Good day, welcome to the Cogeco Inc. and Cogeco Communications Inc. Q2 2019 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Patrice Ouimet, Senior Vice President and Chief Financial Officer of Cogeco Inc. and Cogeco Communications Inc. Please go ahead, Mr. Ouimet.
Good morning, everybody, and welcome to our Q2 conference call j oining me today are Philippe Jetté, Marie-Hélène Labrie, André Thériault, Pierre Miron, and Philippe Bonin. Before we begin this call, as usual, I would like to remind listeners that the call is subject to forward-looking statements, which can be found in our press releases issued yesterday. I'll turn over the call to Philippe Jetté.
[Foreign language] Patrice. Good morning, ladies and gentlemen, and thank you for joining us to discuss the results of Cogeco Communications Inc. and Cogeco Inc. for our Q2, ending 28 February 2019. Let us begin with Cogeco Communications and the sale of Cogeco Peer 1. One of the major development in the Q2 is the announcement that we reached an agreement to sell Cogeco Peer 1 for proceeds of CAD 720 million, subject to closing adjustments. We expect to close the sale in the current quarter.
Cogeco will retain significant fiber capacity in Montreal and Toronto for future needs. This transaction will allow us to regroup completely our resources and effort on the Canadian and American broadband segments with greater flexibility to pursue organic investment and acquisition opportunities. Note that the following sales announcement, Cogeco Peer 1 operating and financial results for the current and comparable periods were reclassified as discontinued operations.
To reflect the reclassification, Cogeco Communications revised its fiscal year 2019 guidelines for continuing operations, where revenue is expected to grow by 6%-8% and EBITDA by 8%-10%. Capital intensity should remain at similar level to last year, and free cash flow is expected to grow by 38%-45%, mainly as a result of EBITDA growth and declines in financial expenses, current income taxes, and restructuring integration and acquisition cost.
For the quarter, revenue is up 7.6% and EBITDA up 10.5% in constant currency. Reported revenue has reached CAD 584.1 million and EBITDA reached CAD 280.6 million, generating a margin of 48%. Cogeco Connexion achieved its best financial performance since the Q1 of last fiscal year with an EBITDA growth of 2.8% in constant currency. Atlantic Broadband has continued to perform strongly with an organic EBITDA growth of 9.7%.
On the wireless side, as we have advocated for many years in favor of an MVNO model, we were very pleased to see the CRTC launching a consultation to examine the state of the mobile wireless market and to seek comments on its preliminary view that mobile virtual network operators should have mandated access to the network of the national wireless providers.
We all remember that the national providers benefited from favorable conditions to launch and expand their operations many years ago. We were also encouraged by the federal government's policy directive to the CRTC, encouraging all forms of competition and the reduction of barriers to entry for regional telecommunication service providers. Cogeco does favor a facility-based MVNO model, which would allow for progressive and disciplined investment in facilities, along with some type of partnerships or network-sharing arrangement.
Given the consultation timeframe and the various discussion at this point that this process will result in, it is too early for me to provide further comments on the specific business model. The quarterly dividend was reconfirmed at CAD 0.525 per share, a 10.5% increase over last year.
Let us look at the individual components. At Cogeco Connexion, our PSU trends in the quarter have significantly improved relative to the last two quarters as our new CMS migration issues have been fixed, and we have ramped up our sales and marketing efforts since last November. The video and telephony customer loss are comparable to last year, while the internet additions are slightly lower as a result of competition offers.
The new CMS will be the foundation piece of Cogeco Connexion's evolution to digitize customer experience, enabling quicker response time and greater digital interaction capabilities to enhance the customer experience.
Cogeco Connexion's revenue has grown by 0.8% and EBITDA by 3.8% in constant currency as a result of higher revenue, mainly generated through the rate increase implemented in November, and a decline in operating expense, mainly attributable to better management of programming costs and cost saving from a workforce reduction program.
This program, which targeted administrative functions, was carried during the first and Q2s and is expected to generate CAD 10 million in saving in fiscal year 2019 and CAD 14 million on an annual basis. We expect that Cogeco Connexion will achieve low single-digit EBITDA growth in the fiscal 2019, mainly as a result of the right sizing of our workforce and the further operational efficiencies we expect from the new CMS and the ongoing digital transformation.
