multi-gigabit symmetrical internet speeds of 3 gigabits in 6.5 million locations. That's a big competitive advantage that our cable competitors cannot match across their entire footprint, and our performance and quality gap over cable is reflected in our internet subscriber metric. We also secured new 5G Plus spectrum licenses in the recently completed 3800 MHz auction. We now have the most 5G Plus spectrum in Canada, acquired at a total cost that was the lowest among national wireless carriers.
Speaker Change: We met our broadband fiber buildout target and we surpassed our mobile five G and five G plus coverage objectives. In fact, we now offer multi gig symmetrical internet speeds of three gigabytes and $6 5 million locations. That's a big competitive advantage that our cable competitors cannot match across their entire footprints and.
Speaker Change: Our performance in quality gap over cable is reflected in our internet subscriber metrics.
Speaker Change: We also secured new five G plus spectrum licenses in the recently completed 3800 megahertz auction. We now have the most five G plus spectrum in Canada acquired at a total cost that was the lowest among national wireless carriers.
Mirko Bibic: In wireless, we delivered a great result in an increasingly competitive environment. We delivered a healthy step-up in sales, strong net ads focused on high quality premium brand customer load, and positive organic ARPU growth in Q4 and throughout the year. And importantly, we managed our promotional offers in a disciplined way to balance growth with profitability, with a sizable improvement in product margin in Q4. Fueled by our fiber footprint, we also grew broadband internet market share, contributing to strong residential internet revenue growth of 7.1% in 2023. In particular, we increased share gains and our competitiveness in the province of Quebec given our fiber advantage and bundling capability. Turning to media, digital revenue was up 19% and represented 35% of total media revenue versus 29% last year, and that's a notable result given the current challenging advertising market conditions. This is also notable given our strategic shift to digital, and investments to sustain this strategy are continuing with long-term access to premier content from core partners, including Warner Bros.
Speaker Change: In wireless we delivered a great result, and an increasingly competitive environment, we delivered a healthy step up in sales strong net ads focused on high quality premium brand customer loadings positive organic ARPA growth in Q4 and throughout the year and importantly, we managed our promotional offers in a disciplined way.
To balance growth with profitability with a sizable improvement in product margin in Q4.
Speaker Change: Fueled by our fiber footprint. We also grew broadband internet market share contributing to strong residential internet revenue growth of seven 1% in 2023 in particular, we stepped up share gains and our competitiveness in the province of Quebec, given our fiber advantage in bundling capabilities.
Speaker Change: Turning to media digital revenue was up 19% and represented 35% of total media revenue versus 29% last year and that's a notable result, given current challenging advertising market conditions. This is also notable given our strategic shift to digital.
Speaker Change: And investments to sustain this strategy are continuing with long term access to premier content from Corre partners, including Warner Brothers Discovery on the NFL. The recent introduction of AD supported subscription tiers on crave and upcoming distribution on Amazon and Amazon Prime video, which we announced this week as well as the.
Mirko Bibic: With Discovery and the NFL, the recent introduction of ad-supported subscription tiers on Crave, an upcoming distribution on Amazon Prime Video, which we announced this week, as well as the launch of addressable advertising that will enable advertisers to target ads to specific households or devices, we're well positioned to capture an even higher share of industry digital ad market revenue going forward. On the customer experience front, our investments in building the best broadband networks, which are consistently recognized by third parties as being the fastest, together with online digital support tools and innovative apps, continue to deliver a better customer experience. These efforts are a big reason why we've increased our share of digital online service transactions through self-serve. Aravinda Galappatthige, Drew McReynolds, Tim Casey, Drew McReynolds, Tim Casey, Now on slide five of our presentation.
Speaker Change: Launched of addressable advertising that will enable advertisers to target ads to specific households, or devices were well positioned to capture an even higher share of industry digital AD market revenue going forward.
Speaker Change: On the customer experience front, our invest our investments in building the best broadband networks, which are consistently recognized by third parties as being the fastest.
Speaker Change: Together with online digital support tools and innovative apps continue to deliver better customer experiences.
Speaker Change: These efforts are a big reason why we've increased our share of digital online service transactions through self service tools to nearly 70% of all digital transactions and wide bell customer satisfaction scores continue to improve as reflected in the latest report from the Cts.
Speaker Change: Which showed as you know a 6% drop in bell share of overall complaints again.
Speaker Change: Best performance among national service providers for an eighth consecutive year.
Speaker Change: Now on slide five of our presentation.
Mirko Bibic: It's clear from all the data points I just provided that we made good progress against our strategic imperatives in 2023. And we fully appreciate that our shareholders look to Bell for the safety and growth of our cash flows. However, we must address a number of factors in our operating environment, including unsupportive federal government policies, higher interest rates and inflation, changing consumer preferences regarding service experience and delivery, and managing through a fundamental technology transformation. Competition and customer expectations are also putting downward pressure on ARPUs, requiring a more agile and scaled-down cost structure. Media companies are facing increasing competition from global tech players, an ongoing advertising recession, and a declining legacy distribution business. And the Canadian regulatory environment is marked by policies on fiber resale that are negative, specifically Target Bell, and a broadcasting framework that curiously still does very little to assist Canadian media.
Speaker Change: It's clear from all of the data points I just provided that we made good progress against our strategic imperatives in 2023.
Speaker Change: And we fully appreciate that our shareholders look to bell for the safety and growth of our cash flows. However, we must address a number of factors in our operating environment and that includes Unsupportive federal government policies higher interest rates and inflation changing consumer preferences regarding service experience and delivery and Madden.
Speaker Change: Jing through a fundamental technology transformation.
Speaker Change: Competition and customer expectations are also putting downward pressure on our booth, requiring a more agile and scale down cost structure.
Speaker Change: Media companies are facing increasing competition from global Tech players and ongoing advertising recession in a declining legacy distribution business.
Speaker Change: And the Canadian regulatory environment is marked by policies on fiber resell that are negative specifically target Bell and a broadcasting framework that curiously still does very little to assist Canadian media companies.
Mirko Bibic: Because of the CRTC's targeted actions, we are halting the elevated CapEx spending program that we've been operating under since 2021. As a result, we are notably slowing the pace of our fiber footprint expansion, and we're capping fiber speeds at 3 gigabits per second. This also led to $105 million less capital being invested than planned for in Q4 of 2023, and we intend to reduce CapEx by at least an additional $1 billion over the next two years, including a minimum $500 million year-over-year decrease in 2024 alone. Given the lack of government and regulatory support for the historic capital investments Bell has made since the onset of COVID in 2020, and an unwillingness or inability to level the playing field between domestic competitors And consistent with this refocusing, we're today announcing the sale of 45 radio stations and the closure of 107 Source stores.
Speaker Change: Because of the CRT six targeted actions, we are halting the elevated capex spending program that we've been operating under since 2021.
Speaker Change: As a result, we are notably slowing the pace of our fiber footprint expansion and we're capping fiber speeds at three gigabits per second.
Speaker Change: This also led to a $105 million less capital being invested than planned for in Q4 of 2023.
Speaker Change: And we intend to reduce capex by at least an additional $1 billion over the next two years, including a minimum $500 million year over year decrease in 2024 alone.
Speaker Change: Given the lack of government and regulatory support for the historic capital investments Bell has made since the onset of Covid in 2020, and an unwillingness or inability to level the playing field between domestic competitors in global Tech Giants. We're also shifting our focus away from overly regulated parts of our business towards key.
Speaker Change: Growth areas, where we plan to accelerate investments such as cloud and security services advanced advertising and digital transformation just to name a few and.
Speaker Change: And consistent with this refocusing we're today announcing the sale of 45 radio stations and the closure of 107 source stores.
Mirko Bibic: To succeed in a landscape that's being reshaped, it's more important than ever to continue to align our operating model and cost structure to customer expectations and the revenue profile of our business segment. And for these reasons, we're undertaking a significant workforce restructuring initiative, our largest in nearly 30 years, that will eliminate approximately 4,800 positions, including 750 contractors, or 9% of all Bce employees. This restructuring initiative will yield in-year cost savings in the range of $150 to $200 million for 2024, or $250 million on an annualized basis. Restructuring the business is never an easy decision, but it's what we need to do to simplify our organization and accelerate our transformation. Where possible, we are leveraging vacant positions and natural attrition in order to minimize the impact on our team.
Speaker Change: To succeed in the landscape that is being reshaped its more important than ever to continue to align our operating model and cost structure to customer expectations and the revenue profile of our business segments.
Speaker Change: And for these reasons, we are undertaking a significant workforce restructuring initiative.
Speaker Change: Our largest in nearly 30 years that will eliminate approximately 4800 positions, including 750 contractors or 9% of all BCE employees.
Speaker Change: This restructuring initiative will yield in year cost savings in the range of $150 million to $200 million for 2024.
Speaker Change: $250 million on an annualized basis.
Now the restructuring the business is never an easy decision, but it's what we need to do to simplify our organization and accelerate our transformation where possible we're leveraging vacant positions in natural attrition in order to minimize the impact on our team will remove overlaps and consolidate certain functions across.
Mirko Bibic: We'll remove overlaps and consolidate certain functions across different teams, reducing corporate functions by 20% and over-indexing reductions in non-customer-facing roles. While we're eliminating positions in areas where demand and revenue are declining, we are continuing to hire in growth areas. And this restructuring program is enabled in part by our accelerated investments in automation, digitization, and AI, strategic acquisitions, new partnerships, and service launches to improve our competitiveness and innovation agenda. Given the transformation investments we've made since 2020, we're in a better position now to drive costs out of the business. These transformation investments will continue in 2024 and beyond, and they'll drive more OPEC savings in the medium to long term than those being realized as a result of today's announcement. Now, moving to slide six.
Speaker Change: Current teams, reducing corporate functions by 20% and over indexing reductions in non customer facing roles, while we're eliminating positions in areas where demand and revenue are declining we are continuing to hire in growth areas.
