Q3 2024 Rogers Communications Inc Earnings Call
Thank you for standing by this is the conference operator welcome to the Rogers Communications, Inc. Third quarter 2024 results Conference call. As a reminder, all participants are in a listen only mode and the conference is being recorded following the presentation. We will conduct a question and answer session.
To join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing Star then zero.
Speaker Change: I would now like to turn the conference over to Paul Carpino, Vice President of Investor Relations with Rogers Communications. Please go ahead and let your casino.
Paul Carpino: Thank you Kalia and good morning, everyone and thank you for joining us today I'm here with our President and Chief Executive Officer, Tony Staffieri, and our Chief Financial Officer Glen brand.
Paul Carpino: During our Q&A I'd ask you limit yourself to one question and a quick follow up if needed. Today's discussion will include estimates and other forward looking information from which our actual results could differ. Please review the cautionary language in today's earnings report M. D N a N and our 2023 annual report regarding the various factors assumptions.
Speaker Change: Risks that could cause our actual results to differ with that let me turn it over to Tony to begin.
Tony Staffieri: Thank you Paul and good morning, everyone.
Tony Staffieri: I'm very pleased to report that Rogers delivered another strong quarter of results for 11 consecutive quarters, we have delivered industry, leading results driven by disciplined execution and a healthy and competitive market.
Tony Staffieri: We once again reported industry, leading market share in wireless industry, leading margins in wireless and cable and strong profitability in media and we continue to invest in the future growth of our three core businesses.
Tony Staffieri: And we made significant progress in strengthening our balance sheet. As you saw this morning, we announced the transaction with a leading global financial investor to provide innovative $7 billion structured equity financing.
Tony Staffieri: Proceeds will be used to pay down debt and as a result, we now expect our debt leverage ratio to reach three seven times by year end. This is well ahead of our 4.2 times target, we previously communicated and it will accelerate our Shaw deleveraging plans by a full 12 months.
Tony Staffieri: Yeah.
Tony Staffieri: This structured financing transaction is the first of its kind in Canada and demonstrates our innovative approach to maintaining an investment grade balance sheet, while investing in growth.
Tony Staffieri: Closing is subject to the finalization of definitive agreements and is expected to happen in the fourth quarter.
Tony Staffieri: Let me now turn to our third quarter results.
Tony Staffieri: This quarter, we added a record 227000 mobile phone and Internet net additions and over the past 11 quarters. We have added $1 9 million mobile phone and Internet net additions. It's clear our strategy is working and our team is executing with discipline.
More Canadians continue to choose Rogers more than any other provider in Canada I'm proud of our team and the efforts there efforts to compete in a healthy and competitive marketplace.
Tony Staffieri: Wireless postpaid mobile phone net additions were 101000 and prepaid net adds were 93000.
Tony Staffieri: Market was competitive during the seasonally busy back to school period, and we effectively used our chatter brand to gain customers in the new to Canada market.
Tony Staffieri: We remain focused on ensuring a clear delineation between our premium <unk> brand and our successful prepaid chatter brand we have been executing on our brand differentiation strategy for almost two years now and its been highly effective in delivering strong results.
Tony Staffieri: Cable loading was also strong in the third quarter, we delivered retail Internet net additions of 33000 up 15000 or 83% from last year. This brings our year to date retail Internet net additions to 85000 or 50% increase from one year ago.
Tony Staffieri: Our expanded footprint and diversified internet product offering are driving this growth, but choosing rogers customers can select the products. Some plans that best meet their needs delivered seamlessly through our network capabilities, whether it's direct fiber fiber coax five G wireless home Internet.
Tony Staffieri: Our wholesale P P I E.
Tony Staffieri: Our strong wireless and cable loading is underpinned by our networks in the third quarter two global leaders in network benchmarking reaffirmed our network leadership position.
Tony Staffieri: Once again awarded Rogers, Canada's most reliable <unk> network.
Tony Staffieri: In a separate benchmarking study open signal recognize Rogers for delivering the most reliable wireless services in Canada.
Tony Staffieri: Yes.
Tony Staffieri: Open signal also awarded Rogers as Canada's fastest and most reliable internet.
Tony Staffieri: Court found we consistently deliver the most reliable experience the fastest overall download speeds and the best streaming experience in Canada.