We are advancing well with our digitization program, which is aimed at improving our already highly reputable customer service while reducing our operating cost. Over the last 18 months, we have made great progress over our digital key performance indicators. We have increased e-billing by 65%, reduced annual technical calls by 10%, on-site repair by 15%, and have increased self-installs by 40%. We expect further improvements in all our digital KPIs as we improve and implement and ramp up operational best practice and digital tools. Many others will be implemented over the next 18 months.
The number of self-installs will significantly improve when we launch the new IPTV platform later this year, resulting in further reduction in truck rolls. During the quarter, Cogeco Connexion has contributed to launch new NN features for its customers. Among them, we rolled out a cloud-based managed Wi-Fi solution for business customers in Québec, thereby completing our coverage in Canada.
It offers faster connectivity, scalable Wi-Fi capability, and a management portal allowing to customize settings and offer Wi-Fi access for guests, and get insights on Wi-Fi usage to better control IT spending. 1 Gb internet speed is now available to 40% of our footprint, and further launch announcements will be made in the coming months, with the goal of reaching 60% of our footprint by fiscal year-end. We were pleased to see the renewed and increased funding for regional and rural internet connectivity in Canada.
The recent budget announcements from the federal government and the Québec government represent over CAD 3 billion for the next decade and are a great opportunity for Cogeco to further expand its network. We believe we are well-positioned to obtain funding given our strong regional position. In the U.S., again this quarter, Atlantic Broadband has been the prime engine of growth as revenue increased by 18.4% in constant currency and EBITDA grew 21.7%.
Mainly as a result of the timing impact of the MetroCast acquisition completed on 4 January 2018, and combined with strong organic growth. In the quarter, ABB achieved organic revenue growth of 5.5% and EBITDA growth of 9.7%. The strong financial performance is mainly related to the continued growth and upsizing in residential internet and commercial services.
Rate increase implemented in October in the MetroCast systems and the ramp-up of the Florida expansion plan, which is now positively contributing to EBITDA. Given that marketing expense in the first half of the year were lower due to the timing of certain initiatives, and that the 1 January programming cost increase will fully impact the Q3, we expect EBITDA to grow at a mid-single-digit rate during the second half of the year.
Atlantic Broadband has also an ambitious digitization program, which is advancing well in line with what I just explained and described in the Canadian operations. The PSU trends in Q2 were weaker than the comparable quarter last year, mainly due to the timing of bulk activation in Florida.
Let's remember that the Q2 of 2018 included a large bulk activation. The 2019 Florida ramp-up should mainly materialize in the Q4 as we expect to connect and activate many customers. Furthermore, there will be a ramp-up in marketing activities in the second half of this year, which should improve PSU trends.
Atlantic Broadband continues to upgrade its TiVo platform and has just launched the Alexa voice control functionality. Customers with the voice assistant device can now issue hands-free voice commands from anywhere in the room, and among other functionality, Alexa can open streaming apps like Netflix on their TV with a simple voice command. This is in addition to being able to do the same with their TiVo voice-activated remote.
Atlantic Broadband has mostly completed the rollout of its NN suite of services with the launch of NN's Wi-Fi service in the newly acquired MetroCast systems and the launch of voice for business in the new New Hampshire and Maine service area, which now cover close to 50% of the MetroCast footprint. The NN Wi-Fi service utilizes multiple wireless mesh access points and intelligent routing algorithms to provide the best possible wall-to-wall coverage and speeds, which dramatically improve video streaming capabilities.
Atlantic Broadband currently offers 1 Gb internet service in 50% of its footprint and targets a 90% coverage by the end of this fiscal. Let us now take a look at Cogeco Inc., where the consolidated revenue has increased 7.3% and EBITDA 10.3% in constant currency. Advertising markets in the radio business continue to be challenging. As a result, we are managing our costs tightly.
The integration of our 10 new radio stations is proceeding well, and we are excited at the prospect of a wide coverage throughout the province of Quebec. The quarterly dividend has been reconfirmed at CAD 0.43 per share and a 10.3% increase over last year. In conclusion, I would like to note that since the beginning of this fiscal year, we have achieved a number of key strategic milestones.
