Operator: Welcome to the Rogers Communications Inc. Q3 2026 Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. Following the presentation, we will conduct a question and answer session. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may reach an operator by pressing star then zero. I would now like to turn the conference over to David Naccarato, Head of Investor Relations with Rogers Communications. Please go ahead, Mr. Naccarato.
David Naccarato: Thank you, Gaylene, and good morning, everyone, and thank you for joining us. Today, I am here with our President and Chief Executive Officer, Tony Staffieri, and our Chief Financial Officer, Glenn Brandt. Today's discussion will include estimates and other forward-looking information from which our actual results could differ. Please review the cautionary language in today's earnings report and in our 2025 annual report regarding the various factors, assumptions, and risks that could cause our actual results to differ. With that, let me pass the call over to Tony to begin.
Tony Staffieri: Thank you, David, and good morning, everyone. I am pleased to report that we continued to demonstrate strong execution in our three lines of business during the Q3. Against the backdrop of lower market activity, we continued to deliver on our commitments and our long-term strategy. In the Q3, we grew consolidated service revenue and adjusted EBITDA, each by 1%, reflecting continued positive momentum. We delivered industry-leading wireless and cable margins of 68% and 59%, respectively. We significantly improved capital efficiency, reducing capital expenditures by 46% in the Q3. This resulted in our lowest capital intensity ratio in well over two decades. We delivered record free cash flow, generating over CAD 1.3 billion. We further strengthened the balance sheet, improving our debt leverage ratio by 0.1 to 3.7 times. On 1 October, we reached a key milestone in our sports strategy, acquiring the remaining 25% stake in MLSE.
Tony Staffieri: Rogers now fully owns one of the most valuable collection of sports, entertainment, and media assets globally. These assets are appreciating, but they are not currently reflected in our share price. Overall, we remain bullish about our plan to unlock shareholder value and drive long-term growth. I will now briefly turn to our operating performance in our three lines of business, which Glenn will discuss in more detail. In wireless, we stayed focused on financials versus chasing subscriber volume in what is typically a busy back-to-school quarter. While volumes were down for us and more broadly for the industry through the first nine months of 2026, we continued to execute with discipline in a less active market. We delivered 17,000 postpaid and prepaid mobile phone net additions. This was an intentional strategy to participate selectively in a lower volume market.
Tony Staffieri: Importantly, loading was on the Rogers premium brand, which is very consistent with our market strategy. We launched our back-to-school offers in late July and focused on compelling value propositions that delivered more for customers. This included satellite to mobile technology and priority network access on Canada's best wireless network. Although service revenue was down due to lower fee revenue, we again delivered EBITDA growth and industry-leading wireless margins. Turning to cable, we saw our sixth quarter of positive service revenue growth. We once again saw margin expansion and adjusted EBITDA growth. We added 10,000 internet net adds, which reflects a less active telecom market. In media, we delivered very strong results, with revenue growing 9% and adjusted EBITDA growing 12%, supported by a strong quarter for the Toronto Blue Jays. The Blue Jays had the highest overall attendance in the American League this season.
Tony Staffieri: Over 3.3 million fans attended games, and the team drew crowds averaging 97% capacity. This is the club's best attendance since 2016 and the third highest in the Major League Baseball league this year. The Blue Jays' season reflects the value of our sports assets and the opportunity to grow them. Overall, we believe we have the best sports and entertainment assets globally. When combined with our strong national telecom reach, we offer a unique and compelling value proposition that none of our peers can replicate. This gives us a unique competitive position as we transform into a global communications, sports, and entertainment leader. The next step in our strategy is to consolidate our sports media and entertainment assets and to sell a minority interest to third-party investors, and we continue to target a closing date for that by the H1 of 2027.
Tony Staffieri: Investor interest in these assets is substantial as sports franchise valuations continue to rise. As an example, earlier this month, Sportico came out with their latest NBA franchise rankings, which had the value of the Toronto Raptors up 24%. These assets carry significant value, and together, these assets are worth even more. We have a unique set of assets within one integrated ecosystem. Five professional sports franchises across five major leagues, all in one city. Sportsnet, Canada's number one sports media brand and streaming platform with the most valuable sports content, including national NHL rights for the next 12 years, and iconic entertainment and sports venues in the heart of one of North America's biggest cities. We firmly believe the whole of Rogers is greater than the sum of its individual parts.
Tony Staffieri: Our partnership with Live Nation to bring the Backstreet Boys to Canada is a great example of our One Rogers ecosystem. The 12-show residency next year is a new record at Rogers Centre. This model demonstrates the significant growth potential of our concert business. It also shows how we can leverage our assets to deliver a unique customer value proposition our competitors cannot match. This is all part of our plan to give Canadians more reasons to choose Rogers. By integrating our sports, entertainment, and connectivity businesses, we are able to reward customers and create experiences that deepen loyalty and drive long-term value. In closing, we remain committed to delivering on our priorities and to delivering for our customers, fans, and our shareholders. It is an exciting time for our company and we look forward to delivering the next stage of growth.
Tony Staffieri: I would like to once again thank the entire Rogers team for delivering on our priorities for our company and our customers and our shareholders. I will turn the call over to Glenn to walk through the financials in more detail. Glenn, over to you.