Tony Staffieri: Our customers have told US reliability is what matters most to them and we're outperforming our competitors on this key metric.
Tony Staffieri: We're also advancing our DOCSIS road map this quarter, we successful successfully trialed DOCSIS four modem technology with four gigabit download and one gigabit upload speeds. This is a global first and we just hit another milestone we have started trialing the Comcast X C. Our modem the most advanced Wi Fi.
Tony Staffieri: Seven and 10 G capable router in Canada.
Tony Staffieri: Roger satellite mobile partner, Spacex just completed a global first a successful real world test with T mobile of their Starlink lower orbit direct to sell constellation during Hurricanes Lane and Milton.
Tony Staffieri: Spacex also enabled and tested emergency alerts via satellite to mobile phones and affected areas with over 300, Leo satellites and service the technology was able to support thousands of residents with messaging service.
Speaker Change: As we previously announced we were bringing the same industry, leading technology to Canadians.
Speaker Change: From a financial perspective, our growth strong execution and continued efficiency gains are delivering industry, leading financial performance and industry best margins and in fact, we set a new benchmark at Rogers with our best ever cable and wireless margins wireless service revenue.
Speaker Change: Was up 2% and adjusted EBITDA was up 5%, we delivered wireless margins of 66% and blended ARPA remained stable and cable we remain on track to return to growth in the fourth quarter and Q3 cable revenue improved sequentially to a decline of 1%.
Speaker Change: So we're seeing steady progress here.
Speaker Change: Towards a return to growth in the fourth quarter.
Speaker Change: With the improvements in cable revenue adjusted EBITDA was strong up 5% and our team delivered industry, leading margins of 58%.
Speaker Change: Our sports and media business also had a strong quarter, we showed strong growth and profitability with revenue growth of 11% and adjusted EBITDAR was up a healthy 25%.
Speaker Change: As Canada's Communications and Entertainment Company live Sports and entertainment are core to our business strategy in the third quarter, we signed a strategic agreement to buy Bell's 37, 5% ownership stake in Maple leaf sports and entertainment.
Speaker Change: It's a significant step in our long term plan to surface value more value for our shareholders. So overall all three businesses are executing very well and we have clearly and significantly advanced our balance sheet delivering well ahead of plan.
Speaker Change: Before I hand over hand over things to Glenn I want to thank our team for delivering strong results and disciplined execution in a competitive and healthy market. We've delivered 11 straight quarters of growth invested in new innovations and made big bold bets, we have momentum and I'm proud of our team for their.
Speaker Change: Relentless hard work.
Speaker Change: Now ill turn it over.
Speaker Change: Turnover the call to Gwen.
Thank you Tony and good morning, everyone. Thank you for joining us.
Gwen: As Tony has said this is now our 11th straight quarter for posting sector, leading operating and financial performance and we're proud of those results. We remain focused on delivering consistent disciplined execution with strong performance and growth.
Gwen: We are following through on what we have said, we would do urgency and without distraction, including on our accelerated Delevering plans.
Gwen: This morning, we announced an innovative 7 billion dollar structured equity financing with a leading global financial investor to acquire a minority stake in a portion of our wireless backhaul transport infrastructure.
Gwen: This is a transformative transaction and the first of its kind in Canada and it will further strengthen our investment grade balance sheet.
Gwen: This transaction is subject to completion of definitive agreements, which we expect we will complete and close on in the fourth quarter.
Gwen: The $7 billion in proceeds will be used to pay down a corresponding amount of debt.
Gwen: As a result, we now expect to end the year with leverage in the range of three seven times.
Gwen: More on this shortly but let me now turn to an overview of our strong third quarter results.
Wireless service revenue grew 2% year over year, reflecting the continued growth in our mobile subscriber base and continued emphasis to add subscribers on our Rogers premium five G brand.
Gwen: Postpaid mobile phone customer net additions were a strong a very strong 101000 and prepaid net additions were 93000 in the quarter.
Gwen: As expected the back to school period was competitive this year, particularly in the seasonally strong prepaid market, which tends to be more active for back to school.
Gwen: Rogers remain disciplined in the market and delivered an effective balance across strong subscriber loading and disciplined fundamentals reflected in stable ARPA.