Speaker Change: And this restructuring program is enabled in part by our accelerated investments in automation, Digitization and AI strategic acquisitions, new partnerships and service launches to improve our competitiveness and innovation agenda.
Speaker Change: Given the transformation investments we've made since 2020, we're in a better position now to drive costs out of the business. These transformation investments will continue in 2024 and beyond and they'll drive more opex savings in the medium to long term than those being realized as a result of today's announcement.
Speaker Change: Now moving to slide six.
Mirko Bibic: I want to provide some color for you on how we're driving our operational transformation from a traditional telco to a tech services and digital media leader with a number of examples of investments, partnerships, and initiatives we've been undertaking. For wireless, as we've already announced, we've entered into a long-term strategic partnership with Best Buy Canada to rebrand, excuse me, 165 Source stores to Best Buy Express. Bell will remain responsible for store operations, while Best Buy assumes responsibility for consumer electronics merchandising, procurement, marketing, inventory ownership and management, logistics, and supply chain, as well as other support functions. And, most importantly, Bell will continue to control all mobility and internet security.
Speaker Change: I want to provide some color for you on how we're driving our operational transformation from a traditional telco to a tech services and digital media leader with a number of examples of investments partnerships and initiatives we've been undertaking.
Speaker Change: In wireless as we've already announced we've entered into a long term strategic partnership with best buy Canada to rebrand to rebrand excuse me 165 source stores to best buy Express Belle.
Speaker Change: Bell will remain responsible for store operations, while best buy as soon as responsibility for consumer electronics merchandising procurement marketing inventory ownership and management logistics and supply chain as well as other support functions importantly.
Speaker Change: Well, we'll continue to control all mobility and Internet sales.
Mirko Bibic: At Bell Business Markets, we've advanced our capabilities in cloud computing solutions and digital workflow automation with the acquisition of FX Innovation last year and our partnership with ServiceNow, the global leader in digital workflow solutions. Our collaboration with ServiceNow creates unique value for the Canadian business market and will elevate the end-to-end experience for our customers. And on the media side, it's about reducing our dependence on overly regulated businesses like radio and pushing even more aggressively into digital targeted ad platforms through scaling ad-supported subscription tiers on Crave, expanding addressable advertising across more media properties, and acquiring out-front media as a Canadian out-of-home business. And, as I've mentioned, we'll distribute Crave on Amazon Prime Video channels, which will enable even better Crave growth looking forward.
Speaker Change: At Bell business markets, we've advanced our capabilities in cloud computing solutions and digital workflow automation with the acquisition of FX innovation last year and our partnership with service now the global leader in digital workflow solutions, our collaboration with service now creates unique value for the Canadian business market.
Speaker Change: And we will elevate the end to end experience for our customers.
Speaker Change: And on the media side, it's about reducing our dependence on overly regulated businesses like radio and pushing even more aggressively into digital targeted AD platforms through scaling AD supported subscription tiers on crave, expanding addressable advertising across more media properties and acquiring Out-front Media's can.
Speaker Change: And out of home business and as I've mentioned, we'll distribute crave on Amazon Prime video channels, which will enable even better crave growth looking forward.
Mirko Bibic: Against the backdrop of accelerating investments in key growth areas, we're also laser-focused on transforming our existing core business. And we're looking at things like how to build better and more resilient networks, provide better services to enhance distribution channels and sales coverage, speed up innovation and time to market, modernize and rationalize our suite of products, and embrace digital solutions and automation. And a key piece of our product modernization program is leveraging our existing all-fiber network to provide better service to customers, save money on maintenance costs, and, of course, reduce our environmental footprint.
Speaker Change: Against the backdrop of accelerating investments in key growth areas. We're also laser focused on transforming our existing core business.
Speaker Change: And we're looking at things like how to build better and more resilient networks, providing better service through enhanced distribution channels and sales coverage speeding up innovation and time to market modernizing and rationalizing our suite of products and embracing digital solutions and automation.
Speaker Change: And a key piece of our product monitor modernization program is leveraging our existing all fiber network to provide better service to customers saving money on maintenance costs and of course, reducing our environmental footprint.
Mirko Bibic: We've made progress migrating customers and equipment to our fiber network, as well as consolidating and removing copper cables and equipment no longer required in the field. We've launched fiber migration now to 105 central offices, and we expect to transition 110,000 residential customers in 2023. And in 2024, copper customers in Manitoba and Atlantic Canada who need a repair will be transitioned over to fiber where we have fiber, as we already do in Ontario and Quebec. We introduced a new next-generation 5 TV service powered by Bell's in-house software on an Android TV set-top box, and that, importantly, sets the stage for a move to a single IPTV platform and addressable TV capabilities at scale everywhere we operate. This new service is currently available to residential customers in Atlantic Canada, and it will be rolled out, as I said, to other regions across our footprint in the coming quarter.
Speaker Change: We've made progress migrating customers and equipment to our fiber network as well as consolidating and removing copper cables and equipment no longer required in the field we've.
Speaker Change: We've launched fiber migration now to 105 central offices transitioning 110000 residential customers in 2023 and in 2020 for copper customers in Manitoba, and Atlantic, Canada, we need to repair will be transitioned over to fiber, where we have fiber as we already do in.
Speaker Change: <unk> and Quebec.
Speaker Change: We introduced a new next generation five TV service powered by bells in house software on an Android TV set top box and that importantly sets the stage for a move to a single IP TV platform and addressable TV capabilities at scale everywhere, we operate this new.
Speaker Change: Service is currently available to residential customers in Atlantic, Canada, and that will be rolled out as I said to other regions across our footprint in the coming quarters.
Mirko Bibic: We're also consolidating real estate, reducing the number of vendors we deal with, and, very importantly, simplifying our ordering and billing technology platforms by moving all core consumer products to a single billing architecture. This has now been launched at scale to 1.3 million customers in Ontario and Quebec, and we will continue to migrate more customers onto the new billing platform as the year progresses. Each of these programs, and I've given you several examples, each of them will drive growth, better serve customers, and take costs out of the business. Importantly, they'll support a stronger EBITDA growth trajectory, margin accretion, and free cash flow expansion in the years ahead, and that will help support our dividend growth objectives. And that brings me to slide 7 in our dividend announcement this morning.
Speaker Change: We're also consolidating real estate, reducing the number of vendors, we deal with and very importantly, simplifying our ordering and billing technology platforms by moving all core consumer products to a single billing architecture. This.
Speaker Change: This has now been launched at scale to one 3 million customers in Ontario, and Quebec and will continue to migrate more customers on the new billing platform as the year progresses.
Speaker Change: Each of these programs in a given you several examples each of them will drive growth better serve customers and take costs out of the business.
Speaker Change: <unk>, they will support a stronger EBITDA growth trajectory margin accretion in free cash flow expansion in the years ahead, and that's going to help support our dividend growth objective.
Speaker Change: And that brings me to slide seven and our dividend announcement for this morning.
Mirko Bibic: We're increasing the BCE common share dividend by 3.1% for 2024. It's our 16th year of uninterrupted growth, demonstrating our unwavering commitment to dividend growth. Dividend growth remains central to our value proposition, and we'll continue to prioritize it in our capital allocation. And it's apparent from our dividend yield that, at this time, BC's share price is not being rewarded for the higher 5% dividend growth profile.
Speaker Change: We're increasing the BCE common share dividend by three 1% for 2024.
Speaker Change: Our 16th year of uninterrupted growth, demonstrating our unwavering commitment to dividend growth.
Speaker Change: Dividend growth remains central to our value proposition and we will continue to prioritize it in our capital allocation.
Speaker Change: And it's apparent from our dividend yield that at this time BCE share price is not being rewarded for the higher 5% dividend growth profile.
Mirko Bibic: We appreciate that our shareholders want a stable and growing dividend, and we're delivering on that expectation. The 3.1% increase for this year, 2024, will allow us to better balance capital allocation priorities with the ultimate objective of getting our payout ratio below 100%, and that provides us additional financial flexibility at the same time, given the higher interest rate environment, the significant workforce restructuring we're undertaking, and the acceleration of our tech co-transformation that will serve as the future catalyst for growth and deliver the financial results that we continue to deliver for our investors and that you can continue to expect from And on that, I'll turn it over to Kurt. Thank you, Mirko, and good morning, everyone.
Speaker Change: We appreciate that our shareholders want a stable and growing dividend and we're delivering on that expectation.
Speaker Change: The three 1% increase for this year 2024 will allow us to better balance capital allocation priorities with the ultimate objective of getting our payout ratio below 100% and that provides us additional financial flexibility at the same time, given the higher interest rate environment significant workforce restructure.
Speaker Change: We're undertaking and the acceleration of our tech co transformation I will serve as the future catalyst to growth and deliver the financial results.
We continue to deliver for our investors and that you can continue to expect from us and on that I will turn it over to Curtis.
Curtis: Thank you Marco and good morning, everyone I'll begin on slide nine with Bce's consolidated financial results.
Curtis Millen: I'll begin on slide nine with BC's consolidated financials. We had a strong quarter to end the year, with 5.3% higher adjusted EBITDA that drove a 1.9 point increase in margin to 39.7% and 7% adjusted EPS. This EBITDA result was achieved despite ongoing media advertising headwinds and a step up in consumer promotional offer intensity and moderated service revenue growth. Regarding CapEx, due to the deceleration of our fiber network build-out in the back half of the year, CapEx was down $609 million for full year 2020.
Curtis: We had a strong quarter to end the year with $5, 3% higher adjusted EBITDA drove a one nine point increase in margin to 39, 7% and 7% adjusted EPS growth.
Curtis: This EBITDA result was achieved despite ongoing media advertising headwinds and a step up in consumer promotional offer intensity a moderated service revenue growth this quarter.
Curtis: Regarding capex due to the deceleration of our fiber network build out in the back half of the year Capex was down $609 million in full year 2023.