We have announced the sale of Cogeco Peer 1 to re-center our resources on growing our broadband segment, both organically and through acquisitions. We have completed the stabilization of the new customer management system in Canada, which is foundational to our future digital projects. We have now fully embarked on a digital transformation, which will enable us to better serve our customers through innovative and interactive digital platforms and better position our service offering.
This initiative speaks to our commitment to provide our customers the highest level of service, which has always been part of our DNA. Going forward, we will focus on pursuing profitable organic growth through providing NN services to our customers, growing our internet and commercial services market shares, and expanding in select areas such as Florida. We continue to look for attractive acquisition opportunities and will continue to be proactively very engaged in the wireless consultations. Now we will be happy to answer your questions.
Thank you a t this time, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from the line of Jeff Fan from Scotiabank. Please go ahead.
Thanks. Good morning. A couple of follow-ups, then perhaps a bigger picture question. In terms of just following up on the U.S. Cable, you mentioned, Philippe, mid-single-digit growth on EBITDA for U.S. Cable for the second half of the year. Is that on constant currency?
You also mentioned a big PSU or bulk transaction in 2018 c an you just remind us of the magnitude of that, just for us looking at the second half of this year, how it compares? The last question is just on overall capital allocation. Now that the sale looks like it is going to close soon on Cogeco Peer 1, can you just remind us the use of proceeds and priorities in order of what you think are attractive areas to go after? That would be great t hanks.
Okay w ell, the first part of your question, yes, the mid-single-digit organic growth is in constant currency, Jeff. The Florida market, where bulk, so condo towers or gated communities, as you can imagine, these are contracts by contracts, and they fluctuate over years t hat is why the year-over-year comparison sometimes could be difficult, as it is not linear. I simply wanted to remind you that since we had a larger activation last year, just compare the year-over-year, given that fact.
For the capital allocation, the selling price is CAD 720 million. We have some expenses to pay related to this, as we have discussed previously. We are going to be repaying a revolver of about CAD 400 million. That leaves a little more than CAD 300 million in cash. We are planning to launch an NCIB as well. NCIBs get done basically over many months, over a year. As we execute this NCIB, we should normally generate additional cash flows from the business as well. Hopefully that answers your question.
In terms of your leverage, can you just remind us where you think you want to stabilize the leverage? Then also, just in terms of new business opportunities, I think in the past maybe you've given us some priorities, U.S. versus wireless versus other. Now that you've got a wireless proceeding going on, I'm just wondering how that has affected that thinking.
Let me just start with the big picture then. We have not changed our strategy forward, just investing in our existing networks. I could describe many initiatives to better the customer experience as well as reduce our operating costs.
The look for acquisition in our existing territories is also something on the radar. There are many opportunities, as you know, acquisition takes a little bit of time to negotiate and eventually to announce. Stay tuned on that front.
On the wireless, that is the third pillar of our strategy w e are, extremely proactive in conversations w e'll continue to be in conversation with the players and we'll see a s I said, it's too early to announce exactly the business modeling we're looking at and contemplating, we certainly want to be part of this mobile ecosystem.
On the leverage. Our leverage from what we've disclosed yesterday is 3.3 turns of debt to EBITDA. If you were to pro forma the sale of Cogeco Peer 1, you'd be at 2.9 x. Obviously, over time, generally, we're able to decrease this unless we make an acquisition, obviously. Our long-term target is still about 3 x. Pro forma, the sale of Cogeco Peer 1 would be slightly under that, very close to it.
Okay, great. Thank you very much.
Thank you.
Your next question comes from the line of Aravinda Galappatthige from Canaccord Genuity. Please go ahead.
Good morning t hanks for taking my questions. I'll start with a question on the U.S. PSU movement, the net adds. I know that in the past, in the prior quarter, you talked about some of the seasonal movements due to the footprint in New Hampshire and Maine. With that in mind, and I know you've cited that in Q2 as well. With that in mind, when we look at the second half, it follows that we should be looking at year-over-year stronger numbers based on your prior reporting. Are there other sort of dynamics that come into play when we look at the second half for U.S. PSU net adds?