Gwen: As a result, our aggregate net phone additions were 194000 in Q3, which we expect will once again lead the sector and market share for subscriber growth for the 11th consecutive quarter.
Gwen: In a competitive environment, we are leading in net adds while maintaining stable our pool and driving service revenue growth.
Gwen: <unk> paid mobile phone churn was 1.12% for the quarter, which is roughly unchanged from the prior year and from the first half of 2024.
Gwen: Wireless adjusted EBITDA was up a strong 5% year over year.
Gwen: Reflecting enhanced economies of scale and improved efficiency.
Gwen: This was reflected in our adjusted EBITDA margin, which was up by 220 basis points over the prior year to 66% a company all time high and sequentially up from the second quarter, our prior all time high.
Gwen: Moving to our cable business, we continued to deliver strong profitability as we focus on returning to revenue growth.
Gwen: Cable revenue was down negative 1% year over year, a further sequential improvement from the negative 2% decline in the second quarter and on its path to turning positive as we exit 'twenty 'twenty for.
Gwen: That remains our intent and focus.
Gwen: Cable adjusted EBITDA is up a healthy 5% year over year and cable margins are a very strong 58%.
Gwen: 330 basis points from last year, and an all time high.
Gwen: Our employees have worked very hard to leverage our scale efficiencies and cost synergies to deliver enhanced services to our customers, while delivering stronger operating performance.
Gwen: Internet net additions were up significantly year over year, reaching 33000 in the third quarter.
Gwen: Which is up almost double from the prior year.
Gwen: And finally, our sports and media revenue is up 11%.
Gwen: And adjusted EBITDA is up 25% for the quarter.
Gwen: The third and fourth quarters are seasonally our strongest of the year for our sports and media business driven primarily by revenue growth at the Toronto Blue Jays and the N H L. On Roger Sportsnet. We expect this we expect this performance will continue through the fourth quarter as well.
Gwen: At a consolidated level total service revenue increased 1% and adjusted EBITA was up 6% year over year.
Gwen: This drove our consolidated EBITA margin up by 230 basis points to a strong 50%.
Gwen: Free cash flow for the quarter was $915 million up 23% from the prior year, primarily reflecting the higher adjusted EBITDA and lower interest expense on long term capital long term debt.
Gwen: Capital expenditures were $977 million in the quarter.
Gwen: Down $40 million or 4% from last year, largely as a result of minor timing shifts.
Gwen: Turning to the balance sheet.
Gwen: At September 30th we had $4 $8 billion of available liquidity.
Gwen: Including $800 million in cash and short term deposits on hand, and 4 billion available under our bank credit facilities.
Gwen: Our weighted average cost of all borrowings was four 7%.
Gwen: And our weighted average term to maturity was 10 years.
Gwen: We ended the quarter with a debt leverage ratio of four six times.
Gwen: Down 0.1 time from the prior quarter, driven by stronger earnings combined with debt repayments.
Gwen: This morning's announced $7 billion structured equity financing signed with a leading global financial Investor reflects our commitment to de lever and further strengthen our investment grade balance sheet.
Gwen: The Shaw transaction has broadened our national reach and expanded the scale of our world class assets.
Gwen: This $7 billion structured equity financing represents another transformative opportunity for us.
Gwen: It is a first of its kind in Canada with one of the world's leading financial investors <unk>.
Gwen: Like the companies have agreed to terms for Rogers to sell a minority interest in certain parts of our wireless backhaul transport infrastructure.
Gwen: To be very clear.
Our cell towers and related spectrum holdings are not included in this transaction.
Gwen: And remain 100% owned and controlled and we will continue to retain full operational control and consolidation for our entire national wireless network.
Gwen: Closing is subject to finalizing definitive agreements.
Gwen: All of which are expected to be completed and closed in the fourth quarter.
Gwen: We will use the proceeds to repay debt and with this transaction. We expect that we will have reduced year end leverage to around three seven times, a full turn improved from prior quarters and well ahead of our previously communicated target of 4.2 times.
Gwen: We remain committed to Delevering and we'll remain opportunistic for further strengthening of our balance sheet, including.
Gwen: Including in regard to our purchase of an additional 37, 5% interest in M. L. S C, which we.