Glenn Brandt: Thank you, Tony, and good morning, everyone. Thank you for joining us. Our Q3 results reflect another quarter of strong, disciplined execution across our three lines of business. In what continues to be a slower growth competitive telecom market, we have delivered consolidated service revenue and adjusted EBITDA growth. Our continued focus on cost efficiencies grew adjusted EBITDA margins across all three of our business segments. Wireless and cable adjusted EBITDA margins remain among global leaders at 68% and 59%, respectively. Notably, five years ago, at year-end 2021, those margins were 63% and 49%, respectively. Our streamlined capital investment priorities drove capital intensity to just under 10% in the quarter and 12% year to date. We have accelerated free cash flow, which is up 65% in the quarter and 34% year to date, reflecting the lower capital intensity.
Glenn Brandt: Leverage has improved to 3.7x, down sequentially from 3.8x in the prior quarter and from 4x at prior year-end. Perhaps most notably among those, we have substantially changed our capital trajectory and free cash flow profile to better navigate our regulatory and competitive telecom landscape. I am pleased to report we are very well on our way to deliver on our 2026 targets. Our capital priorities remain on plan. Our balance sheet and free cash flow are substantially improved year over year, and we are executing on our sports monetization strategy on schedule and at a time when sports properties continue to attract investors and capital at substantial valuation premiums. Turning to each of our business units, starting with wireless.
Glenn Brandt: Wireless service revenue decreased by 1% year over year, predominantly reflecting the negative impact of the CRTC's decision to prohibit certain fees starting in mid-June. Mobile phone ARPU declined 2.6% to CAD 55.22 as a result of the immediate in-quarter impact from the CRTC decision, together with the lagging impact of the competitive intensity from prior quarters, most notably Q4 and Q1. While we have responded to offset some of the CRTC's impact, and let's keep in mind, these fees were originally sized to recover real costs in our business, both service revenue and ARPU has been negatively impacted in the Q3. Notably, excluding the impact of the CRTC's decision, we would otherwise be reporting modest positive service revenue growth and a better mobile phone ARPU decline that improved sequentially from the Q2.
Glenn Brandt: Importantly, our continued focus on cost efficiency expanded our Wireless adjusted EBITDA margin by 130 basis points year over year to an industry-leading 68%. Rogers continues to find efficiencies driving adjusted EBITDA margin and earnings growth despite the competitive and regulatory backdrop. These ongoing efficiency improvements reflect the scale of our operations and remain critical to driving earnings growth in our low-growth environment. Turning to subscriber growth, our approach to the market remains disciplined and consistent. We are focused on base management, and we are leading with our premium Rogers wireless service plans rather than simply moving to discount prices to chase volumes. Our total mobile phone net additions were 17,000 in a relatively quiet back-to-school quarter, including 6,000 on postpaid. Postpaid mobile phone churn was relatively stable, up 4 basis points year over year to 1.03%.
Glenn Brandt: We view this modest uptick in churn to be temporary and reflective of the pricing actions we took early in the quarter rather than any permanent shift. While we continue to face ARPU pressure, we are optimistic that the more balanced promotional environment can continue into the holiday period. It's early days, but we are seeing some constructive signs. As an example, the incoming ARPU for customers added in the Q3 and into October is up 8% year over year, translating to a higher lifetime value for those customers. Moving to Cable, despite lower market activity, Rogers grew Cable service revenue for the sixth consecutive quarter, albeit modestly, as affected by the year over year impact from the December 2025 sale of our customer-facing data centers. Excluding the impact of the data center sale, on an organic basis, Cable service revenue grew by 1%.
Glenn Brandt: Cable adjusted EBITDA also grew by 1%, and our Cable margin expanded by 40 basis points to 59%. As noted earlier, that is up a remarkable 10 percentage points from five years ago, reflecting the national scale of our operations and our continued emphasis on driving cost efficiencies. Finally, retail Internet net additions were 10,000 this quarter, which was down year over year, reflecting the smaller market and our disciplined emphasis on premium service versus volume and price discounts. Turning to Rogers Sports & Media, Rogers saw another quarter of very strong performance helped by higher game day attendance for the Toronto Blue Jays, who led the American League in total attendance during the 2026 regular season. Media revenue grew by 9% and adjusted EBITDA was up 12% to CAD 84 million.
Glenn Brandt: Media revenue through the first 9 months of the year was roughly CAD 3 billion, up 44% year to date and up 6% on an organic basis. Our sports and media assets continue to show very strong resilience and scale, notwithstanding a softer advertising environment. While we are all disappointed our Toronto Blue Jays were not able to repeat last year's playoff success, we played competitive, meaningful baseball games through the end of the regular season, and Blue Jays fans showed up for all of it, both at Rogers Centre and on Sportsnet and Sportsnet+. Turning to our sports assets more broadly, we are extremely proud of the sports holdings we have acquired over the last quarter-century, and we are excited for our opportunities ahead to drive added premium value both for Rogers customers and shareholders.