Sure. I would say this quarter was a bit weaker than usual. Generally, we have a new advertising campaign that's starting right now. That's a general comment for the overall footprint. We should expect benefits from this. As we stated before or Philippe mentioned in his presentation, we should expect more advertising costs as well in the second half, which partially benefited the EBITDA this quarter.
We basically are going to invest more in the back half. It just happened to be like this year. In terms of seasonal, it's true t here were some seasonal disconnects in this quarter i would say if you look going forward in terms of reconnects, the seasonal reconnects, we would expect that this current quarter, the Q3, and a bit in the Q4 would be the time where it's reconnecting.
It's mainly in the MetroCast areas because in Florida, actually, we sign a lot of bulk agreements i n the MetroCast area last year, we had just bought the company. I would say we're better equipped to basically make sure that we get our fair share of the reconnects this year.
Lastly, in Florida last year, to Jeff Fan's question, we had larger bulk activations in the Q2. We expect this year that we're going to have larger bulk activations in the Q4. Those are from signed transactions that's basically in construction right now. It will fluctuate from quarter- to- quarter o bviously in Florida, we have a bit of visibility as we typically sign these deals in the first months before we install.
Thanks for that. Just staying on the U.S., I know you alluded to this a little bit in the prior answer, but can you just give us an update as to what the landscape looks like when you think about U.S. Cable targets? I know in the past you've kind of given us a sense of sort of the family-owned and privately, the P-owned cable networks that are out there. Any change in that landscape over the last year or so that you can touch update on?
No, it would be the same. Actually, there's been very little transactions over the past year. It basically means that the owners are the same as a year ago. We are ready to make acquisitions and when companies are looking to sell, we're typically there when we can be at the table looking at it. I would say we're fairly active looking at potential transactions, but they obviously have to be available.
Okay, thanks and l ast question on Canada. Obviously, you're emerging from the CRM-related difficulties. As you look to rebound and get back to subscriber growth, particularly on the internet side, any spillover from that period of customer issues? Is there any feedback to suggest that there was some sort of goodwill lost and so on? I'm trying to get a sense of how much you can recover from that period as you build, get back to a sub-growth phase.
I guess the important factor here is that we serve our customer with very good, exceptionally good customer service. Customers, in the areas where we serve, they know that, they knew that, they know that, and we have returned to that high level of customer service. I personally believe that this is the key component that customers are looking for to be served. Yes-
My expectation is that some of these customers that went and try other solutions for a short term will return, as well as we are much better equipped not to lose any on our own doing and i admit we went through a difficult period, but that period is completely over. We are fully operational with new processes and a new system that much very well.
Great. Thank you. I'll pop the line.
Your next question comes from the line of Sanford Lee from Macquarie. Please go ahead.
Hi. Thanks for taking the question. Just you mentioned in your opening comments about the internet net adds in Canada being lower year-over-year because of competitive factors. Is that competitive factors aggressive pricing moves? or are you talking more about increasing FTTH footprint overlap?
Well, I would say the competitive intensity is similar to what we have normally. It comes from different areas so o bviously our competitors, like we do, will run different campaigns, and advertising, promotional activities t his moves all the time. I would say it's usually intense and it still is. In terms of fiber construction, there is some fiber construction every year. It's still the case today.
I would say there has not been a significant pickup in the past year so n o, it's not as if there was a number of large cities that were done. Some of the fiber that's being constructed now is in fiber to the node areas, which means that the competition already offers their key products, including the video product. It's just a faster internet speed. That's a bit different than going from a DSL territory to fiber to the home but i would say both are going on, but there's some areas that are going from fiber to the node to fiber to the home.
Our existing product on the, if we talk about speed, is very well positioned. We offer 120 megabits per second everywhere, and you've seen us make announcement on up to a gigabit. Let's remind ourselves the offer taken in the market are far less than the 120 megabits per second. We feel we have an excellent product that is already deployed across our footprint, and a better customer experience. Combine great product with a great customer experience. Don't look on the product side.
The promotional and advertising is more where sometimes we see some difference in the marketplace. Before we're working really hard segmenting on our marketing efforts to address promotional campaigns launched by our competitors and win our fair share of the marketplace.