Gwen: Spec to close in 2025.
Gwen: As we de lever. It is also important to highlight that we are still investing in growth in our core businesses in Canada for long term value creation.
Gwen: Our wireless cable and sports and media operations are built on disciplined investing targeting sustainable long term growth.
Gwen: And finally, we are reaffirming all of our 'twenty 'twenty four guidance range targets.
Gwen: We consistently lead in a competitive environment and we continue to deliver on our near term and longer term goals.
Gwen: Let me conclude by thanking the entire Rogers team. Thank you.
Gwen: Your perseverance dedication and resourcefulness has consistently outperformed our peers on growth and financial performance quarter in and quarter out.
Gwen: This is a strong team working with world class assets, attracting global investors and we remain optimistic with the opportunities ahead for us.
Gwen: Thank you for your time this morning, and with that Gilead may we please commence with the question and answers. Thank you.
Speaker Change: Okay, only excuse me well now begin the question and answer session.
Speaker Change: And the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request.
Speaker Change: We are using a speakerphone please pick up your handset before pressing any key to withdraw your question. Please press Star then two.
Speaker Change: Our first question is from Bachelor.
Speaker Change: <unk> with UBS. Please go ahead.
Speaker Change: Great. Thank you I'd like to start with the SEC.
Speaker Change: Starting with equity financing, if you could provide a little bit more detail in terms of dogs.
Speaker Change: There will be any shares issued with it how it would impact.
Speaker Change: Hum.
Speaker Change: Maybe are operational.
Speaker Change: Yeah, all patients as you lease backs and those that.
Speaker Change: Network elements so you're.
Speaker Change: Supports any color on that that would be great. And then second question was more on the wireless side, if we could talk about a bit more on the competitive environment as we head into the holiday season, and if you think that the stable Arturo.
Speaker Change: Thank you.
Thank you about yet on the <unk> on the first question to be clear we are not leasing assets. This is not a sale and leaseback transaction.
Speaker Change: We are selling a minority equity interest.
Speaker Change: And a portion.
Speaker Change: Regional portion of our wireless backhaul transport infrastructure and and that's the extent of the transaction. It is an equity transaction.
Speaker Change: With that that minority interest in the subsidiary company, we will maintain full operating control of our entire network, including these assets that are involved in and selling the minority equity stake.
Speaker Change: There are no RCI shares involved our C I, a or b no dilution to our were RCI shareholders.
This is a minority interest being acquired and a portion of our wireless backhaul and there is no lease.
Back to you on the second part of your question relating to a wireless competitive 10 city getting into the fourth quarter, it's always difficult to predict a competitive market.
Speaker Change: Dynamics.
Speaker Change: Amongst the various brands that are in the market.
But if we look to the third quarter and the back to school season, we were very focused on being disciplined with our promotions, we led with a bundled offer of internet and wireless and stuck to that and executed well and resonated throughout the back to school period you saw.
Speaker Change: Sure that a we continue to focus.
Speaker Change: Focus on our primary brand strategy Rogers <unk> premium when you look at the 101000 postpaid nets basketball vast majority of those are on the Rogers brand. So the team is doing an excellent job of focusing on that segment and migrating customers from Fido and chat.
Speaker Change: Or to the premium brand.
Speaker Change: And you saw us.
Speaker Change: Execute really well with the chatter brand in the new to Canada and back to school category. There. What we saw was as a result of a number of system changes. We made we've got a platform now and chatter.
Speaker Change: That is very good in terms of self serve and has dramatically lowered our cost to serve in the prepaid segment.
Speaker Change: So we've consolidated all of our prepaid.
Speaker Change: Chatter and we discontinued prepaid on Rogers and Fido, and that's working extremely well in the fourth quarter also we like what we see in terms of the prepaid customers they're predominantly on Autopay.
Speaker Change: And so the behavior is very similar to a postpaid customer and they're coming in at very healthy <unk> and so the strategy is working well and we'll continue that into the fourth quarter, Although you should expect prepaid to.
Speaker Change: Come down in the fourth quarter, there's seasonality related to it in the third quarter and we expect to focus in the fourth to be onto postpaid.
Speaker Change: Got it thank you.
Speaker Change: Okay.