Glenn Brandt: Our portfolio of sports teams, media, and live entertainment venues is among the very best in the world. Now that we have completed the acquisition of the remaining 25% stake in MLSE, Rogers, on its own, owns a portfolio of sports and media assets that are profitable, growing, and have global appeal. Our team ownership spans 5 major North American sports leagues, including the NHL's most valuable franchise and the only Canadian NBA and MLB teams, uniquely attracting a large national audience and devoted fan base. Beyond the teams, we own stadiums for sports, concerts, and live entertainment, and we own the content rights and media platform directly connecting to fans and telecom customers from coast to coast.
Glenn Brandt: We are now actively engaged on the next phase of this file, pursuing the sale of a minority interest in our consolidated sports, media, and entertainment assets to third-party investors, targeting completion in the H1 2027. Sports franchise valuations are increasing, and we remain committed to unlocking what we view is a very significant unrecognized value for these assets in our RCI share price. Proceeds from the sale will be used to pay down debt. Now turning to our consolidated results. Total service revenue and adjusted EBITDA were both up 1% in the quarter, reflecting strong media growth, more modest telecom performance, and continued discipline on costs across all 3 segments. Year-to-date, service revenue and adjusted EBITDA are up 6% and 3% respectively.
Glenn Brandt: As mentioned earlier, capital expenditures decreased substantially in the quarter, down 46% to CAD 524 million, and capital intensity down 840 basis points to 9.6%, one of the lowest capital intensity ratios amongst our peers and certainly the lowest I can recall across my 3 and a half decades here. Among other initiatives, our lower capital expenditures in the quarter reflect our targeted sale of certain network projects, which are no longer a priority. This substantially lower spend resulted in Rogers generating significantly stronger free cash flow in the quarter of approximately CAD 1.4 billion, up 65% year over year. Free cash flow was also positively impacted from lower cash taxes. Year-to-date free cash flow is over CAD 3.1 billion, up 34% year over year. Our balance sheet and liquidity remained strong at the end of the Q3, ahead of funding the purchase of the remaining MLSE stake on 1 October.
Glenn Brandt: Leverage was 3.7x, down 0.1x from the prior quarter and down 0.3x since year-end 2025. Our available liquidity was CAD 8.3 billion, which included CAD 3 billion in cash and cash equivalents and CAD 5 billion under our bank and other credit facilities. Importantly, these amounts do not include the CAD 5 billion of additional bilateral bank credit facilities arranged to fund our 1 October purchase of the remaining MLSE stake. It does, however, include cash we are holding from our hybrid securities issued in September 2026 to fund and replace our December maturity of similar securities. Net income decreased by approximately CAD 5.3 billion this quarter, driven by a CAD 5 billion non-cash gain recorded in the prior year relating to our original 37.5% interest in MLSE as a result of our purchase of BCE's interest in MLSE in July 2025.
Glenn Brandt: As noted this morning, we have reaffirmed our full 2026 outlook for total service revenue growth 3% to 5%, adjusted EBITDA growth +1% to +3%, capital expenditures CAD 2.5 billion to CAD 2.7 billion, and free cash flow CAD 4.1 billion to CAD 4.3 billion. To summarize, we remain focused on strengthening our balance sheet as we advance our initiative to surface shareholder value through the monetization of our sports and media assets. This is an exciting time for Rogers, and we continue to meet our commitments on schedule while driving strong performance in a challenging environment. I want to thank our entire team for their ongoing commitment to Rogers, to our customers, and to our sports fans across all of our businesses. I will now turn the call back over to Gaylene to begin the Q&A session. Thank you very much for your time and attention.
Operator: Thank you. We will now begin the question-and-answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, press star then two. The first question is from Drew McReynolds with RBC. Please go ahead.
Drew McReynolds: Yeah, thanks very much, and good morning. Two questions from me on wireless. First, on the wireless ARPU trajectory, just with respect to the CRTC fees, wondering, I guess, Glenn, if the impact that you saw in Q3 changes in Q4 and into next year. In other words, are we seeing the full run rate impact? Then related to that, obviously the industry is pushing back here. Just wondering, following the submissions and the replies to those submissions that went in in September, just what kind of timing you expect to get something out of the CRTC on that. Then second question on market expansion and wireless. Just wondering if we can get an update on the rate of penetration gain the market is still seeing.
Drew McReynolds: Obviously, we are all hopeful in Canada for more population growth to resume maybe as early as next year, but just would love to get an update on the penetration side. Thank you.
Glenn Brandt: Thank you, Drew. On your first two, on the ARPU trajectory and the impact of the CRTC decision, I would say the full run rate for the decision was felt in the quarter. These fees, and you heard it in my comments, were initially designed to recover specific costs within our business. We are now moving back to finding alternatives for covering those costs, shipping costs, for example, as just one example. That effort remains ongoing. We have some of those initiatives identified in quarter, more still to do. I am not going to speak on behalf of our peers. I think they are likely undergoing similar exercises.
Glenn Brandt: In terms of timing of that, we are carrying on looking to manage our business, manage our costs and cost recoveries and offsets, or elimination, reduction of those costs so that we continue to find opportunities to earn and grow our revenues and earnings. On your penetration and market expansion, I will turn it over to Tony.
