Welcome to our last session of the day. We've got the team from Rogers here, Tony Staffieri, CEO, Glenn Brandt, CFO. Guys, welcome. Thanks for coming, and look, let's skip the gristle and get down to the bone here. I think all your shareholders wanna know how much stock do they need to own to get Taylor Swift tickets?
You're starting with the hard stuff. I gotta tell you, my popularity-
What, what-
has gone next level. And so
What's the over-under on ticket requests?
Yeah. It,
... I imagine.
Over. The number keeps climbing.
Yeah, no kidding. No kidding.
Well, thanks for having us.
Yeah, well-
Good morning, or good afternoon, everyone.
No, in all seriousness, I think we all know what a lot of people wanna talk about, and that's how the integration with Shaw is going. And maybe we'll start on... Before we get into numbers with Glenn, Tony, maybe if you can talk about what you're seeing, you know, with products, with, with penetration, with employees. Give us the big picture before we get into numbers on the integration.
Sure. You know, if I were to summarize it at a high level, think about it as, teams have been working really hard over the last couple of years getting ready for Shaw, which really put us in a good position once we closed Shaw. I know you've heard that before, but we're now six months, I guess, post-close or closing in on that, and what we're seeing is, you know, if I were to break it down, one is the team itself and how we've integrated is working out extremely well ahead of schedule. And so the leaning of the organization, the simplification, and the coming together of our org structures, cultures couldn't have asked for a better setup.
And so it's that team that's executing on, you know, as I think about our customer experience in the West and the ability to transact with us seamlessly now, whether you were a Shaw customer or a Rogers customer and trying to do the rest, the systems are up and running. We said they would be July 1, and they have been, and so that process is working really well. So from a customer experience standpoint, that interface is well on its way, and I would say the heavy lifting on that is behind us. And you're seeing that... You know, our proof point is not just do we feel good about it, are we seeing it result in transactions that are meaningful?
When you look at the performance in the West in terms of subscriber performance, and mind you, that's against the backdrop of a Canadian subscriber base that continues to grow at a very healthy pace, the result of that execution is phenomenal, and so you look at the customer experience. The next is the product, and so we now have integrated product between Rogers and Shaw. It's one product that we go to market under the Rogers brand. So the acceptance of the Rogers brand was always a bit of a question mark, and these things always are, but it's been extremely positive. We're really benefiting from the strong NPS the Rogers brand had in the West because of our wireless performance, combined with some of the things we've done on network in wireless that have only helped to do that.
You know, when you think about things like, SpaceX, TTC, Highway 16 in the West, and a few other areas that were key dark spots in wireless, they've gone a long way to help us. And it's a whole bunch of things coming together that is allowing us to be pleased with the market share that we're seeing out there. And then you look at the underlying systems and how that's going, and we always said that was sort of, you know, the third, fourth order of business is, what's the pacing for things like ERP, billing platforms? And I would say those are progressing well, but they were always, you know, a 12- to 24-month, and we're doing that, I would say, carefully and slowly, in order to pace that.
So that's sort of an overview of how we're sort of seeing it, and I would say the last piece I'd give you is really pleased with the reverse synergies. And so it's not just in the West, but how their operations are helping us in the East is meaningful. You know, when we look at the base, and I've said this before, the more we get to know the asset, the Shaw asset, the more we're pleased with it in terms of when you look at that, cable base, extremely low churn, which is healthy, lower than the churn we've had in the East. And there are good operational reasons for that, that we've been able to leverage and will leverage in a more meaningful way, as we move into the fourth quarter. So you'll see that.
That's sort of a summary, fly-by, and I'll let Glenn talk to more specifically on the synergy part of it. I think that was part of your question, too.
Yeah. Yeah, Glenn, why don't you take over?
Sure.
I mean, and just maybe level set for some people who aren't aware what the original targets were-
Yeah
... and how that's coming along.
Sure. So we've been consistent from, you know, the start of this, that the target for us is CAD 1 billion in synergies within the first two years of the acquisition. Those are OpEx synergies. We are, I'd say, ahead of plan, ahead of target on that. It's early. We're coming up on six months in, but I'm very pleased with where we are. If you look at the exercises that we've gotten under our belt, we've integrated the team. We've gone through a significant portion of the headcount reduction part of that, eliminating the duplication of the head office, as well as some of the operating company duplications of departments and what have you, the traditional stuff you point to.