Speaker Change: The next question next question.
Speaker Change: Okay.
Speaker Change: Uh huh.
Speaker Change: Maintaining with kidney Colin Please go ahead.
Speaker Change: Thanks very much.
Speaker Change: Sneak into as well.
Speaker Change: One.
Speaker Change: Just if you can flesh out that prepaid a bit more healthy are proven means like close to $30 close to what you were getting a low end flanker before Tony and I also note Neil.
Speaker Change: Turn on prepaid way lower this year than it was last year and this quarter, even better at two 8%. So you can you remind us or really any difference between out of low end flanker.
Speaker Change: And our prepaid customer anymore. So that's question one the other sorry, Glenn but something just sounds too good to be true here, who who's going to give you a $7 million.
Speaker Change: No no equity and no lease payments is there what is the buyer getting here are they getting some sort of.
Speaker Change: Like option to resell these assets back to you in the future or what's the what's the angle here there has to be something for for somebody to want to pay for the minority interest in the infrastructure.
Speaker Change: Weekend, we can turn to that do you want me to turn to that first Tony Okay. The so the arrangement is obviously the the wireless backhaul.
Speaker Change: Sports data.
Speaker Change: The the towers to our core.
Speaker Change: So the transport going from the edge of our towers to the edge of our core.
Speaker Change: It is a business of transporting data.
Speaker Change: And currently that business is 100% owned and controlled nationally from coast to coast.
Speaker Change: By Rogers.
Speaker Change: This is a transaction that takes.
Speaker Change: A portion a regional portion.
That that national transport.
Speaker Change: And creates a subsidiary.
Speaker Change: Debt using wholesale rates will.
Speaker Change: We'll pay for the transport.
Speaker Change: And so it creates revenues there were expenses and and capital for maintaining that regional portion of the backhaul.
Speaker Change: And that ultimately will drive net income within the subsidiary consolidated subsidiary won't affect EBITDA, but.
Speaker Change: But the minority interest holders will earn a portion of the net income within that subsidiary and there will be distributions paid from that net income and from the cash.
Speaker Change: That settles between our operating.
Speaker Change: The company.
Speaker Change: At Rogers and the and the subsidiary carrying the backhaul in these regions or in this region.
Speaker Change: And that's actually the business model, so theres, no least there'll be a periodic distributions of available cash they'll settle up and and that's the that's the business model.
Speaker Change: That makes more sense, so rogers pays in operating expense as opposed to at least two units of supply agreement yes.
Speaker Change: And so that and that and a portion of it.
Speaker Change: Controlling portion of that will attribute to RCI.
Speaker Change: And a minority portion of that will attribute to the minority investor.
Speaker Change: Sorry, then just to follow up on that it is this data transport backhaul significantly underutilized today, so that there's excess capacity to grow those revenues is that the catch.
Speaker Change: Okay. So just to be very clear and to make sure there's no confusion.
Speaker Change: This is not a business that will sell backhaul to other carriers.
Speaker Change: This is a business that will continue to serve Rogers exclusively.
Speaker Change: And we will continue to consolidate up into Rogers.
Speaker Change: There is data revenue our data traffic growth.
Speaker Change: Going on today annually, our data traffic rose by 40% to 50%.
Speaker Change: As a result of increased data loading to each subscriber.
Speaker Change: And as a result of subscriber growth from quarter to quarter.
Speaker Change: We are we will maintain.
The the network as we always have we will continue to maintain it invest in it we control that investment we control that operation of the infrastructure. This is simply a setting up a supply agreement between our subsidiary in the operating company.
Speaker Change: The the the returns to the Investor the minority investor coming in.
Speaker Change: Based on that traffic.
Speaker Change: And and you know we have we have the forecast worked out are based on on historic and expected growth rates two to set up that business and the volumes that it will drive that revenue that will drive the expenses that are expected for operating at and the distributions out.
Speaker Change: To the the minority investor.
Speaker Change: And back up to RCI is the controlling shareholder those distributions are forecast to be.
Speaker Change: You know anticipate are anticipated to be relatively stable within a within a known range based on our forecast.
Speaker Change: I guess you don't want to tell me that known range at this point I am not looking to disclose the financial terms no fence. Thank you.
Speaker Change: Thank you Glenn that was much better.