Curtis Millen: As Mirko pointed out, we reduced planned capital investment by an additional $105 million in Q4 as a direct result of the CRTC's Fibre Resale. Our strong EBITDA growth, substantial CapEx reduction, lower cash taxes, and the positive change in work that we had signaled to the street throughout the year drove a $913 million year-over-year positive swing in Q4 free cash. Turning a bell, CTS starts on slide 10, starting with a high-level summary of Q4 subscribers. Overall, I would say they were doing a very good job in striking a healthy balance between volume growth, acquisition cost, and our. We delivered a record quarter for post-paid mobile phone gross activations that drove 128,715 new net sales.
Curtis: As Marshall pointed out we reduced planned capital investment by an additional $105 million in Q4 as a direct result of the CRT vies fiber resale decision.
Curtis: Our strong EBITDA growth substantial capex reduction lower cash taxes, and the auditor of change in working capital that we had signaled to the street throughout the year drove a $913 million year over year positive swing in Q4 free cash flow.
Curtis: Turning to Bell Cts on slide 10.
Starting with a high level summary of Q4 subscriber metrics.
Curtis: Overall, I would say that we're doing a very good job in wireless striking a healthy balance between volume growth acquisition costs and <unk>.
Curtis: We delivered a record quarter for postpaid mobile phone gross activations drove a 128715, new net subscribers.
Curtis Millen: This result, which comprises our second-highest Q4 for consumer post-paid net ads after last year, was achieved even with a higher number of switchers, reflecting aggressive offers from our competitors that we chose to match selectively. This disciplined approach was reflected in our promotional offers, where handset subsidies were, on average, 32% lower than they were in 2020, driving a significant improvement in the wireless product market. Wireless ARPU is up.4% this quarter, driven by our focus on premium 5G subscriber load and further growth in outbound roaming.
This result, which comprises our second highest Q4 for consumer postpaid net adds after last year was achieved even with a higher number of switchers, reflecting aggressive offers from our competitors that we chose to match selectively.
Curtis: Disciplined approach was reflected in our promotional offers or handset subsidies were on average 32% lower than they were in 2002, driving a significant improvement in wireless product margin.
Curtis: Wireless <unk> was up <unk>, 4% this quarter driven by our focus on premium <unk> subscriber loadings and further growth in outbound roaming a great result in light of the more aggressive rate plan offers during the Black Friday and December holiday sales period, demonstrating our alliance on network quality and distribution strength rather than.
Curtis Millen: A great result in light of the more aggressive rate plan offers during the Black Friday and December holiday sale season. Demonstrating our reliance on network quality and distribution strength, rather than promotional discounting to drive profitable subscribers, Switching to our industry-leading broadband, Bell Internet added 55,591 total new net retail subscribers, our second best Q4 result in nearly two decades.
Curtis: Promotional discounting to drive profitable subscriber growth.
Curtis: Switching to our industry, leading broadband segment.
Curtis: Internet added 55591 total new net retail subscribers. Our second best Q4 result in nearly two decades.
Curtis Millen: And on the TV side of things, we added 23,537 net IPTV customers, which is approximately $17,000 lower versus Q4 2020. This was an expected result, as our result last year benefited from a significant number of customer activations driven by the world. Moving to Bell CTS.
Curtis: And on the TV side of things, we added 23537, net IP TV subs, which was approximately 17000 lower versus Q4 of 2022.
Curtis: This was an.
Curtis: Expected result, as a result last year benefited from a significant number of customer activations driven by the World Cup.
Curtis: Moving to Bell Cts financials.
Curtis Millen: This is a very good set of results to end the year. Topline revenue grew a respectable 1.7% in Q4. This was achieved despite ongoing legacy declines, a tough year-over-year calm for business product sales, and a richer residential service bundle discount, reflecting a more intense promotions market compared to last year. Total consumer wireless revenue increased 5.5%, profiting from a higher sales mix of premium mobile phones on the product and positive ARPU growth on the. Residential Internet revenue was up 5.5%.
Curtis: A very good set of results to end the year topline revenue grew a respectable one 7% in Q4. This was achieved despite ongoing legacy declines a tough year over year comp for business product sales and a richer residential service bundle discounts, reflecting a more intense promotions market compared to last year.
Curtis: Total consumer wireless revenue increased five 5% profiting from a higher sales mix of premium mobile phones on the product side and positive <unk> growth on the service side.
Curtis: Residential Internet revenue was up five 4%.
Curtis Millen: CTS revenue also benefited from higher sales of security and cloud-focused managed and professional service solutions to businesses, as well as the financial contribution from our acquisition of FX Innovation. The combined impact of continued consumer strength across our wireless residential home service, together with Improved Business Wireline Results, better wireless promotional offer discipline, and lower weather-related cost pressures for a strong eBidog growth of four dogs. Clearly, there's a financial highlight. On to slide 11.
Curtis: Cts revenue also benefited from higher sales of security and cloud focused managed and professional service solutions to businesses as.
Curtis: As well as the financial contribution from our acquisition of FX innovation engine.
Curtis: The combined impact of continued consumer strength across our wireless residential home services together with improved business wireline results better wireless promotional offer discipline and lower weather related cost pressures drove strong EBITDA growth of four 8%.
Curtis: Clearly there is a financial highlights for Q4.
Curtis: Onto slide 11.
Curtis Millen: The media continued its digital revenue growth and, in aggregate, performed better than we expected during the pandemic. Digital revenues were up 27 percent. Underpinning this result was Crave, which grew direct streaming subscribers by 14% on the back of market-leading content, as well as continued strong growth of our Sam TV sales. We saw a 70% increase in sales. Despite strong digital ad growth in the quarter, total ad revenue was down 13.7% as advertiser spending, particularly for TV, continued to be impacted by the economy and now resolved Hollywood's. Furthermore, revenue generated in Q4 2022 from the World Cup contributed to the year-over-year decline. Normalizing for the World Cup, ad revenue, net of displacements, was down $9.
Curtis: No media continued its digital revenue growth and in aggregate performed better than we expected during the quarter.
Curtis: Digital revenues were up 27% over last year.
Curtis: Underpinning. This result was crave, which grew direct streaming subscribers by 14% on the back of market, leading content as well as continued strong growth of our Sam television sales tool, which saw a 70% increase in sales in Q4.
Despite strong digital AD growth in the quarter total AD revenue was down $13, 7% as advertiser spending, particularly for TV continued to be impacted by the economy and now resolved Hollywood strikes.
Curtis: Furthermore, revenue generated in Q4 2022 from the World Cup contributed to the year over year decline.
Curtis: Normalizing for the World Cup AD revenue net of displacements was down 9%.
Curtis Millen: That performance is better than our peers, which is a testament to Bell Media's programming strength, diversified mix of assets, and focused execution of our digital-first strategy. Despite the unfavorable revenue backdrop, EBITDA increased 14.7% again. This result was supported by the favorable impact of various restructuring initiatives undertaken in 2023 to help right-size our cost structure and asset portfolio, along with lower TV programming costs due to the Hollywood strike and last year's World Cup. I'll now turn to our 2024 financial outlook, starting with revenue and EBITDA on slide 13. Based on the latest economic forecasts and industry outlooks, our revenue and adjusted EBITDA growth ranges for 2024 take into consideration potential recessionary risks, competitive pricing pressures, and the Business Product Sales Lump. Additionally, our strategic distribution partnership with Best Buy Canada will see the elimination of approximately $300 million in largely consumer electronics revenue from our consolidated results in 2021.
Curtis: That performance is better than our peers, which is a testament to bell Media's programming strength diversified mix of assets and focused execution of our digital first strategy.
Curtis: Despite the unfavorable revenue backdrop, EBITDA increased $14, 7% in Q4.
Curtis: This result was supported by the favorable impact of various restructuring initiatives undertaken in 'twenty three help rightsize, our cost structure and asset portfolio, along with lower television programming costs due to the Hollywood strikes and last year's World Cup broadcasts.
Speaker Change: I'll now turn to our 2024 financial outlook, starting with revenue and EBITDA on slide 13.
Speaker Change: Based on the latest economic forecast on industry outlook, our revenue and adjusted EBITDA growth ranges for 24 takes into consideration potential recessionary risks competitive pricing pressures and business product sales lumpiness.
Speaker Change: Additionally, our strategic distribution partnership with best buy Canada will see the elimination of approximately $300 million in.
Speaker Change: Largely consumer electronics revenues from our consolidated results in 2024.
Curtis Millen: The impact on EBITDA will not be material, given the relatively low margin for consumer electi- As a result, we're setting our guidance growth ranges for 2024 at 0% to 4% for total revenue and 1.5% to 4.5% for adjusted revenue. Given this outlook and benefiting from the cost savings we expect to realize from the transformation initiatives that Mirko outlined earlier, including a 9% work reduction in our work, we predict BCE's margin for 2024 to remain at a minimum stable year over year, and notably, if you exclude the financial impact of the Best Buy transaction. Target Guided Rain, Underpinning this steady growth is our continued focus on premium mobile phones with an increased emphasis on market growth as we capitalize on our wireless network.
Speaker Change: The impact on EBITDA will not be material, given relatively low margins for consumer electronics.
Speaker Change: As a result, we're setting our guidance growth ranges for 2024 zero to 4% for total revenue and $1 five to $4 five for adjusted EBITDA.
Speaker Change: Given this outlook and benefiting from the cost savings, we expect to realize from the transformation initiatives that mark and I outlined earlier, including a 9% reduction in our workforce.
Speaker Change: <unk> margin for 2024 to remain at a minimum stable year over year.
Speaker Change: Notably if you exclude the financial impact of the <unk> transaction, our target guidance ranges are consistent with last year, showing the relative stability of our business and the confidence we have in our proven ability to execute under any circumstance.
Speaker Change: Underpinning this steady growth because of our continued focus on premium mobile phone subs with increased emphasis on market growth as we capitalize on our wireless network leadership.