We've signaled we'd get through this year or the first 12 months with a run rate of CAD 200 million of in-year cost synergies achieved in 2023, as well as an annualized run rate within the first 12 months of CAD 600 million. We are, again, at or ahead of plan on those measures. We will go into Q1 of next year at that CAD 600 million run rate. If not, by the end of this year, certainly very early in 2024, we will achieve, you know, we said CAD 200 million. I anticipate that we will have that in hand, well in hand as we exit 2023. So we're ahead of plan on the cost synergy saving side of things. We are, as Tony has said, we are executing well on the revenue side.
The revenue synergies, it's, you know, I've said all along, it's a little difficult to distinguish between organic growth and synergistic growth. I don't really... You know, I don't spend a whole lot of time trying to do the calculus on that. The growth is there on the revenue side, particularly in wireless. As we lean in the West with bundling, we are transitioning the Shaw Mobile customers over. That will be completed in year. So, you know, on the integration side and on the cost synergy side, at or ahead of plan, in most cases, ahead of plan. Very happy with where we are.
Let's stick with you, Glenn, and maybe go into your leverage targets and-
Sure.
You've made a couple announcements. You talked about some real estate, introducing a DRIP. Maybe just give us a summary of,
Sure
... balance sheet management going forward.
Yeah, so when we closed on the transaction, we closed with leverage of 5.2x back in April. We hit 5.1x after our very first three months of operations, Q2 release. I anticipate that we will continue apace to come in at a 0.1x or better in quarters as we move forward. So, you know, over the first three years of acquisition, we will delever by about 1.6x . We need to get to 3.5x within three years of the acquisition, and that's roughly on pace to come down 0.5 turn a year. We are delevering at that pace. And so from a leverage standpoint, Q3 will continue that exercise. We will build on the synergies.
We had CAD 50 million of cost synergies realized in Q2. We will build on that in Q3, and then again in Q4 , getting to that run rate of about CAD 600 million of run rate synergies by early 2024. That will have us delevering below 5x as we close out 2023 and go into 2024. I'm satisfied, well satisfied with that pace. It's, as I said, ahead of plan. From the credit rating agency standpoint, we met with them heading into our bond deal last week. I'll come back to the bond deal. Credit rating agencies are satisfied with where we are in executing against our plan. On the bond deal, we had an order book of CAD 9 billion, issued 3 billion across four tranches in Canada.
Our fixed income investors, our bondholders, are satisfied with where we are on execution. Absolutely, no question. We cleared the table. We cleared the table across Canadian institutional investors with that issue. There were very, very few that stayed on the sidelines. And so from a delevering standpoint, that's landing well. In terms of the asset sales, we've announced predominantly real estate assets, surplus real estate assets, that we have underway.
Those are proceeding on schedule, on plan, hoping to have something to announce this calendar year, likely with proceeds coming in, I'll say, you know, by mid-2024, on the real estate side, as well as a couple of our non-core business lines that we are looking to see if we can find a buyer for that to raise some capital there as well. On track to source CAD 1 billion across each of those initiatives. I'm not yet prepared to announce which business lines those are, because it's disruptive to the business line itself and to the employees. But they're... You know, these are not units that would affect EBITDA in any significant manner whatsoever. On track for generating that CAD 1 billion.
Okay, great summary. Before we start getting into the operations, just so any questions from the floor with respect to Shaw itself? Doesn't appear so. Okay, well, let's talk wireless. You know, it's a robust loading environment out there. You guys have outperformed the peers the last few quarters. Can we get an update on what's happening in wireless, Tony?
Yeah, a couple of things. One, in terms of the size of the market, continues to be very robust, and it's really driven by the two things we've pointed to in the past. One is, the new to Canada category continues to be strong. It's interesting how, you know, we've been quoting growth numbers that only now the government is catching up with officially, and that continues to be strong. And we saw it quite strong in back to school with foreign students coming, as well. And so that continues to be strong. The uptick in penetration rates continues to be healthy as well. So both of those are contributing to... We estimate, a market growth that continues to be in the 5%-5.5% range.
which is just slightly down from what we saw in Q2. But, you know, we've still got a few weeks to go, and it'd be about the same. So good, healthy growth, and against that backdrop, we've been executing on, I would say, probably three fronts. One is how are we doing on market share on a regional basis? And we continue to focus on the areas that you would expect, certainly in the West, but also here in Ontario, as our leading market share. Those are the fastest-growing markets, and so we want to make sure we do well in those. The new to Canada category is one that we've been focused on for several years now, and so that muscle is one that continues to perform well in attracting disproportionate share in that group.