Tony Staffieri: Sure, I will pick that up. Good morning, Drew. In terms of wireless penetration and what you are really getting at, sort of size of the market and how we are seeing the growth in that. For the H1 of the year, we saw the total market of net adds down about 30%. Our estimate in the Q3, including the back-to-school period, is probably higher than that. Probably our estimate in the 30% to 40% range down year-on-year. As we look to the composition of that, penetration seems to have softened traditionally in the 2% to 2.5% range. Our sense penetration is more in the 1.5% to 2%. Then, of course, on population growth, essentially flat. When we look at and try to unpack the slowdown in penetration rate, we owe it really to the type of promotional activity in the Q3.
Tony Staffieri: As both Glenn and I said in our opening remarks, our focus strategy was on value proposition other than just price discounting alone. We steered away from that, and it was an opportunity for us in a much lower market volume to develop our strength in marketing and selling and retaining customers with value propositions that were, as I said, outside of just pricing. We indexed to hardware promotions that were tiered based on the tier of the customer in terms of the plans that they came in on, or for the ones renewing in the base, based on the plans that they were at. That was very successful for us. The promotional activity was largely funded by the OEMs, and you see that in our equipment margin continuing to be strong and positive.
Tony Staffieri: That is how we are seeing the size of the market as we look to Q4. You can expect our strategy on promotional activity to be consistent with what we did in Q3. We were pleased with the outcome that we had. As you heard from Glenn, a focus on ARPU is clearly a priority, and it was good to see the loading coming in on the Rogers brand almost entirely, with incoming ARPU up year-on-year 8%, the best year-on-year ARPU growth on incoming that we have seen in a very long time.
Drew McReynolds: That is great. Thank you very much.
Tony Staffieri: Thank you, Drew.
David Naccarato: Thanks, Drew. Next question, Gawain.
Operator: Next question is from Batya Levi with UBS. Please go ahead.
Batya Levi: Great. Thank you so much. Can you provide maybe your thoughts on how you think Starlink can change the competitive landscape and connectivity in Canada, but focusing on the broadband side and the mobile side? May I have any update of what you are seeing from your partnership to cover the white spaces with them. Thank you.
Tony Staffieri: Thanks for the question, Batya. I think there is two parts to your question. One is on the internet side, then on the satellite to mobile. I will start with the internet side. Starlink has been operating here in Canada for quite some time, we see them participating largely in rural markets where there are not other alternatives. We see the market share being very small on the home internet side. In many respects, we partner with them in selling the product to small businesses, for example, where they provide the connectivity that otherwise is not available. On that, we provide our business application services to that. In terms of the satellite to mobile, we have had a very good partnership with SpaceX and continue to. That has grown over several years of working together.
Tony Staffieri: We work closely with them in the satellite technology, so we understand it, we understand its evolution, and we understand where it is going. We also understand the product from a customer perspective, having it in market with the capabilities it now has, for almost a year now. So we understand its use cases, its limitations today, and where the use cases can evolve to. We are proactively deepening our collaboration with Starlink on satellite to mobile connectivity, and Rogers intends to lead Canada as we work with Starlink Mobile to bring expanded coverage and capability to Canadians. I would summarize by saying our approach here in Canada that we have taken is different than what you are seeing in the US for a few reasons that are particular to Canada and unique to Canada.
Tony Staffieri: First off, from a technology standpoint, the spectrum quantity that is available in Canada is much less than that in the US. The spectrum bands available at the most recently acquired US spectrum is extremely limited in Canada or not available. That spectrum band, as some of you have written about, is largely used in the public sector. We have a different population size, much smaller here in Canada, and the distribution is a lot different with a concentration in key urban markets. We have a different regulatory framework here with foreign ownership, which includes ownership of spectrum, and there is a process for that. Then finally, in working with SpaceX and what they have said publicly in their filings with ISED, they intend in Canada to work with wireless operators.
Tony Staffieri: As I said, we continue to work well collaboratively on that product, and we see it as continuing to be a complementary evolving product to our wireline and terrestrial wireless services.
Batya Levi: I appreciate that. Thank you.
David Naccarato: Thanks, Batya. Gaylene, next question, please.
Operator: The next question is from Aravinda Galappatthige with Canaccord Genuity. Please go ahead.
Aravinda Galappatthige: Good morning. Thanks for taking my question. A question for Glenn and a follow-up for Tony. My question for Glenn is on the accounts receivable. I know you had alluded to the possibility of securitization. I was wondering if there were any updates that you could share on that front and what the impact could be on the financials and the cash flow. Secondly, for Tony, obviously, you have been very open and transparent about your plans with Rogers Sports. I know that in the past you have alluded to the possibility of a subsequent transaction down the road, as long as you maintain control with your capital structure. I just wanted to clarify, is that still your high-level thought process, recognizing that you will not be able to give us specifics at this point? Thank you.
Glenn Brandt: Thank you, Aravinda. I will start on the securitization. We are getting very close. Close enough that, in fact, if you had asked me this question two or three weeks ago, I would have hoped that we would have it in place in time for this call. We have a proposed facility arranged with our financial institutions that are involved. Because this is on bank credit card receivables, it needs to be vetted with OSFI. It is with OSFI now. I do not mean these comments to do anything other than just identify where it is. I am certainly not throwing them under the bus. They have had the file and are reviewing it back and forth. I am expecting a timely response in the coming days. Once we have satisfied all of that review and everything we need to do, I expect that will get funded. I anticipate being able to fund that in Q4.