Curtis Millen: Ongoing 5G upgrades. We also plan to continue winning the home by leveraging our industry-leading Symmetrical Internet Speed Advantage over..., delivering the best customer experience with our products and driving greater cross-sell penetration of higher value mobility and internet housing. In our B2B sector, our objective is to build on our momentum from 2023 by accelerating growth in cloud, security, and workflow automation solutions in the large enterprise, while also expanding key channels and leveraging our fiber footprint in SMB. At Bell Media, although the timing of an advertising recovery remains uncertain, we'll continue to drive advanced advertising, digital products such as, as well as new distribution initiatives such as Crave's partnership with Amazon, to further grow our These digital opportunities, together with the financial contribution from our pending acquisition of M4Media and restructuring cost savings, should drive improved media financial performance.
Speaker Change: Ongoing five G upgrade cycle and strong integration levels.
Speaker Change: We also plan to continue winning the home by leveraging our industry, leading symmetrical internet speed advantage over cable delivering the best customer experience with our products and driving greater cross sell penetration of higher value mobility and internet households.
Speaker Change: In our <unk> sector. Our objective is to build on our momentum from 2023 by accelerating growth in cloud security and workflow automation solutions in the large enterprise space, while also expanding key channels and leveraging our fiber footprint and SMB.
Speaker Change: At Bell media, although the timing of an advertising recovery remains uncertain. We will continue to drive advanced advertising digital products like frame as well as new distribution initiatives, such as creative partnership with Amazon to further grow our market share of digital assets.
Speaker Change: These digital opportunities together with the financial contribution from our pending acquisition of upfront media and restructuring cost savings should drive improved media financial performance in 2024.
Speaker Change: Moving to slide 14.
Curtis Millen: Despite growth in EBITDA, we project adjusted EPS to be in the range of $2.98 to $3.13 per share in 2021, 2-7% lower versus. This year-over-year decline can be attributed largely to... an approximate $200 million step up in interest expense due to higher rates and more debt outstanding from investments in our growth strategy. An estimated $100 million increase in depreciation and amortization expense, consistent with the growth in our broadband network capitalization. Higher pension financing costs and gains on the sale of real estate realized in 2023 related to our multi-year consolidation and conversion program that totaled $67 million or $0.05. Turning to slide 15.
Speaker Change: Despite growth in EBITDA, we project adjusted EPS to be in the range of $2 98 to $3 <unk> three per share in 2024, or 2% to 7% lower versus last year. This year over year decline can be attributed largely to the.
Speaker Change: Approximately $200 million step up in interest expense due to higher rates and more debt outstanding from investments in our growth strategy and.
Speaker Change: An estimated $100 million increase in depreciation and amortization expense consistent with the growth in our broadband network capital asset base.
Speaker Change: Higher pension financing costs and gains on the sale of real estate realized in 2023 related to our multi year consolidation and conversion program that totaled $67 million or <unk> <unk> per share.
Speaker Change: Turning to slide 15, we.
Curtis Millen: We expect to generate $2.8 to $3.05 billion of free cash flow in 2020. This is 3-11% lower compared to 2023 and reflects around $400 million in one-time severance payments related to the 4,800 employee reductions that Mirko announced. Normalizing for the severance payments associated with our announced workforce restructuring initiatives in 2023 and 2024, free cash flow growth is in the range of zero to seven percent. Providing support for the 3.01% dividend increase, we declare... This underlying growth in free cash flow is the result of higher year-over-year EBITDA and a $500 million decrease in CapEx that will drive a capital intensity ratio of 16.5% or less in 2021. Although we have currently budgeted approximately $4.1 billion in CapEx spending for 2024, this amount can possibly be even lower depending on government policy decisions during the course of the year that may further disincentivize investment.
Speaker Change: We expect to generate $2 <unk> to $3 <unk> 5 billion of free cash flow in 2024.
Speaker Change: This is 3% to 11% lower compared to 2023 and reflects around $400 million.
Speaker Change: And one time severance payments related to the 4800 employee reductions that mark will detail.
Speaker Change: Normalizing for the severance payments associated with our announced workforce restructuring initiatives in 2023, and 2020 for free cash flow growth is in the range of zero to 7% this year, providing support from the $3, 1% dividend increase we declared this morning.
Speaker Change: This underlying growth in free cash flow as a result of higher year over year, EBITDA and a $5 $500 million decrease in Capex that will drive our capital intensity ratio of 16, 5% or less in 2024.
Speaker Change: Although we have currently budgeted approximately $4 1 billion in Capex spending for 2024. This amount can possibly be even lower depending on government policy decisions. During the course of the year that may further disincentivize investments.
Curtis Millen: 2024 free cash will also reflect higher interest paid, stable to higher cash taxes as the federal government's accelerated CCA program is phasing out beginning this year, and Low Projected Cash from Work. His work in Capital Drag is attributable mainly to the significant improvements in AR and inventory levels realized in 2023, which normalized following substantial COVID and supply chain impacts in 2020, as well as potential recessionary impacts on customer collections that may materialize with a harder economic landscape. Moving to slide six.
Speaker Change: 2020 for free cash flow also reflects higher interest paid stable to higher cash taxes at the federal government's accelerated CCA program is phasing out beginning this year and lower projected cash from working capital.
Speaker Change: This working capital drag is attributable mainly to the significant improvements in AR and inventory levels realized in 'twenty, three which normalized following substantial COVID-19 and supply chain impacts in 2022.
Speaker Change: As well as potential recessionary impacts on customer collections that may materialize with a harder economic landings.
Speaker Change: Moving to slide 16, as we begin the year, we were in a very strong financial position we.
Curtis Millen: As we begin the year, we are in a very strong financial position. We have access to $5.8 billion of liquidity and a balance sheet with a sizable pension solvency surplus totaling $3.6 billion, which provides good overall financial flexibility to execute on our business plan and strategic priorities for 2020. Our net debt leverage ratio is just under 3.5 times adjusted EBITDA due to several years of generational capex spending and critical spectrum investment. It is projected to remain more or less stable. Our debt capital structure also remains very well-structured, with an average term to maturity of approximately 12 years.
Speaker Change: We have access to $5 8 billion of liquidity and our balance sheet with a sizeable pension solvency surplus totaling $3 6 billion.
Speaker Change: Which provide good overall financial flexibility to execute on our business plan and strategic priorities for 2024.
Speaker Change: Our net debt leverage ratio of just under three five times adjusted EBITDA due to several years of generational capex spending in critical spectrum investments is projected to remain more or less stable. This year.
Speaker Change: Our debt capital structure also remains very well structured with an average term to maturity of approximately 12 years and after tax cost of borrowing that is below prevailing interest rates at around 3%.
Curtis Millen: An after-tax cost of borrowing that is below prevailing interest rates at around 3% at a floating interest rate exposure that is below our historical target range of 20-30%. At these levels, together with no material debt refinance or requirements until Q1 2025. Interest rates that are expected to ease and access to lower-cost short-term financing options. We can be opportunistic in accessing the debt capital markets this year, if market conditions are favorable, to pre-fund upcoming maturities and mitigate interest rates.
Speaker Change: Had a floating interest rate exposure that is below our historical target range of 20% to 30%.
Speaker Change: At these levels together with no material debt refinancing requirements until Q1 2025 <unk>.
Speaker Change: Interest rates that are expected to ease and access to lower cost short term financing options, we can be opportunistic in accessing the debt capital markets. This year, if market conditions are favorable to pre fund upcoming maturities and mitigate interest rate pressures.
Speaker Change: Lastly, I wanted to note that capital leases are expected to begin declining this year, having reached a peak in 2023, which will drive lower principal repayments beginning in 2025.
Speaker Change: To conclude on slide 17.
Curtis Millen: Lastly, I wanted to note that capital leases are expected to begin declining this year, having reached a peak in 2020, which will drive lower principal repayment beginning in 2020. To conclude on slide 17... 2024 is an important transformation year. It's a year where we look to maintain operational momentum, while balancing growth with financial performance, as we continue our transition to a tech services and digital media leader. Within that context, the guidance targets we're providing today are appropriate, given the current economic, competitive, and regulatory backdrops, while also reflecting the impacts of our workforce restructuring and other transformation initiatives that will better position the company for future growth and financial success. I will now turn the call back over to Thien and the operator to begin the Q&A. Thanks, Curtis. So, given the volume of information presented this morning, I'm sensitive to the time we have left for Q&A, so I would please ask that you limit your questions so we can get to everybody in the queue. With that, Matthew, we're ready to go.
Speaker Change: 2024 is an important transformation year for bell, it's a year, where we look to maintain operational momentum while balancing growth with financial performance as we continue our transition to a tech services and digital media leader.
Speaker Change: Within that context, the guidance targets, we're providing today are appropriate given the current economic competitive and regulatory backdrops, while also reflecting the impacts of our workforce restructuring and other transformation initiatives that will better position the company for future growth and financial success.
Speaker Change: I will now turn the call back over to <unk> and the operator to begin Q&A. Thanks, Curtis So given the volume of information presented this morning I'm sensitive to the time, we have left for Q&A site I would please ask that you limit yourself. One question. So we can get to everybody in the queue.
Speaker Change: With that Matthew we're ready to take our first question.
Speaker Change: Thank you. The first question is from Mayer Yaghi from Scotiabank. Please go ahead.
Maher Yaghi: Alright. Thank you for taking my question believe it or not that want to ask you about Q4 or 2024.
Speaker Change: Think we need to discuss the elephant in the room here.
Maher Yaghi: One can set aside the regulatory environment, when looking at pricing pressure hitting Canadian telcos.
Maher Yaghi: On both wireless and wireline.
Maher Yaghi: Have seen similar issues in the Canadian broadcasting industry.
Maher Yaghi: The slow evolution on regulation.
Medical I wanted to ask you.
Operator: Thank you. The first question is from Maher Yaghi from Scotiabank. Please go ahead.
Maher Yaghi: Is there a telecom service in Canada <unk> of seeing similar long term profitability issues, if regulation continued to lag technological advancements.