Speaker Change: But it's on the first part of your question.
Speaker Change: We have been driving and we are seeing a blurring of the lines between prepaid and postpaid and it's been a very deliberate strategy for us and it's been very competitive.
Speaker Change: You.
Speaker Change: Beneficially competitive for us in that segment of the market, where chatter is participating.
Speaker Change: Customers are coming in as I said earlier largely on auto pay and so the behavior is very much like postpaid and we're seeing very little difference.
Speaker Change: In New York, who is very strong our prepaid <unk>, who is not that different than Quebec or are just to put it in perspective, we're not going to quote specific numbers by brand, but that'll give you a sense of the value proposition and the strength of the pricing.
Speaker Change: On the chatter brand.
Speaker Change: Okay. Thank you.
Speaker Change: Next question Galen.
Speaker Change: The next question is found their Yankee with Scotiabank. Please go ahead.
Speaker Change: Great. Thank you for taking my question, so just to follow up on <unk>.
Speaker Change: This Ah interesting transaction that you guys announced today are trying to figure out what what kind of effective rate. The minority interest is getting on this deal I'm trying to triangulate a little bit more out the impact of this transaction on your future free cash flows.
Speaker Change: And what percent of your backhaul is included in this deal.
Speaker Change: Say that it's a regional parts of your network, but if you can just ballpark a little bit how much of your current back hauling this represents.
Speaker Change: And are there minimum commitments that you need to provide your equity minority shareholder.
Speaker Change: On this deal in the future that is set in advance or it's just pay per use.
Speaker Change: And I'll have a follow up on an on an after that.
Speaker Change: So it's.
Speaker Change: It's based on.
Speaker Change: Dear at wholesale rates volume tiered.
Speaker Change: As the data traffic grows you know bill the touring adjusts.
Speaker Change:
Speaker Change: There is no specific term on the investment there is no guaranteed minimum for the distributions.
Speaker Change: There is a.
Speaker Change:
Speaker Change: A a theoretical maximum that we would reach or or approach as you get into higher and higher tiers keep in mind, we've got a business that's growing data rates at 40% to 50% and so if this were yeah where to run.
Speaker Change: Indefinitely that 40% to 50% annual growth would would get quite high and so the rates are adjusted accordingly in the theory.
Speaker Change: The costs and the maintenance will all be factored in and the distributions. The the order of magnitude mayor I'm I'm not going to quantify.
Speaker Change: The the annual distributions.
Speaker Change: And the.
Speaker Change: The impact on our free cash flow and our ability to continue to invest in our business carries on.
Speaker Change: <unk> unrestricted by this transaction.
Speaker Change: Great. It sounds like it's basically a bond on on back on the back calling it's like selling a bond on your back hauling business.
Speaker Change: We're selling a oh I'm going to resist the you know they they that description and that this is an equity transaction and so it'll be.
Speaker Change: Considered as such.
Speaker Change: And so we're selling though a a distribution stream.
Speaker Change: Yes, Okay, and do you have any option to repurchase that that that that ownership overtime.
Speaker Change: We will have full control over how long this.
Speaker Change: This investment remains in place and and we'll determine that in a phone or some time with our with the needs of our balance sheet, yes.
Speaker Change: One last one.
Speaker Change: Are the distributions to the equity partners that entity tax deductible.
Speaker Change: No they would be equity distributions and so they would be treated as such.
Speaker Change: So that's the we will be repaying debt that has tax deductible interest we will be paying distributions that are not tax deductible, but even with the effect of that if I factor in the difference between what I expect will be the annual distribution amounts and the annual interest savings.
Speaker Change: In the context of our free cash flow, it's a it's not a significant increment to our our obligations right.
Speaker Change: Thank you mayor are gaining can we have the next question. Please thank you Mara.
Speaker Change: Yeah.
Speaker Change: Certainly the next question is from drew Mcreynolds with RBC.
Speaker Change: Please go ahead.
Drew Mcreynolds: Yeah, Thanks, very much good morning, sorry, yeah yeah.
Drew Mcreynolds: What kind of quiet on I'm sure the financing is being hashed it out here, but one follow up there for you Glenn.
Speaker Change: Yeah, you know in terms of valuing that minority stake you know, obviously, you're not going to get into the details there.