Glenn Brandt: As soon as it is available, we will start issuing securitization proceeds to get some of that working capital back to RCI. We are making progress, and we are close.
David Naccarato: Yep.
Tony Staffieri: Aravinda, on the second part of your question relating to sports, as I said in the opening comments, it is a really exciting time for us as we consolidate our sports and entertainment holdings. The value continues to show strong appreciation, both in third-party valuations like Sportico and Forbes valuations, which is good to see. Beyond just the sports teams themselves, we continue to see good solid growth in Sportsnet, both in terms of top line and online subscribers. Good solid growth there. When you use market valuations for that business, it is a very material part of our sports and entertainment franchise. When you look at the concert business, it was already a very solid, profitable business for us, both through the venues we own, like the Rogers Centre directly, as well as through our partnership with Live Nation. That continues to grow double digits for us.
Tony Staffieri: We are really pleased with that. Again, when you look at valuations for the live business that are out there and put it to our EBITDA, it is also a very material part of that. We have businesses that are growing very strongly, and that is very good to see. The team has done a really good job out of the gate in utilizing the value add of some of those, and you would have seen some of the concerts, Backstreet in particular, pre-sales for Rogers customers were up to 30% of the tickets were available for our customers. It was good to see that the customers who wanted tickets got tickets for Rogers customers by and large. That was good, and a number of other initiatives that I will not get into on this call.
Tony Staffieri: It is good to see the synergies coming through, not just in cost, but the revenue and value add synergies across our businesses. We have been clear that our intent is to sell a minority portion of our sports and entertainment business. We are going through that process now. It is early days, but as I said in the comments and Glenn said, we expect to conclude that in H1 of next year. We expect to see strong valuations for that. The intent is to take those proceeds to pay down debt. It is as simple as that, and we have always been clear on our strategy. What we do down the road in terms of further monetizing, we will leave that for another day, but that is our focus right now, is step 1 on monetizing that asset.
Aravinda Galappatthige: Thank you.
Tony Staffieri: Thank you, Arvind.
David Naccarato: Yeah. Thanks, Arvind. Gaylene, next question, please.
Operator: The next question is from Maher Yaghi with Scotiabank. Please go ahead.
Maher Yaghi: Great. Thank you for taking my question. I have one on wireless and one on free cash flow. I will start maybe with wireless. Obviously, you discussed the low loading in the quarter, but I am trying to just split the benefit of the focus on promotional discipline from the churn metrics that you guys reported, which showed some increase year-on-year. Small, but still. I am trying to figure out when will we see the impact from your promotional discipline on the type of customers you are loading in the churn metrics, as a result of this focus and you willing to let go of some low-value customers?
Glenn Brandt: Okay. Let me start on that. When we start seeing the impact of our discipline, I think the first stat I would point to, and I know you are asking about churn, the first stat I would point to is the +8% growth year-over-year in the ARPU in, which is one of the most promising signs we have seen in a very long time on the traction and the impact of that discipline. On our churn being up four ticks to 1.03%. You are right, it is up a little bit. We had a fairly substantial price action that we took in the quarter, that candidly, I think holding that to four ticks, we never want to see churn. But putting through any price change for customers tends to create some activity.
Glenn Brandt: In a period where it is also back to school, where there is already activity, holding that to four ticks on the churn, we were satisfied, I will say, not pleased, but satisfied with that outcome. And you see the effect of that in the ARPU in, as I said earlier. Overall, I think, on balance, we were pleased with the traction that discipline is having. It only works when there is discipline across the entire sector, and we all saw another example of that in the first quarter. We are responding the way we can with our strategy and our approach to the market. We are pleased with on balance where it has all come out in the quarter. And I will pause there.
Maher Yaghi: No, that is very helpful, Glenn. Thank you. And it explains a few things.
Glenn Brandt: Thanks, Meir.
Maher Yaghi: Yeah. Okay. On the free cash flow, obviously there are results out from the promotional discipline that you are having and other actions you have taken to reduce CapEx. How sustainable this is, this kind of free cash flow generation, even if I exclude some of the asset disposal you did in the quarter, they were still very strong. Looking into 2027, how are we thinking about the cash conversion and the sustainability of these strong cash flow results?
Glenn Brandt: It is a good question. I think if I look at the quarter, the asset sales serve two purposes that are directly related. One is we are exiting some capital that has been invested in some of these projects that are no longer priorities. So it is taking some capital out that has already gone into the projects. As importantly, if not more importantly, it is taking out future spend that would have to be invested into those projects through to completion. Those will not hit then our 2027 or beyond capital expenditures or even in the Q4. So it both helps the current free cash flow and intensity. Then going forward, those are projects that were under substantial builds that somebody else will be taking on.
Glenn Brandt: In terms of our earnings and the businesses retained, I do not expect these to have any substantial impact in driving revenue, EBITDA, and free cash flow in that way. On the capital spend going forward, I have been fairly clear in my comments through each of the last couple of these calls that this new guidance run rate for 2026, I am not guiding 2027 yet, but I have been clear that you should be using this guidance as an indication for your expectations for the coming year or the near term over the coming years.