Maher Yaghi: Thank you for taking my question. Believe it or not, I won't ask you about Q4 or 2024. I think we need to discuss the elephant in the room here. One can't set aside the regulatory environment when looking at pricing pressure hitting Canadian telcos on both wireless and wireline. I mean, we have seen similar issues in the Canadian broadcasting industry due to slow evolution in regulation. Mirko, what do you want me to ask you?
Maher Yaghi: Underlying my question is this question beyond 2024 should we expect.
Maher Yaghi: Future years to see additional material cost reductions to continue to stay ahead of the regulatory pressures. Thank you.
Speaker Change: Thanks Amir.
Speaker Change: Thanks for that question, so a lot there.
Speaker Change: Let me start with want to reemphasize, what I started with in my opening remarks, we continued to deliver strong results each quarter.
Mirko Bibic: You know, is your telecom service in Canada at risk of seeing similar long-term profitability issues if regulation continues to lag technological advances? You know, and underlying my question is this question: beyond 2024, should we expect future years to see additional material cost reductions to continue to stay ahead of these regulatory pressures? Thank you. Thanks, Mara. Thanks for that question. Let's go up there.
Speaker Change: And that's because we're always planning ahead. So we were making investments in 2000 22021 to get us in a position where we could deliver strong results in 2023, and we're continuing to do that always plan for the environment that surrounds us now and where we expect it to go and that's kind of where your questions going so where that could be technology that could be you know kind of macroeconomic.
Speaker Change: <unk> customer expectations obviously.
Speaker Change: Matter, a lot competitive environment and significantly regulatory so.
Mirko Bibic: Let me start with. I want to re-emphasize what I started with in my opening remarks. We continue to deliver strong results each quarter, and that's because we're always planning ahead. So we were making investments in 2020-2021 to get us in a position where we could deliver strong results in 2023, and we're continuing to do that. We always plan for the environment that's around us now and where we expect it to go, and that's kind of where your question's going.
Speaker Change: If you look at our free cash flow guide sorry, our Capex guidance for 2024, we say less 16, 5% capital intensity ratio or less.
Speaker Change: And we say that we're kind of reducing capex by at least $1 billion over the next two years in the or less in the at least is basically saying if it gets worse on the regulatory front in terms of some of these rules that we know very well fiber access in this particular case, we will do more than that could be.
Mirko Bibic: So that could be technology, that could be, you know, kind of macroeconomic, customer expectations obviously matter a lot, the competitive environment, and significantly regulatory. If you look at our free cash flow guide, sorry, our capex guidance for 2024, we say less, you know, 16.5% capital intensity ratio or less. And we say that we're kind of reducing CapEx by at least a billion over the next two years, or less, and the at least is basically saying if it gets worse on the regulatory front in terms of some of these rules that we know very well, fiber access, in this particular case, we will do more, and that could be cutting investments in these areas and then redirecting monies to growth CapEx and transformation CapEx, and it could be more restructuring And unfortunately, I actually thought that we'd be at $4.1 billion in 2026, not in 2024 or 2025. When we were kind of anticipating to build to 9 million fiber locations by the end of 2025. So we pulled our spending in earlier than planned, specifically because of regulatory rules and federal public policies.
Speaker Change: Cutting investments in these areas without Wow, and then redirecting moneys to growth Capex and transformation capex and it could be more restructuring for sure.
Speaker Change: The 16, 5% capital intensity ratio was about $4 1 billion of Capex planned for this year and Unfortunately, I had actually thought that we'd be at $4 $1 billion in 2026, 19 2020 for 2025.
Speaker Change: When we were kind of anticipating to build to 9 million fiber locations by the end of 2025. So we've pulled our spending in earlier than than planned specifically because of the regulatory rules and federal public policies, we got to call those out as well.
Speaker Change: And in the midterm, we can operate this company below that capital intensity Myer given the work we're doing now on our growth and our transformation agenda I wont re list them I went a wind at linked that them on them.
Speaker Change: Yeah.
Speaker Change: In my opening remarks, so now let's go back on fiber.
Speaker Change: Fundamentally.
Speaker Change: Yeah.
Speaker Change: Why the question we have to ask yourselves why continue to invest at the pace that we did in 2020 2021 'twenty two 'twenty two in 2023.
If we're going to make investments that are going to enrich.
Speaker Change: The shareholders of our major incumbent telcos and cable codes I mean, you got to ask yourself at some point why don't we just kind of right on their networks right, but ultimately that would be terrible outcome for.
Mirko Bibic: We got to call those out as well. And in the midterm, we can operate this company below that capital intensity, Mayor. Given the work we're doing now on our growth and our transformation agenda, I won't relist them. I went at length on them in my opening remarks. So let's go back to fiber.
Speaker Change: Resiliency network competition.
Speaker Change: This competition et cetera, so yeah.
Speaker Change: Long answer short short answer is there could be more to come depending on where this goes and you didn't focus on.
Mirko Bibic: Fundamentally, I Why should we continue to invest at the pace that we did in 2020, 2021, 2022, 2022, and 2023? If we're going to make investments that are going to enrich the shareholders of our major incumbent telcos and cablecos. I mean, you have to ask yourself at some point, why don't we just kind of ride on their networks, right? But ultimately, that would be a terrible outcome for.
Speaker Change: On media in the in your question too much other than calling out kind of what's been a slow evolution in the broadcasting environment on regulatory but I mean think about it.
Speaker Change: We have been talking about and the need for same rules for all in broadcasting domestic and international competitors for years, and we still got nowhere, we actually had the renewal of our TV licenses until 2026 without meaningful prior consultation.
Speaker Change: Despite the fact that we're mired in them and in that recession, and an existential media industry prices. We have the CBC that has greater flexibility on their news obligations. Then we do despite the fact that we've made it very public that we lose $40 million a year on unused like we wanted to deliver news, but wanted to find a way to make this.
Mirko Bibic: Resiliency Network Competition, price competition, etc. So yeah, the long answer, the short answer is, there could be more to come depending on where this goes. And you didn't focus on media in your question too much, other than calling out kind of what's been a slow evolution in the broadcasting environment in terms of regulatory. But I mean, think about it.
Speaker Change: Work, so I can go on but I'll stop there.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question is from David Barden from Bank of America. Please go ahead.
Mirko Bibic: We've been talking about the need for the same rules for all in broadcasting, domestic and international competitors for years, and we've still gotten nowhere. We actually had the renewal of our TV licenses until 2026 without meaningful prior consultation. Uh, despite the fact that we're mired in, um, an ad recession and an existential media industry crisis. We have the CBC, which has greater flexibility on their news obligations than we do. Despite the fact that we've made it very public that we lose $40 million a year on news, like we want to deliver news, but we want to find a way to make this, you know, work. So I could go on, but I'll stop there.
Hey, guys. Thanks, so much for taking the question.
David William Barden: I guess maybe Curtis.
David William Barden: I think the free cash flow guide was probably the biggest surprise I just wanted to make sure I'm thinking about this correctly.
David William Barden: If we do a free cash flow walk from 2023.
David William Barden: <unk> starting at $3 one.
Curtis: <unk> 4 billion and we add a 500 million capex reduction tailwind, we added $300 million midpoint guidance EBITDA increase than.
Curtis: Then we subtract the $400 million severance and then we subtract.
Curtis: $300 million of higher interest expense, we get to about three and a quarter billion. So that suggests that there's at least three.
Curtis: Quarter $1 billion more.
Curtis: Incremental stuff I guess that would be taxes, and working capital could you kind of addressed the gap there and I apologize.
Mirko Bibic: Thank you. Thank you. The next question is from David Barden from Bank of America. Please go ahead.
David William Barden: Hey guys, thanks so much for taking the question. Um, I guess maybe Curtis, you know... I think the free cash flow guide was probably the biggest surprise. I just want to make sure I'm thinking about this correctly.
Speaker Change: We're asking related question, which is.
Speaker Change: Free cash flows 3 billion and your common dividend of $3 5 billion in your preferred dividends are $200 million, we've got a pretty huge gap there when do we close it.
Curtis Millen: If we do a free cash flow walk from 2020 to 3.3, starting at 3.1. 4 billion, and we add a 500 million capex reduction tailwind, we add a 300 million midpoint guidance EBITDA increase, and we subtract $400 million of severance, and then we subtract $300 million of higher interest expense. We get to about $3.25 billion. So that suggests that there's at least $3.25 billion left for more incremental stuff. I guess that would be taxes and working capital.
Speaker Change: Great. Thanks for the question David.
Speaker Change: So ultimately we continue to drive free cash flow growth, while we're funding generational investments in our network.
Speaker Change: There are growth initiatives that mark talked about there were funding that as cloud and security services and all the digital transformation projects.
Speaker Change: As Marco said, we were looking to spend more than $4 1 billion.
Speaker Change: But 401 still remains a pretty significant level of investment I would say, it's not a surprise 2024 is a transformational year given the scale of our workforce reduction so that's $400 million of severance that's an exceptional one time drag on free cash flow.
David William Barden: Could you kind of address the gap there? And I apologize to Thane for asking a related question, which is, if your free cash flow is $3 billion, and your common dividend is $3.5 billion, and your preferred dividends are $200 million, we've got a pretty huge gap there. When will we close it?
Speaker Change: As you mentioned I mean, there are a couple of one time timing issues here in terms of working cap driving some pressure in 2024. One example, as we're building out broadband and fiber and broadband subsidy reasons. So we incur those costs and then we get refunded by the government, but there is a timing out there again, it's just a matter.
Curtis Millen: Great, thanks for the question, David. So ultimately, we continue to drive free cashflow growth while we're funding generational investments in our network. You know, there are growth initiatives that Mirko talked about that we're funding, such as cloud and security services, and all the digital transformation projects. You know, as Mirko said, we were looking to spend more than $4.1 billion, but $4.1 still remains a pretty significant level of investment. I'd say, you know, it's not a surprise that 2024 is a transformational year, given the scale of our workforce reduction. So that's $400 million in severance.
Speaker Change: Of time, we do get the money back, but but it causes pressure in 2024.
Speaker Change: And then again as you noted interest paid.