Great. Patrice, just sort of on a related issue, competition from fixed wireless internet services i know it is fairly early, but can you give us any commentary on what you're seeing in terms of market that you can face competition from fixed wireless?
Yeah. Well, that will be very short because we haven't seen in our footprint any fixed wireless major activity going on. That remains mostly theoretical for now.
Okay, great. Also, the FiberLight business that you acquired, I believe it had customers. Is that in your internet subs and it's in your base as well as in the net add now?
Those were business customers. I would say it's large dollars per customer. They are in, but it's a very small number of customers i t's really, if you were to see the list, it's very common names in the U.S. of consumers of bandwidth.
Okay. I guess that the partially driving the large increases in the U.S. dollar ARPU could possibly come from some of that.
It has an impact, because we did and we acquired that network b asically, it's a dual reason t here's obviously these customers, and we'll grow with new customers as well, and there's also an ability to grow our bulk activity with this network. You're right, in terms of ARPU, the customers we acquired came with higher ARPUs versus what we typically do on the commercial side. Most of our customers are SMEs, and we have larger customers as well i would say the bulk are SMEs, whereas this network, the bulk was larger enterprises.
Great. Last one on the U.S. Cable, M&A. It looks like the U.S. Cable has performed quite well year-to-date, c an you tell us what you're hearing and what you're experiencing now as far as cable valuation and much impact?
It's difficult to say because as I was saying earlier, there's been little transactions in, let's call it the last year. Obviously when we look at the transaction, we look at the benefits of that particular transaction, which includes many elements, including obviously where it is, the population that it serves, penetration rates, synergy, a ll these things. And that impacts ultimately the multiple we're paying. It's also some transactions done by others i t will depend basically what their strategy is and what they're willing to pay to integrate it in their business.
Fair. Understood. Maybe one just quick last on the just wanted to know if you wanted to comment or refute the CCTS findings that sort of show a large increase in the customer complaints over the last six months and again in January, acknowledging that it does, I guess with the CMS transition period.
Well, it's actually that. The period covered by the report is exactly when we had some issues with the CMS migration. Now that we have fixed these issues, we expect our numbers to come back where they were, very distant from the number one position in that report.
Okay, thanks for that.
Your next question comes from the line of Vince Valentini from TD Securities. Please go ahead.
Just a quick question on the guidance. I noticed the EBITDA guide has stayed at 8%-10%, even though business ICT or Peer 1 is now gone. I know it's small but m athematically, I would've expected that to boost the EBITDA growth rate? can you maybe talk about some of the puts and takes in there?
Yes. There's a couple of things o bviously we removed CP1 from the prior numbers and the future numbers. There's an inorganic portion in there as well, from MetroCast. I would say, that's why we have a range. It could have been that by redoing the guidance with one less division, the numbers could have changed.
As you pointed out, CP1 was not a large part of our business. When we came out with the original guidance, we did not expect as much issues with the transition in the CMS system in Canada. As you know, we're back on track now, but that had an impact obviously on the Q4 of last year and Q1 of this year. That played a little bit into the expected growth rate for this year, which does include, obviously, the performance you saw in the last quarter, in Q1.
Okay, thank you.
Your next question comes from the line of Maher Yaghi from Desjardins. Please go ahead.
Thanks for taking my question. Congratulations again on the sale of Peer 1 i t was nicely priced. I wanted to ask you a question on the penetration of internet in your Canadian territory, Canadian footprint. You're putting a lot of focus on internet and cable companies in general are doing so, less relying on TV to grow.
When I look at your internet penetration rate in Canada, it seems to have peaked in the Q2 of fiscal year 2018. Since then it has been declining. I wanted to get your view on the trend that we're seeing over the last three quarters i s that something that you are focused on turning around?
What is your objective in general? In the U.S., when I look at your internet penetration rates, they have been around 46%, 47%, just until you did the MetroCast acquisition and that boosted the percentages. Is 45%, 46%, is that where things should settle in Canada? or you could hope for more than that?