Maher Yaghi: Okay, great. Thank you. I'll pass it on.
Glenn Brandt: Thank you, Meir.
David Naccarato: Thanks, Meir. Gaylene, next question, please.
Operator: The next question is from Jerome Dubreuil with Desjardins. Please go ahead.
Jerome Dubreuil: Hey, thanks everyone for taking my questions. Two for me. First one, wondering if there is a policy or an internal view on the way that you expect to deal with agentic shopping going forward. Maybe if you can comment if your intent to block access or embrace it essentially. Then the second question. Glen, you mentioned a couple of times during the quarter that the team is looking to give a bigger part of the network build to other parties. What parts of the CapEx guidance reduction this year is due to this shift in build strategy? Maybe if you can elaborate on the rationale for the shift. Thank you.
Glenn Brandt: I will start with that second part, Jerome. The largest part of our reduced capital spend, I will say, is with deprioritizing some projects. But there is not an insignificant portion of that that is coming from either taking a longer time to execute on sustainable or sustained projects and initiatives. Both those measures are contributing to the reduction. I am going to choose not to enumerate the relative share of those. They are both a significant portion of what makes the reduced capital spend in 2026.
Tony Staffieri: Jerome, on the second part of your question, agentic AI, obviously, a big topic across different parts of the business. But I think your question was specific to agentic AI shopping from the customer standpoint. I would say we continue to look at it. We have not come down with a concrete internal policy. We continue to see how the customer uses it. It is certainly helpful from a price standpoint. But we will see how the intelligence of it evolves to capture the complete value proposition for the customer. So the tool, the capabilities has a ways to go, and I have no doubt it will evolve quickly over time. But we continue to watch it, Jerome.
Jerome Dubreuil: Great. Thank you.
Glenn Brandt: Thank you, Jerome.
David Naccarato: Thanks, Jerome. Gaylene, next question, please.
Operator: The next question is from Vince Valentini with TD Cowen. Please go ahead.
Vince Valentini: Hey, thanks very much. First of my two questions is on the equipment margin. It seems to be getting bigger. It looked like about 12% positive EBITDA margin on your equipment revenue this quarter, and it was about 5.5% in Q3 last year. I mean, a two-part question. Is this a sustainable trend? Secondly, is this perhaps some of the activation fee stuff where you are getting your tactics to get back some of that money shows up as equipment revenue, if it is a delivery fee or something, as opposed to traditionally it would have been in service revenue?
Glenn Brandt: I am going to answer the second part of that with a very quick and succinct, no, it is not looking to recover service revenue or that. It is a continuation of what we have been looking at all along, which is use OEM subsidies and our own promotion to help get handsets into the hand of our customers, but to try and make sure that we are carrying as much of that cost, and you see it in the margin, as we can in the OEM subsidy portion. It will drift up and down over time, depending upon the degree of promotional activity in the quarter. I suspect it will be a higher margin in lower activity quarters, which is what you are seeing, Vince.
Vince Valentini: Okay. Thanks, Glenn.
Glenn Brandt: Thank you.
Vince Valentini: Second question, going back to the ARPU. I appreciate the churn is up a little bit because of the, what you call pretty meaningful price action you took. I mean, churn of 3% for the quarter, like 1% a month, it means 97% of your customers did not leave after the price increase. So can you give us a more total picture of ARPU? The 8% sounds great, but I mean, we can all do the math. You had pretty small gross adds this period, so the ARPU in is on a pretty small base. Should we not be seeing positive ARPU trends across the entire 11 million base of postpaid subs if you did a back book price action, plus you are seeing better ARPU in?
Vince Valentini: Given how weak the sub-adds are, I am hoping you can give us a bit more color on when you would expect total reported ARPU, excluding the CRTC stuff, to start to reflect these positive trends and churn back to positive.
Glenn Brandt: Sure. Keep in mind, the largest impact on ARPU in the quarter was on the CRTC decision that came in just before the start of the quarter, late in June or mid-June. We had so far, through to the end of September, it had 3 months to provide a response and reflect it in quarter. There was some warning prior to it being in place, but we have not had a long time to adjust in operations. You can adjust in Q2 when the setup fees are still being charged with starting to put in place alternative methods. I reiterate, the purpose of those setup fees was exactly that, to offset costs of account changes or new accounts coming on. The charge disappeared from the CRTC decision, the costs do not.
Glenn Brandt: You have some early initiatives being implemented in Q3 to help recover a portion of those costs that are reflected in ARPU, but they do not fully offset the impact of the decision. That is why in my comments you heard me say there is still more work to do here. We continue to look to find ways to either eliminate or reduce those costs. We are completely happy with that decision. The task here is to drive earnings, not revenue. I am very happy to drive better margins. You see that in the results. But where we cannot eliminate the costs, it is to try and offset them. Still work to do there. The 8% increase year-over-year in ARPU, we are pleased with. You are always going to see some difference in pricing on the total base relative to the new pricing in the market.
Glenn Brandt: It shifts over time. But we are pleased with the progress on that 8% bump.
Vince Valentini: Thank you.
Glenn Brandt: Thank you.
David Naccarato: Thanks, Vince. Gaylene, next question, please.