Speaker Change: It's quite a step up this year, given interest rates and the bigger balance sheet. So.
Speaker Change: There are there are a handful of moving pieces, but ultimately we're pretty confident in our ability to drive free cash flow growth.
Speaker Change: And our dividend at this level is supported by the free cash flow growth, we're going to push forward this year.
Speaker Change: Thanks.
Speaker Change: Thank you. The next question is from Stephanie price from CIBC World markets. Please go ahead.
Speaker Change: Good morning, Thank you.
Stephanie Price: Following up on the last question I was hoping you could talk a little bit about the longer term outlook for dividend growth.
Curtis Millen: That's an exceptional one-time drag on free cashflow. As you mentioned, I mean, there are a couple of one-time timing issues here in terms of working cap, driving some pressure in 2024. One example is we're building out fiber and broadband subsidy regions. So we incur those costs, and then we get refunded by the government, but there is a timing gap there. Again, it's just a matter of time.
Stephanie Price: 3% of the new normal here or is it more of a near term impact from the restructuring how should we think about dividend growth going forward.
Stephanie Price: Although we will assess that Stephanie <unk> will assess that year by year of course.
Stephanie Price: Look we're always going to use funds available to us in a balanced manner in line with the priorities I outlined in my opening remarks, so dividend growth.
Stephanie Price: Remains remains number one.
Curtis Millen: We do get the money back, but it causes pressure in 2020. And then again, as you noted, interest paid is quite a step up this year, right, given interest rates and the bigger balance sheet. You know, there are a handful of moving pieces, but ultimately, we're pretty confident in our ability to drive free cash flow growth, and our dividend at this level is supported by that free cash flow growth. We're going to push forward. Right?
Stephanie Price: This year.
Stephanie Price: For this year, the 3% is absolutely appropriate, particularly given where where our dividend yield sits at right now.
Stephanie Price: And then we will always balance that against the growth Capex that I've talked about the transformation Capex I've talked about there might be some smaller scale M&A opportunities that come up they often do.
Stephanie Price: Thank you. The next question is from Stephanie Price from CIBC World Markets. Please go ahead.
Stephanie Price: So that'll be that'll be how we line up our our priorities and we'll reassess. It again again next year, but I would say, 3% is that is a solid bump in this environment and it's still competitive with our peer group.
Mirko Bibic: Morning, thank you. Just following up on the last question, I was hoping you could talk a little bit about the longer-term outlook for dividend growth. Do you see 3% as the new normal here? Or is it more of a near-term impact from the restructuring? How should we think about dividend growth going forward? Oh, and we'll assess that, Stephanie. Hi, it's Mirko.
Speaker Change: Thank you very much.
Stephanie Price: Thank you. The next question is from drew Mcreynolds from RBC capital markets. Please go ahead.
Drew Mcreynolds: Yes, thanks very much good morning.
Stephanie Price: So.
Drew Mcreynolds: Marco with respect to some of the top line uncertainty whether.
Mirko Bibic: We'll assess that year-by-year, of course. Look, we're always going to use funds available to us in a balanced manner in line with the priorities I outlined in my opening remarks. So, dividend growth remains number one this year. For this year, the 3% is absolutely appropriate, particularly given where our dividend yield sits right now.
Drew Mcreynolds: In your control, but a lot of it's not in your control including regulatory.
Drew Mcreynolds: Certainly from our perspective lowering the cost to serve.
Drew Mcreynolds: <unk> is a pretty big protector and driver of EBITDA and free cash flow growth and I think you've alluded to that certainly in your opening comments can you just speak to.
Mirko Bibic: And then we'll always balance that against the growth capex that I've talked about, the transformation capex I've talked about. There might be some smaller-scale M&A opportunities that come up. They often do.
Drew Mcreynolds: How you are lowering the cost to serve kind of programming.
Drew Mcreynolds: Our program beyond 2024.
Mirko Bibic: So that'll be how we line up our priorities, and we'll reassess it again next year. I'd say 3% is a solid bump in this environment, and it's still competitive with our peer group. Thank you very much.
Drew Mcreynolds: And in that.
Drew Mcreynolds: Just where do you kind of stand on copper decommissioning for this year and what should we expect over the next few years. Thank you.
Drew Mcreynolds: Thank you. The next question is from Drew McReynolds from RBC Capital Markets. Please go ahead. Yeah, thanks very much. Good morning.
Speaker Change: Yeah. Thank you. Thank you for the questions. So again as we.
Drew Mcreynolds: As we as we lined up how we're going to spell spend our capital most efficiently you got kind of dividends on one side then it got network expansion, which unfortunately is at a significantly reduced pace, but that will continue and then it's a question of <unk>.
Mirko Bibic: So, Mirko, with respect to some of the top line uncertainty, whether, you know, it's in your control, but a lot of it is not in your control, including regulatory. Certainly, from our perspective, lowering the cost of CERB becomes a pretty big protector and driver of EBITDA and free cash flow growth. And I think you've alluded to that, certainly in your opening comments.
Drew Mcreynolds: Allocating the rest is between kind of what I've been calling this morning, the growth Capex and the transformation Capex and the right mix, there and as we invest more in the transformation.
Mirko Bibic: Can you just speak to, you know, how you're lowering the cost of CERB kind of programming or program beyond 2024? And in that, just where do you kind of stand on call for decommissioning for this year? And what should we expect over the next few years? Thank you.
Drew Mcreynolds: Bell, we're able to get more efficient with our capex dollars over time and of course drive costs out of the business and drive growth. So.
Drew Mcreynolds: Some examples.
Mirko Bibic: Thank you for the question. So again, as we line up how we're going to spend our capital most efficiently, you've got dividends on one side, and you've got network expansion, which unfortunately is at a significantly reduced pace, but that'll continue. And then it's a question of allocating the rest between kind of what I've been calling this morning the growth capex and the transformation capex and the right mix there. And as we invest more in the transformation of Valve, we're able to get more efficient with our capex dollars over time and, of course, drive costs out of the business and drive growth. So some examples, and I'm repeating a little bit what I said in my opening remarks, but it's important.
Drew Mcreynolds: Repeating a little bit what I said in my opening remarks, but it's important.
Drew Mcreynolds: Moving core consumer products to single ordering and billing our architecture is.
Drew Mcreynolds: So many benefits.
Drew Mcreynolds: A more understandable bill a better customer experience.
Drew Mcreynolds: Obviously, you only have one architecture to manage multiple builders to manage fewer manual kick outs, which means fewer people needing to oversee billing and fewer or shorter time to market.
Drew Mcreynolds: Want to make adjustments. So that's something we were really focused on for the last several years and thankfully mid last year, we were able to start migrating customers.
Drew Mcreynolds: We're going to continue to invest in our digital apps, we've been talking about that for several years now and it keeps getting better customer.
Drew Mcreynolds: Customer self install continues to scale, especially where we obviously where we have fiber.
Drew Mcreynolds: AI and generating of AI are big opportunities that we're going to harness.
Mirko Bibic: Moving core consumer products to a single ordering and billing architecture may have so many benefits. A more understandable bill, a better customer experience, obviously, you only have one architecture to manage, not multiple billers to manage, fewer manual kickouts, which means fewer people needing to oversee billing, and a shorter time to market when you want to make adjustments.
Drew Mcreynolds: At.
Drew Mcreynolds: More meaningfully in 2024, and especially beyond on the copper decommissioning up to 105 central offices as I mentioned and that's going to keep growing over time.
Drew Mcreynolds: We've got too many.
Drew Mcreynolds: Too many legacy products in especially in the enterprise side, and we're going to rationalize that and that's going to kind of make us leaner and better.
Mirko Bibic: So that's something we were really focused on for the last several years, and luckily, mid last year, we were able to start migrating customers. We're going to continue to invest in our digital apps. We've been talking about that for several years now, and it keeps getting better. Customer self-install continues to scale, especially where we have, obviously where we have fiber. AI and generative AI are big opportunities that we're going to harness more meaningfully in 2024 and especially beyond. On the copper decommissioning, up to 105 central offices, as I mentioned, and that's going to keep growing over time. We've got too many.
Drew Mcreynolds: Highlighted in my opening remarks to move to a single IP TV platform that has multiple benefits.
Drew Mcreynolds: Better products better customer experience. That's one a single five P V architecture across our entire operating territory, we're not going to have three or four or five TV services, which we currently do so big cost savings there and on the growth side of that.
Drew Mcreynolds: Is the addressable TV capabilities that are going to drive it.
Drew Mcreynolds: Digital advertising revenue for Bell media, so that that wasn't there has multiple benefits from better customer experience the better digital AD capabilities to lower cost structure real estate always looking at that we're consolidating our vendors managing our supply arrangements very carefully.
Mirko Bibic: Too many legacy products, especially on the enterprise side, and we're going to rationalize that, and that's going to kind of make us leaner and better. I highlighted in my opening remarks the move to a single IPTV platform that has multiple benefits. Better product, better customer experience. That's one.
Drew Mcreynolds: Standardized and contractor rates in sourcing where we can.
Drew Mcreynolds: Terminating some long term partnerships that we've had some of which have been public like these are all the things that we're doing to drive costs out of the business and actually enable better growth.
Mirko Bibic: A single 5TV architecture across our entire operating territory. We're not going to have three or four 5TV services, which we currently do. So big cost savings there.
Speaker Change: Comprehensive list. Thanks, Thanks for that.
Drew Mcreynolds: Thank you. The next question is from Simon Flannery from Morgan Stanley. Please go ahead great.
Drew Mcreynolds: Great.
Simon Flannery: Thank you very much good morning, I wanted to just talk about the macro if I could for a minute you talked a few times about potential recession being included in your guidance.
Mirko Bibic: And on the growth side of that is the addressable TV capabilities that are going to drive digital advertising revenue for Bell Media. So that one there has multiple benefits from a better customer experience to a better digital ad capability to a lower cost structure. Real estate, always looking at that.