Speaker Change: I'd have to worry about the arrangements with partners not have to worry about the intricacies of that we control. It we control the operating costs and so we're able to forecast with a pretty good degree of confidence.
Speaker Change: Where the data loading traffic is going to go.
Speaker Change: We have a tiered rate structure that's that reflects.
Speaker Change: That traffic today, and the loading going out into the future.
Speaker Change: That generates the revenues with a good degree of confidence we know the operating cost the capital cost of maintaining that transport with a good degree of confidence and then those forecasts.
Speaker Change: Sure the investors look at in and run their own analysis and assessment based on their experience and then it's just a financial valuation of what their hurdle rate returns are how they value it how they they risk adjust it and we have determined the value of their minority stake as being 7 billion.
Speaker Change: Canadian.
And so it's a significant valuation, but let's keep in mind, we carry a very significant volume of traffic on that network.
Speaker Change: And so.
Speaker Change: That's that's the simplicity of it.
Speaker Change: And then in terms of your question around <unk>, and <unk> and revenue growth going into the fourth quarter.
Speaker Change: <unk>.
Speaker Change: You know my my I would anticipate that the fourth quarter will be competitive just as of third quarter was we will continue to emphasize disciplined approach to going after our net adds emphasizing our premium brand and you've seen us for.
Speaker Change: Yeah well.
Speaker Change: Many quarters now.
Speaker Change: Leading on on net adds while being disciplined around the impact on <unk> and sustaining revenue growth I expect what you've seen in the third quarter and a competitive quarter will carry into the fourth.
Speaker Change: Drew if I could add to that just to bring it back to the macro revenue outlook.
Speaker Change: I'm sorry.
Speaker Change: Besides <unk> I think it's important to look at the size of the market. The Canadian landscape continues to have healthy growth.
Speaker Change: I expect to see additional details of what that structure might look like given commentary previously that it will not be a lever leveraging transaction.
And so that's my first question.
Speaker Change: Thanks, Sebastian I know the we standby the statement that it will we will manage this that we will continue to emphasize or de levering will continue to manage our balance sheet with the closing of that MLS see investment.
Speaker Change: And particularly the.
Speaker Change: This structured equity transaction gives us.
Speaker Change: Some optionality in some leeway on on how we structure that to to continue to hold the gains from this transaction and and looked at how we fund MLS see between now and when we close which I expect will be out in 2025.
Speaker Change: There's there's a number of different ways, we could do that I expect on closing, we will own and control a majority stake in MLC.
Speaker Change: It could be as high as 75% if we bring in outside partners overtime, whether its at closing or subsequent or whatever we'll determine all of that in the fullness of time.
Speaker Change: This structured equity transaction now provides us with a substantial delevering.
Speaker Change: We will we will close 2024 in the range of three seven times.
Speaker Change: We anticipate with.
Speaker Change: With the MLC transaction.
Speaker Change: We will we will close 2025.
Speaker Change: And are you now in a similar range.
Speaker Change: And maybe I'll just leave the comments at that it's the best channel.
Speaker Change: A similar range to $3 seven.
Speaker Change: Exiting 2020 core with Ghana, Yes, yes, sorry, yes, yes.
Speaker Change: Okay, and then I mean, just zooming back, though as we think about the Delevering overall, I mean I think the.
Speaker Change: The strategy of the stated plan was to Delever.
Speaker Change: Half a turn before asset sales entering the year.
Speaker Change: We now have.
Speaker Change: Transaction.
Speaker Change: I appreciate we haven't sold the targeted $1 billion of noncore assets and that's the gist of your question.
Speaker Change: I acknowledge that but we're not desperate wasn't ever going to be a fire sale in the interest rate environment, we've had to take a pause on that.
Speaker Change: I think what we've shown.
Speaker Change: Is <unk>.
Speaker Change: Strong flexibility around adjusting our strategy, we were going to sell noncore assets and then get to our cogeco shares last year, we realized that noncore assets would be delayed and so we flipped and we sold our cogeco stake de Levered at the end of 'twenty three from that.
Speaker Change: <unk>.
Speaker Change: This year, we found an opportunity.
Speaker Change: I appreciate you said, we haven't sold assets.