Okay w ell, thanks for that question, Maher. T he peak you have alluded to in that timeframe, we had this CMS issue and i f you remember, we had said that customer service was very important and a t the time, we redirected our sales and marketing efforts to the customer experience.
That explained why our sales and marketing activities were less than efficient during that period. The internet sales certainly were lower because of that. Now that the CMS is behind us and the sales and marketing are back in growth mode, I'm expecting that the internet market will continue to grow as there is still a huge potential out there.
If I can add to this, there's still a large portion of our footprint that's covered by competition in the DSL, so that's very low-speed internet. There's a great opportunity there, and we're working on this and, w hat works against it, obviously, is when competitors rebuild their networks, then we have to adjust in these territories. Overall, some capacity to grow still.
Okay. The potential long-term is, what do you believe is a good target to achieve over the next two years in terms of penetration?
Well, we won't put a number on this, but let's say that, as I described earlier, we have a superior product in the market. It's very fast and reliable. Combined with great customer service, this is what customers are expecting from their service provider. We should do very well.
Okay. In terms of margins in the Canadian broadband services business, you mentioned that you are going to invest a bit more in marketing in the next couple of quarters now that the system is up and running. What is a good target in terms of margins in that business? As the switch from video to internet continues, normally you should expect margins to keep growing. What is the upside here in terms of margins in the next couple of years in the Canadian business?
We're, I would say, in the 53%-ish area right now. We've been able to grow it every year, even before the, I would say, a bit more focus on internet as you're pointing out. More internet obviously will direct us to higher margins normally but w e do a lot as well on our OpEx front. That's part also of the digitization project t hat's a program that was referred to before.
We see upside there. Difficult to know exactly where we will be in the future w e've been able, typically, to grow probably one point a year. We see a lot of upside in being able to, again, better serve our customers with more tools and at the same time, work on our cost side. The other thing I can add is on the video front, with the new IPTV product, we should expect some savings there. We still believe that video is a good product. Our approach is always to offer the best solution possible t hat's why we introduced TiVo early on.
We're going to introduce the new IPTV platform as well. The idea is to provide everything the consumer needs. Again, our areas of operations are more suburban and rural, which means that you have more single dwellings, and TV is still an important product for many people.
Okay. My last question on capital intensity, n ow that you have sold Peer 1, when we look at the Canadian and U.S. business combined, what is a more sustainable capital allocation intensity ratio that we should be looking at in terms of the business over the next couple of years? I know you gave a guidance for the year i s that what we should use in terms of an average capital intensity ratio going forward?
Well, we've been running Canada between 18%-19% for a few years, and that includes all the digitalization, which requires some capital rolling out gigabit, which will be at 60% in a couple of months. We're able to do a lot within this. 18%-19% is probably not a bad number to use, going forward. We might have some upside there as well as we roll out smaller CPEs for video going forward with the IPTV introduction.
Once we're there and we've introduced it, then we'll be able to talk more about it but i would say it's probably a right range to use. At ABD, we've typically run below 20% as well, except more recently when obviously we bought dark fibers initially from FiberLight before we completed the acquisition, and we're investing more in Florida.
As Florida now is the additional extension is generating revenues and EBITDA, it puts less pressure on the intensity so w e're expecting low 20% at ABD this year. Going forward, we'll probably get back down below 20%. You have to stay tuned on this when we're done with our budgeting exercise, which is in a couple of months for next year but i f you think a couple of years should be below 20%.
Okay s orry, one last question I forgot i t's the closing requirements for the Peer 1 sale a re there any closing conditions that the buyer still has not fulfilled?
There's a number of things we had agreed with the buyer to do before the transaction closes. We're very well advanced in this, but not fully done yet. We should expect to close it this quarter.
How about the financing of the transaction?
No, that was already arranged before we announced the transaction.
Okay, thank you.
Your next question comes from the line of Matthew Griffiths from Bank of America, Merrill Lynch. Please go ahead.
Yeah. Hi, thanks for taking the question i just had two quick follow-ups, if I could. One is on the bulk transactions in Florida i was just curious if this kind of once-a-year type of pace is what we should expect going forward, or if maybe the opportunity is potentially larger, and we might see these pop into the results more frequently going forward.