Simon Flannery: I want to really see what you were seeing on the ground today, I think you'd talked about higher business disconnects as well as some lengthening of payable cycles and so forth. So to what extent are you being cautious here or are you actually starting to see some signs obviously, you've talked a lot about media, but more on the communications side of the business. Thanks.
Mirko Bibic: We're consolidating our vendors, managing our supply arrangements very carefully, standardizing contractor rates, insourcing where we can, terminating some long-term partnerships that we've had, some of which have been public. These are all the things that we're doing to drive costs out of the business and actually enable better growth. Thanks.
Speaker Change: Right. Okay. So look our our guidance on revenue and EBITDA pretty much in line with previous years, but for the.
Speaker Change: Impact of the bestbuy transaction on on product revenue. So that's.
Simon Flannery: Thank you. The next question is from Simon Flannery from Morgan Stanley. Please go ahead.
Speaker Change: That's one thing I would say right off the top so we're balancing kind of what we see is in the macro environment, but also.
Mirko Bibic: Great. Thank you very much. Good morning.
Mirko Bibic: I want to just talk about macroeconomics for a minute. You talked a few times about potential recession being included in your guidance, and I want to really understand what you were seeing on the ground today. I think you talked about higher business disconnects, as well as some lengthening of payable cycles and so forth. So to what extent are you being cautious here, or are you actually starting to see some signs?
Simon Flannery: The areas, where we've where we've done.
Simon Flannery: Quite well, whether or not it be internet or a wireless loadings were seeing on the enterprise side quite strong service revenue growth and kind of what we call. The growth verticals, you know cloud cloud service solution security automation, Digitization, but I kind of work that we do for our customers actually we saw.
Mirko Bibic: Obviously, you've talked a lot about media, but more on the communications side of the business. Thanks. Right, okay. So, look, our guidance on revenue needs is pretty much in line with previous years, except for the impact of the Best Buy transaction on product revenues. So, I mean, that's one thing I'd say right off the top.
Simon Flannery: Pretty strong organic solutions revenue growth.
Simon Flannery: At Bell business markets and of course, then that's excluding the impact of FX XI, which is also going to going to grow.
Simon Flannery: So I think on the enterprise side is a question of continuing to maintain our position in our core business the kind of the legacy business, while while taking costs out of that business continuing to harness the growth that we're seeing on kind of the new solutions and improving the customer experience that would be the what we're trying to do.
Mirko Bibic: So, we're balancing kind of what we see as the macro environment but also, you know, the areas where we've done quite well, whether or not it be, you know, internet or wireless loading. We're seeing, on the enterprise side, quite strong service revenue growth and kind of what we call the growth verticals, you know, cloud service solution security, automation, digitization, that kind of work that we do for our customers. Actually, we saw pretty strong organic solutions revenue growth at Bell Business Markets. And, of course, that's excluding the impact of FXI, which is also going to grow. So, you know, I think on the enterprise side, it's a question of continuing to maintain our position in our core business, the kind of the legacy business, while taking costs out of that business, continuing to harness the growth that we're seeing in kind of the new solutions and improving the customer experience. That would be what we're trying to do on the enterprise side. In the small business segment, we're not really seeing too much downsizing and rationalizing or too much of an increase in business closures.
Simon Flannery: On the enterprise side and the small business segment.
Simon Flannery: Like we're not really seeing too much downsizing and rationalizing.
Simon Flannery: Or too much of an increase in business closures, but like I said in previous quarters, where we're monitoring that carefully.
Simon Flannery: And then on the wireless side.
Simon Flannery: I'd say you know customer.
Simon Flannery: Payment patterns are okay, we haven't seen a material change, but again worthy of further monitoring.
Simon Flannery: And the environment remains pretty competitive, but I have to say I was quite pleased in Q4 with how we manage the competitiveness.
Simon Flannery: We did we.
Simon Flannery: We did a really nice job leveraging our premium brand strategy to load customers on the better network at higher <unk> and you can see that in our organic <unk> growth and we've used the flanker for Virgin in particular to better segment, the customer base and serve the value segments. So we're resisting dropping price.
Mirko Bibic: But like I said in previous quarters, we're monitoring that carefully. And then on the wireless side, I'd say, you know, customer payment patterns are okay. We haven't seen a material change, but again, worthy of further monitoring. And the environment remains pretty competitive.
Simon Flannery: On the premium brand for the sake of saying that we're loading customers on the premium brand. So.
Simon Flannery: There's still some upside there on the wireless side and of course on Internet.
Mirko Bibic: But I have to say I was quite pleased in Q4 with how we managed competitiveness. We did a really nice job leveraging our premium brand strategy to load customers on the better network at higher ARPUs. And you can see that in our organic ARPU growth. And we've used the Flanker Virgin in particular to better segment the customer base and serve the value segment. So we're resisting dropping prices on the premium brand for the sake of saying that we're loading customers on the premium brand. So, I mean, I think there's still some upside there on the wireless side and, of course, on the internet. Great, thanks a lot.
Speaker Change: Great. Thanks, a lot.
Simon Flannery: Thank you. The next question is from Tim Casey from BMO capital markets. Please go ahead.
Simon Flannery: Okay.
Tim Casey: Thanks Curtis can we go back to your walk down on free cash flow.
Tim Casey: And your comment on working capital.
Tim Casey: Are you, implying there's a release coming in 2025, because youre talking about those working capital items being onetime in nature.
Tim Casey: People are struggling with the.
Tim Casey: The walk down on this and how you end up with free cash flow guiding below 3 billion. Thanks.
Speaker Change: Yes. Thanks for the question Tim I think there are a couple of things and some of these things. Unfortunately, it will take more than one year to normalize out I mean, if you're looking at the one that I mentioned in terms of government subsidy build so we'll be building out over the next couple of years and then.
Tim Casey: Thank you. The next question is from Tim Casey from BMO Capital Markets. Please go ahead.
Tim Casey: Thanks. Curtis, can we go back to your walk down on free cash flow and your comment on working capital? Are you implying there's a relief coming in 2025? Because you're talking about those working capital items being one-time in nature.
Tim Casey: Two years after that it swings in our favor.
Tim Casey: Another one I'd mentioned so in 'twenty three.
Tim Casey: As as supply chain normalized R. R.
Curtis Millen: I mean, I just think people are struggling with the, you know, the walk down on this and how you end up with free cash flow guiding below $3 billion. Thanks. Thanks for the question, Tim. I think there are a couple of things, and some of these things, unfortunately, will take more than one year to normalize out.
Tim Casey: Our excuse me, so receivables and inventory levels came down quite substantially.
Speaker Change: Got that.
Speaker Change: That creates a year over year pressure, where there's no incremental or limited incremental improvement year over year. So it was a win in 'twenty three but its already normal in 'twenty three so there's no incremental wind in 'twenty four.
Curtis Millen: I mean, if you're looking at the one that I mentioned in terms of government subsidy build, so we'll be building out over the next couple of years, and then the two years after that, it swings in our favor. Another one I'd mention, so in 23, as the supply chain normalized, our AR, excuse me, receivables and inventory levels came down quite substantially, but that creates a year-over-year pressure where there's no incremental or limited incremental improvement year-over-year. So it's a win in 23, but it's already normal in 23, so there's no incremental win in 23.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question is from Hamzah <unk> from <unk> Securities. Please go ahead.
Hamzah: Hi, Thanks, good morning.
Hamzah: One on the network convergence you.
Hamzah: You do have a high level of overlap between your wireless and wireline networks, but you are not 100%, whereas we're seeing competitors, making strides and putting more focus on the fixed wireless.
Hamzah: Even in Europe in areas.
Hamzah: You are increasingly considering or are you happy with your current addressable market and maybe also just possible in the context of network sharing agreement. Thank you.
Hamzah: Mr, whom we've had a we've had a fixed wireless product in market since 2018.
Jerome Dubreuil: The next question is from Jerome Dubreuil from Desjardins Securities. Please go ahead. Hi, thanks. Good morning. One on network convergence. You do have a high level of overlap between your wireless and wireline networks, but you're not 100%.
Hamzah: And we had a we had a pretty aggressive build target initially, which we had to scale back.
Hamzah: Does have some regular regulatory outcomes and then and then forged ahead again when the when the regulatory rules got a little bit better in 2019 'twenty by the way another shows how regulatory decisions do matter, but we have a pretty sizeable addressable market with fixed wireless we have been selling our products. Since 2018, we continue to.
Mirko Bibic: You know, we're seeing competitors making strides and putting more focus on fixed wireless, even in urban areas. Is this something you are increasingly considering, or are you happy with your current addressable market, and maybe also, is this possible in the context of a network sharing agreement? Thank you. Jerome, we've had a fixed wireless product on the market since 2018. And we had a pretty aggressive build target initially, which we had to scale back because of some regulatory outcomes, but we forged ahead again when the regulatory rules got a little bit better in 2019-20. By the way, it shows how regulatory decisions do matter, but we have a pretty sizable addressable market with fixed wireless. We've been selling our products since 2018. We continue to upgrade them, and it works in rural areas where you don't have fiber or DOCSIS cable. In my view, fixed wireless access will never be competitive where there is fiber, top-tier cable, and then in rural areas.
Hamzah: Upgrade it and it works it works in rural where you don't have very well in rural where you don't have.
Hamzah: Fiber or DOCSIS cable.
Speaker Change: It's my view fixed wireless access will never be competitive where there is.
Hamzah: Fiber and and.
Hamzah: And top tier cable and then in rural areas. You also have to depreciate compared to 2018 and Theres now starlink as an option for customers. So a long way to say I'm I'm happy with where we are with our addressable market on fixed wireless access and how that product performed especially at the beginning when we launched.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question is from <unk> <unk> from Canaccord Genuity. Please go ahead.
Batya Levi: Good morning, Thanks for taking my question it sounds the adjusted EBITDA Guide for one and a half to four and a half I just wanted to understand sort of the lower end there I mean, obviously the benefit of the acquisition and media and then.