Speaker Change: We sold $7 billion.
Speaker Change: And an equity interest in assets that if you were to look to our balance sheet and find the net book value for those assets.
Speaker Change: $7 billion far outstrips, the net book value of those assets and this is a portion.
Speaker Change: Of our wireless backhaul.
Speaker Change: This is not even the majority of our wireless backhaul infrastructure on our balance sheet and we sold it for $7 billion of equity interest.
Speaker Change: We control the operations.
Speaker Change: You're you're right to acknowledge these assets aren't noncore their core and that's why we will maintain control.
Speaker Change: But I think we're showing a very dedicated driven intent to de lever.
Speaker Change: And continue to invest and grow.
Speaker Change: Maybe I'll pause there.
Speaker Change: Sebastian Yes, Thanks, Sebastian will next question gaining.
Speaker Change: Yeah.
Speaker Change: The next question is from David Barden with Bank of America. Please go ahead.
David Barden: Hey, guys. Thanks, so much for taking the question.
David Barden: Another reports.
David Barden: Have been prepared externally.
David Barden: The category is down in the third quarter at 40% year on year temporary workers.
David Barden: Foreign temporary workers is down 20% to 25%.
David Barden: And so in the new to Canada category.
David Barden: That has impacted it.
David Barden: And as you say, we've traditionally done extremely well in that category, but what you see in our results for the third quarter is that.
David Barden: We execute cros.
All segments of the market and perform extremely well our estimate is that we once again have leading market share in the third quarter in both postpaid.
David Barden: And total mobile phones.
David Barden: And so that's really.
David Barden: Really attributed to again, our focus on the Rogers premium brand.
David Barden: As I said the vast vast majority of our net adds is on the Rogers premium brand.
David Barden: And now increasingly good share on on chatter.
David Barden: In terms of the size of the market outside of the new to Canada category, we've traditionally seen over the last year and a bit.
David Barden: If we look at that trend line, excluding new to Canada, we're seeing organic growth in the two 5% to 3%.
David Barden: As a result of penetration penetration growth.
David Barden: <unk>, which is now at 88%.
David Barden: And going up to 90%.
David Barden: Very soon.
David Barden: Lagging other countries on that key metric so good opportunity for growth in terms of size of market.
Speaker Change: Thanks, David next question getting.
Speaker Change: Next question is from Jeremy.
Speaker Change: Dan go ahead.
Speaker Change: Hi, Good morning, Thanks for taking my question. The first one is on the.
Jeremy: The equity sale and the backhaul there I'm just trying to bridge the gap with the what the leverage guidance that you have provided if you can maybe clarify the tax impact.
Jeremy: Question on roaming.
Speaker Change: Alright, great. Thank you. Thank you thanks, Simon and our last question Gayla in place.
Speaker Change: The next question is from Alexandra Goller, Patsy Gate with Canaccord Genuity. Please go ahead.
Alexandra Goller: Good morning, Thanks for fitting me in two quick ones. One a follow up obviously first of all Glen Your you mentioned sort of in the vicinity of three seven times leverage even exiting 2025, just wanted to clarify does that and does that in vision.
Alexandra Goller: Non core real estate sales or does that exclude that and the second question is obviously on guidance.
The 12% to 15% guide that does require a an uptick in Q4.
Alexandra Goller: Perhaps maybe talk to what could drive that I know there'd be some pricing actions that you've taken anything that would change the trajectory that we've seen in Q2 and Q3. Thank you.
Speaker Change: Thank you you are into the on the on the revenue we were going into a inactive quarter its a strong quarter for us across our businesses.
Alexandra Goller:
Alexandra Goller: <unk>.
Alexandra Goller: We remain determined to.
Alexandra Goller: To meet those guidance ranges as I've indicated and so on.
Alexandra Goller: I'll leave the answer at that you've hit on some of the some of the elements of that in terms of some pricing initiatives.
Alexandra Goller: The vast portion of our growth is driven on the growth in our subscribers. We've had strong contributions from that through the first three quarters of the year and that obviously helps drive the fourth quarter as well and so it's a balance across all of those.
Alexandra Goller: All of those elements in terms of your question on the noncore real estate assets that remains a work in progress.
Alexandra Goller: [music].