Operator: The next question is from Sebastiano Petti with J.P. Morgan. Please go ahead.
Sebastiano Petti: Hi. Thank you for taking the question. I just want to clarify something. As you think about your CapEx reduction year to date and your targets and the soft guide as we look out into 2027, how much of that includes additional asset sales that will be netted out against CapEx? What is the true underlying capital reduction that is occurring? Tangentially related to that, in a world where we are seeing cable come under pressure because of the threats of Starlink came up earlier, but as well as just a mature market in Canada because of a mature market as well as pretty deep fiber and cable businesses running challenges regarding the HFC plant, I mean, how confident are you that this reduction in capital spend is not going to impair your long-term growth?
Sebastiano Petti: Why is now the time to pull back on investments when there is perhaps some overarching macro factors that might be impacting your business, both on the telecommunications side and mobile, as well as on the cable side? Just trying to understand the impacts of how comfortable you feel about the sustainability of the CI reduction, and if this is more just we could see this being reversed over the next several years. Thank you.
Tony Staffieri: Sebastiano, I will start with the latter part of your question. In terms of state of what I would call the wireline or cable industry side of it.
Tony Staffieri: Contrary to the way you described it, we continue to have industry-leading wireline performance across our network, whether it is fiber or through the cable plant, as we continue to work through mid-split installations that continue to improve performance. We have third-party validation of that. The next step, we continue to invest in expanding the network. Housing starts, as well as business expansion, industrial parks, things like that. Modest growth, but obviously on the slowdown. That is always cyclical for sure. The other part for us is focusing on rural expansion, and that has been through wireless for the most part in terms of connectivity, and increasingly through our partnership with SpaceX on satellite. The use case implications for us in the enterprise space, IoT, for example, is tremendous. We see a lot of growth opportunity there.
Tony Staffieri: Against that backdrop, in answer to your question, do we see the CapEx envelope as being the right size? We very much do. We are focused on capital efficiency. We are focused on projects that are going to yield the right returns, particularly given the regulatory environment and implications that we are under. We are being very surgical and thoughtful to make sure that our capital spend envelope gives us the ability to lead on network performance and on the things that matter most to our customer, and we are comfortable with where we are setting it at.
Glenn Brandt: On the first part of your question, Sebastiano, where you asked about the CapEx reductions and how much of that will be asset sales, I will point to the Q3 first to just put it in context. I am indicating a guide of CAD 2.5 billion to CAD 2.7 billion. You should count on going forward. If you were to just take the Q3 sales or the Q3 CapEx rather, and annualize that number, you would come up to somewhere in the range of CAD 2.1 billion. That is the impact of offloading those projects that are no longer priorities. Q3 is a little bit understated relative to what that guide would be for the further or the outer years, 2027 and beyond. I expect you will see some more of that in Q4. Those are projects that we are no longer earmarking for ongoing operations. We are exiting them.
Glenn Brandt: They lay off some of the expense that we have put in life to date, and they get rid of future spend in future years. To be clear, when I am indicating what is expected for CapEx in 2027 and beyond, I am not intending to get there as a result of, we will spend at this level, but then we will just have to find things to sell. We are investing, as Tony has said, in the projects, in the priorities that are an ongoing part of our business in making up that number. Does that help?
Sebastiano Petti: Yes, it does help. I think, Tony, the industry-leading performance, that is the crux of the question, the sustainability of that, right? You have seen US Cable and some other markets be a little bit more challenged, and that is kind of the genesis of the question. So appreciate the response. Thank you.
Tony Staffieri: Yeah.
David Naccarato: Thanks, Sebastiano. Gaylene, next question, please.
Operator: The next question is from Stephanie Price with CIBC. Please go ahead.
Stephanie Price: Hi. Good morning. Thanks for taking my call. So the first one is just on the wireless side, on the mix of pre and postpaid nets in the quarter. You mentioned a focus on leading with premium plans, but it did skew towards prepaid nets this quarter. So hoping you can walk through the puts and takes here. On the second question, Glen, as you know, the cable margins continue to increase here. Just curious if you could talk a little bit about what's driving the increase at this point and relate it a bit about the opportunities that Rogers could see using AI to improve internal efficiency more broadly. Thank you.
Tony Staffieri: I'll start with the first one, Stephanie. In terms of the mix between pre to post, I wouldn't necessarily focus on an absolute number or ratio in any particular quarter. As we focused on price discipline and promotional discipline in Q3, we were very conscious on postpaid, our entry points being at CAD 45 and above. As I said, the vast majority came in on the Rogers plan with entry points at CAD 55 to CAD 60 and above, and indexed to add a line type of promotions. You would have seen our back-to-school offer, as far as price goes, was limited to CAD 5 off at most with the right student credentials. What that did was create a gap between the entry point on postpaid and where some of our prepaid plans were on. So you saw a bit more volume on the prepaid side.
Tony Staffieri: I would not read too much into it other than something specific to back to school in terms of relative volumes. We continue to focus on migrating prepaid to postpaid. I should add that a lot of the prepaids more and more look, act, and feel like postpaid in the sense that there is a top-up credit card on file, and they just automatically renew. Maybe I will leave it at that in terms of that part of the question. Then Stephanie, on your question on cable margin. The increase in our cable margin over the last five years reflects, first off, just the consistent intensity with which we go after the costs in our business. It is not a new phenomenon that this is a relatively low-cost business even in times of growth, population growth, and what have you. Wireline is a mature business.