Mirko Bibic: You also have to appreciate compared to 2018, there's now Starlink as an option for customers. So a long way to say I'm happy with where we are with our addressable market for fixed wireless access and how that product performed, especially at the beginning when we launched. Thank you. Thank you. The next question is from Aravinda Galappatthige from Canaccord Genuity. Please go ahead. Good morning.
Speaker Change: The 150 to 200 translates to somewhere between 1.5% to 2%.
Speaker Change: Absolutely.
Speaker Change: Is it that perhaps you because of the AD conditions, you are assuming a steep decline in media is that sort of dragging down that low and I wanted to understand the low end of that range a little bit better.
Aravinda Galappatthige: Thanks for taking my question. It's on the adjusted EBITDA guide between 1.5 and 4.5. I just wanted to understand sort of the lower end there.
Curtis Millen: I mean, there's obviously the benefit of the acquisition in media, and then, you know, the 150 to 200 translates to, you know, somewhere between 1.5 to 2% roughly. Is it that perhaps, because of the ad conditions, you're assuming a steeper decline in media? Is that what's sort of dragging down that low end? I wanted to understand the low end of that range a little bit better.
Speaker Change: Yes, Hi, Irvin thanks for your question.
Speaker Change: The simple answer is it's the same guidance as last year, but for the adjustment on the low end, which takes into account the range of.
Irvin: $150 million to $200 million of cost savings, so that $50 million range, there driven by our workforce reduction.
Irvin: So in line with last year's guidance range.
Curtis Millen: Thanks. Yeah, hi Aravinda, thanks for your question. I mean, the simple answer is it's the same guidance as last year, but for the adjustment on the low end, which takes into account the range of $150 to $200 million of cost savings. So that $50 million range there is driven by our workforce reduction. So in line with last year's guidance. Okay, but then, I mean, the acquisition obviously adds about half a turn. Isn't that the case?
Speaker Change: Okay, but then I mean.
Speaker Change: The acquisition, obviously thats about half a turn isn't that the case.
Speaker Change: Half a percent.
Speaker Change: So youre talking about upfront upfront hasnt closed yet.
Speaker Change: So you're right, there's a bit of a balance here between AD market recovery and the potential closing of the acquisition.
Speaker Change: Okay. Okay. Thanks.
Aravinda Galappatthige: profit descent. Yeah, so you're talking about out front? Yeah, out front hasn't closed yet. So you're right, there's a bit of a balance here between the ad market recovery and the potential closing of the ad. Okay, okay. Thanks. Thank you. The next question is from Batya Levi from UBS. Please go ahead. Good morning, this is Chris on behalf of Batya.
Speaker Change: Thank you. The next question is from <unk> Levi from UBS. Please go ahead.
Speaker Change: Good morning. This is Christopher about you just digging into the postpaid phone churn result, any color you can give on the performance youre seeing by geography, and whether the level of competition has been consistent across regions and any early color you might be able to provide an <unk> level of switching intensity ease so far in January.
Batya Levi: Just digging into the post-base phone churn result, any color you can give on the performance you're seeing by geography and whether the level of competition has been consistent across regions, and any early color you might be able to provide on 1Q has a level of switching intensity E so far in January. Thanks.
Speaker Change: Yeah, so look on churn.
Speaker Change: We're not sitting idly by and like we've got to watch this very carefully it has gone up it feels a lot more obviously like pre COVID-19 than it has in the last several years. So what we're gonna do is.
Speaker Change: Continue to leverage our household bundling strategy, where we've been pretty effective over the last couple of years, including in 2023 focus on the premium loadings and the way I suggested a couple of questions ago continue to improve customer experience I think that common billing platform I've talked about is going to help.
Mirko Bibic: We're not sitting idly by, like we've got to watch this very carefully. It has gone up. It feels a lot more obviously like pre-COVID than it has in the last several years.
Mirko Bibic: So what we're going to do is, you know, continue to leverage our household bundling strategy, which has been pretty effective over the last couple of years, including in 2023, and focus on the premium loadings in the way I suggested a couple of questions ago. Continue to improve the customer experience. I think that the common billing platform I've talked about is going to help. We're going to use Crave quite strategically. And, you know, these are the things that we're going to do to make sure that churn stays under control. But it has to be looked at quite seriously.
Speaker Change: We're going to use crave quite strategically.
Speaker Change: And these are the things that we're going to do to make sure that churn stays under control, but it has to be looked at quite seriously and and that's what we're going to do looking forward now if we look back at Q4.
Speaker Change: You can see how diligent we were right we managed to deliver record sales strong service growth solid nets organic or <unk> growth significantly better product margin and basically we didn't have to overspend to deliver the solid results. We did so again, it's always about balancing.
Mirko Bibic: And that's what we're going to be looking for. Now, if we look back at Q4, you can see how diligent we were, right? We managed to deliver record sales.
Mirko Bibic: Strong service growth, solid nets, organic ARPU growth, and significantly better product margin. And basically, we didn't have to overspend to deliver the solid results we did. So again, it's always about balancing the spend on the share you gain while making sure that you're doing all the right things tactically to keep the churn in check. Great, thank you. Matthew, we're starting to time out, so this will be our
Speaker Change: The spend on the share gain while making sure that youre doing all the right things tactically to keep churn in check.
Speaker Change: Okay. Thank you.
Speaker Change: Yes, Matthew we're starting to time out so this will be our last question.
Speaker Change: Perfect. Thank you. The next question is from David Barden from <unk> Securities. Please go ahead.
Speaker Change: Okay.
Operator: Thank you. The next question is from David McFadgen of Cormark Securities. Please go ahead.
David William Barden: Thanks for squeezing me in just a question on the Capex.
David McFadgen: Oh, great. Thanks for speaking to me. Just a question on CapEx. I know you don't like the regulatory decisions that have been made, but don't the financial metrics just force you to cut CapEx anyway if you want to get down to a 100% payout ratio and you have to pay $400 million in severance, and $300 million in higher interest expense? Doesn't it just kind of force your hand to lower the CapEx anyway?
David William Barden: I know you don't like.
David William Barden: The regulatory decisions that have been made but.
David William Barden: Don't the financial metrics just for you to cut Capex annually. If you wanted to get down to below 100% payout ratio and you have to pay foreign sovereigns.
David William Barden: And higher interest expense does that just kind of force your hand to lower the Capex anyways and now with a lower capex on would you expect to reach the $9 million.
Mirko Bibic: And now with the lower CapEx, when would you expect to reach the $9 million? Well, no, we, we outlined two years ago in 2021 that our goal was to hit 9 million fiber locations, and we signaled quite clearly and consistently to shareholders that, as a result, we were going to operate at an elevated payout ratio, but it was the right thing to do at the time given the environment, for the long-term strategic benefit of shareholders. But that was done in the context of the regulatory environment we had in front of us then.
Speaker Change: Well no we outlined two years ago, while in 2021.
David William Barden: Our goal was to.
David William Barden: Hit 9 million fiber locations, and we signaled quite clearly and consistently to shareholders that as a result, we were going to operate at an elevated payout ratio, but it was the right thing to do at the time given the environment.
David William Barden: For the long term strategic benefit of shareholders, but that was done in the context of the regulatory environment. We had in front of US then so we are reducing capex as there is a direct result of the regulatory environment.
Mirko Bibic: So we are reducing CapEx as a direct result of the regulatory environment because we had clearly signaled that, you know, we were going to operate at the elevated payout ratio because again, we're always managing for kind of the year, but we're also managing for the long term. You know, we can always. You know, at 4.1 billion dollars of CapEx compared to 4.6, obviously, it's a reduction, but we get to choose where to spend that 4.1. Right, and we've chosen to de-emphasize fiber and focus on other growth vectors and transformation. So even within the reduced, reduced CapEx budget for 2024, there are allocation decisions that are totally in our control.
David William Barden: Because we had clearly signaled that.
David William Barden: We were going to operate at the elevated payout ratio because again, we're always managing for kind of in year, but we're also managing for the long term.
David William Barden: And we are we can always.
David William Barden: At $4 $1 billion of Capex compared to $4 six obviously, it's a reduction, but we get to choose where to spend that $4 one.
David William Barden: And we've chosen to deemphasize fiber and focus on other growth vectors and transformation. So we're even within the reduced.
David William Barden: Reduced.
David William Barden: Capex budget for 2024, there are allocation decisions that are totally in our control.
David McFadgen: Okay, all right, thank you. Thank you. There are no further questions at this time. I would now like to turn the meeting over to Mr. Fattato. Thank you, Matthew. So, thank you again for your participation this morning. As usual, Richard and I will be available throughout the day for follow-up questions. On that, have a great day, and thank you. Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation. Please stand by and enjoy this music. If you wish to queue to ask a question, dial star 1, www.youtube.com www.youtube.com
Speaker Change: Okay alright, thank you.
Mr. Fotopoulos: Thank you there are no further questions at this time I would now like to turn the meeting over to Mr. Fotopoulos. Thank you Matthew So thank you again for your participation. This morning as usual Richard and I will be available throughout the day for follow up questions and clarifications on that and have a great day. Thank you.
Fotopoulos: Thank you. The conference has now ended please disconnect your lines at this time and we thank you for your participation.
Speaker Change: Please standby and enjoyed this music if you wish to queue to ask a question dial star one.
Mirko Bibic: Yeah.
David William Barden: Okay.
David McFadgen: Yes.
David McFadgen: Sure.
Curtis Millen: Yes.
Curtis Millen: Okay.
David McFadgen: Yes.
Curtis Millen: Okay.
David McFadgen: <unk>.
David William Barden: Yeah.
Maher Yaghi: Sure.
Tim Casey: Yes.
David McFadgen: Okay.
Tim Casey: Okay.
Curtis Millen: Sure.
David McFadgen: Okay.
Tim Casey: Yes.
David William Barden: Sure.
David McFadgen: Sure.
David William Barden: Sure.
David McFadgen: Yes.
David McFadgen: Okay.
David McFadgen: Sure.
David McFadgen: Sure.