The second thing I wanted to follow up on was just on this digitization push that you're doing. I was wondering where you are, if you're still in the investment phase of this or if that is largely complete, perhaps, and now you're in the process of harvesting some of those benefits more. Kind of related to that, whether or not Canada or the U.S. is maybe more advanced in that process, if there's a difference. Thanks.
Okay. Well, let me start with the bulk question for Florida so w e are still ramping up our operations, sales operation, marketing. And right now, you're right, they come in more in spike. It's totally our intent to level that and add an ongoing sales and marketing, more regular activities, and the pipeline won't spike as much. You should expect for the years to come, more regular deployments.
That's for the first part of your question. The digitization, as I said many times, the foundation was this new CMS system, so there was already a large investment made there. It's up and running the first phases, and I just reported some KPIs for the first 18 months of our program. We're doing already very well on billing and truck rolls and on-site repairs and self-installs.
Over the next 18 months, there will be more benefits coming. They don't require as much investment because the platforms and the foundation is there. It does require some incremental investment here and there, and you should expect more benefits to show up, and I will be glad to report as to where we are in future meetings.
Great. Thank you.
Your next question comes from the line of Drew McReynolds from RBC. Please go ahead.
Yeah, thanks very much g ood morning t wo quick ones for me, Patrice o n the fiber-to-the-home overlap with your footprint, can you remind us where that stands right now? With respect to your free cash flow guidance for fiscal 2019, perhaps provide us with an update on cash taxes assumed in that guidance and maybe the medium-term outlook for the cash tax rate into the next couple of years, if you have that kind of visibility right now, that would be great. Thank you.
Okay. On the fiber to the home, as I said earlier, this moves every year a little bit. It's around 30% right now of our footprint with the footprint where we have Bell as a competitor. The balance is made up of fiber to the node and primarily DSL as well. That's where we are right now.
On the free cash flow guidance for this year, the cash tax is estimated on a consolidated basis at 12%. That's a lower number than what we had before, it's pursuant to the reduction we've got or accelerated depreciation at the federal level, and Quebec will also follow with a similar program. It's about 12%. Going forward, well, it's difficult to know exactly where we will end up, but these programs are not just for one year. We should expect that over time it will go up, it takes a few years basically to go up significantly from that percentage.
That's great. Thank you for that.
If there are any additional questions at this time, please press star followed by the number one on your telephone keypad. Your next question comes from the line of Jeff Fan from Scotiabank. Please go ahead.
Thanks i just have a follow-up on wireless. Philippe, you mentioned that it's too early to discuss any business model. Is it fair to say that you're adopting maybe a more wait-and-see approach given what the CRTC has decided to do with respect to the MVNO proceeding, that it might be difficult at this point to kind of paint which path you're going to take until you know what the rules look like? I'm just wondering what your thinking is there and why it's too early and how this regulatory proceeding may or may not play a role into that.
Well, of course, we are anticipating more good news from the industry, I said, as well as on the CRTC. I mentioned that the public hearings have been scheduled, the work has started, and we are in active conversation, as you can imagine, not only with the governments but also with industry players. My position at the moment is just to work on these things, when we will have meaningful announcements, we will make them but a t this stage, it's private commercial conversations and government conversations that are taking place.
Your expectation for what's coming out of ISED, can you elaborate on that a little bit more?
Well, ISED has been very public and very clear that they want Canadians to benefit more from a market that will bring more competition, more innovation, and greater choice for Canadians. ISED has also issued policy to the CRTC to look at the future regulatory environment that would benefit Canadians.
We certainly think, given our existing networks, our existing footprints, the relationship we already have with a significant base in Quebec and Ontario, as well as if you consider the number of home pass and business where our network is already installed, we have a large and significant presence. We know we can contribute to this ecosystem. Now it's a matter of the regulatory framework to land and commercial negotiations to take place and continue.
Okay. Thanks for the call.
There are no further questions at this time. I turn the call back over to management for closing remarks.
Okay w ell, thanks, everyone, for being on the call today w e're going to be discussing our Q3 results in July. We'll see you then, and feel free to call us in the meantime if you have additional questions. Thank you.
Thank you. This concludes today's conference call. You may now disconnect.