Tony Staffieri: The largest impact we have seen, though, is over the last three years, where we have substantially more scale. We are now coast to coast, the largest operator amongst cable operators. That has continued to pay in terms of being able to find opportunities to reduce costs, whether it is larger volumes going through vendors, and so able to negotiate tighter costs, whether it is just on that scale, being able to move different processes as we ingested or integrated the Shaw operations. In some cases, how we were doing things helped reduce some of their costs. In other cases, the reverse was true, and so we found the best of both practices. Then finally, we have had a substantial reduction in costs as a result of looking to using more resourcing of our call center work offshore.
Tony Staffieri: That was a substantial reduction that we are still seeing some benefits of that in terms of the capabilities of the offshore providers. But certainly, we have seen a lowering the cost from that. On AI, we are really just at the start of that, and frankly, I would suggest that is true for most of my peers in all sorts of different sectors, not just the one I operate in. AI is a relatively new technology. All of us are figuring out where to apply it, whether that is on network management in our case or whether it is on taking costs out of the business, better service to the customers, lower time to assess the customer's issues. Those are really at, I would say, at a starting point.
Stephanie Price: Thank you for the answers. I appreciate the color.
Tony Staffieri: Thank you, Stephanie.
David Naccarato: Thanks, Stephanie. Gaylene, we have time for one more question.
Operator: The final question is from Matt Griffiths with Bank of America. Please go ahead.
Matt Griffiths: Oh, hi. Thanks for taking the question. Within the cable segment, I was wondering if it would be possible to talk about the broadband internet performance as it relates to revenue contribution separate from what you are experiencing in the decline in video and satellite and home phone. Then just a clarification on the ARPU in comment. I am assuming you are using ARPU probably purposely, but I wanted to double-check that it is on an apples-to-apples basis with how you are reporting, rather than just maybe a component of the monthly recurring revenue or something like others may define it. Just finally on the churn as it relates to the price action. Should we expect an impact of that going into Q4, or are you suggesting that the impact of it was limited to what you experienced in Q3? Thanks.
Glenn Brandt: Let me start with, in no particular order, I'll start with the ARPU in. The change that I think you're referring to where we've identified the ARPU in is up 8% year over year. It's calculated on a consistent basis. The revenues coming in from those subscribers is adding 8% more than the revenues coming in from the prior year. All of that helps to support what's in our revenues reported overall for the coming year. The impact of things like the elimination of setup fees. Obviously, those subscribers coming in are not going to be levied in Q3, those setup fees that many of them would have paid in the prior year. So you've got to look at the components a little bit in isolation, Matt. The largest impact on our revenues, though, were the service charges that we're able to charge our subscribers.
Glenn Brandt: We're not in the business of charging cost offset fees. We're in the business of selling plans and subscriber services.
Glenn Brandt: By far the largest impact on growing revenue is growing subscribers and being able to charge competitive prices, but being able to charge for the value of the service delivered. Hopefully, that helps. In terms of your question on churn, both Q3 and Q4 are active promoting quarters. I'm not going to start guessing and guiding in the third week of October what we're going to report for the quarter. This is a very important quarter seasonally in terms of subscriber activity. I would expect, and based on the volumes we saw through back to school, that we may well see a more tempered seasonal period than we have seen in prior years in terms of volume, certainly, and in terms of maybe promotional activity. The churn level that you saw in Q3 was reflective, as I said, of that price action taken in Q3.
Glenn Brandt: That activity tends to be fairly quick in terms of response to price actions. But there may be some of that that still follows through in the month of October or into Q4. I wasn't particularly fussed by understanding the dynamics that drove the 4-point increase in Q3. I wasn't particularly fussed in Q3. I'm certainly not concerned with where that impact might be felt in Q4. You're asking on trying to delineate between activity or performance of internet versus video and satellite. Our broadband services are one of a few key services that we sell in our residential business, and I'm not going to start trying to parse the revenues from one to another.
Glenn Brandt: Many broadband customers pay a service fee for broadband access only and are very important customers to us in driving service revenue because they enjoy streaming services, and that's what we are able to provide to them. On an earnings basis, their revenues will be lower, but our costs are lower because if they are only taking in broadband, then we do not have the offset for the media content costs on that account. Other subscribers are taking our broadband services and a full suite of services over our Xfinity product, and those are also extremely important customers to us. They have a higher cost because of the media content cost, but they have a higher revenue profile. We are not here to try and figure out which customers are any more or less important. They are all critical.
Glenn Brandt: You can see from our margins and from sustaining revenue and earnings growth in a sector where many others are not able to, most others are not able to, I think we are executing well. I am going to pause there. I appreciate the question, but I am going to give some context to it without directly answering it.
Matt Griffiths: No, I appreciate that. Thanks, Glenn.
Glenn Brandt: Thanks, Matt.
David Naccarato: Thanks, Matt, and thanks, everyone, for joining our Q3 call. If you have any follow-ups, feel free to reach out to the IR team.
Glenn Brandt: Thank you very much.
Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