And so, that's working well. So from a subscriber net addition perspective, pleased with where that's going. And as I said, the team continues to execute extremely well on that, including some additional bundling, which I've talked about before, predominantly in the West, as we came together with Shaw. The second piece of it, in terms of fundamentals, is the ARPU side of it and how that... Our objective was, given the growth of the market and where some of that was coming in as new to Canada, our objective was to have stable ARPU and, in the back half of this year, to see underlying ARPU grow. And, we're pleased, you should be pleased, that what we see is a good, stable ARPU profile.
So in the Rogers category, you continue to see migration up from Fido, and so that's working well within the Rogers brand. You're seeing less on Fido, and that was an important milestone for us as we did Back to School. And what you saw, more Rogers than we've ever had in a long time. So we've said our strategy is to move back to the Rogers brand as the leading brand, and that's playing out in the marketplace with good resonance and leading with 5G. And so, we're pleased with the way that's playing out. And then, as I said, on the new to Canada, that's one we don't want to under index on, because they come in on mixed profiles. And so, you might intuitively think of them as lower ARPU. That's not necessarily the case.
There are many that come in at a very high ARPU, and the depth of wallet on that is good. But even for the ones that come in low, they sort of are finding their footing, and then once they do, they have a really good migration path upward, and the team executes really well in capitalizing on that ARPU migration for the new to Canada. So all of those are contributing to, you know, what I would call a healthy, stable ARPU on balance. But you got to realize it's stable because of the inflow at the bottom end, that I really do feel we'll see that translate to, albeit modest, ARPU growth later this year and into next year. So that's that.
Competitive pricing has been talked about a lot, as one when we closed Shaw, a lot of and some of your peers have written about, you know, impending doom on that. Didn't happen, and then it was Back to School. I would say it's competitive for sure. And we have four brands out there or four companies with multiple brands out there, competing in each market. So the competition is fierce, but it isn't anything different we would have seen any other year. So I would say the competitive side of it is what we expected, and nothing that really detracts from the economics of... for us. And then the last piece is executing on all that while still maintaining industry-leading margins is important for us. So we continue...
Even though Shaw was a cable integration, we continue to look at efficiency across all the businesses, and so, we're pleased with the way the wireless efficiency continues to play out. Especially, and it's not just OpEx, but on the CapEx side as well, because one of the things we've always said is our value proposition was gonna be centered around best network, and we're pleased with the coverage. You see our tagline of "Largest and best 5G network," and that dovetails with our expansion of the Rogers brand nationally. You would have seen. You know, we focus on the studies that matter most, and, you know, umlaut, that was recently acquired by Accenture, we believe is probably one of the most in-depth analysis of network performance.
For the fifth year in a row, we continue to lead on that in terms of network performance. That's sort of an overview of the wireless landscape, the way we see it.
What... Can you comment specifically on how you're performing in the former Shaw footprint with, you know, integrating Rogers Wireless as a brand and services, and also how you're managing the former Shaw Mobile subscriber base that you, that you-
A good question, Tim.
Yeah.
So, in coming together with Shaw, we weren't sure how that bundled, or, as I said at the outset, the favorability towards the Rogers brand was gonna play out. What we saw in Q2 and continue to see in Q3 is double-digit growth in market share in the West, and so we're extremely pleased with the way that's playing out. And some of that is new to Canada because it's landing in certain cities in the West, and Vancouver in particular. But it's really more broadly in both BC and Alberta, and so that's playing out well. On the Shaw Mobile customers, that was about 500,000, what we've been trying to do, and you gotta, you know, we, the headline on those were low ARPU, et cetera.
But I always remind folks, they were bundled with home products. And so when you looked at the profile, and as we got under the covers, very low churn and high ARPA customers. They are predominantly on high-speed internet tiers, with a video package. And so as a customer, they're very valuable. And so we were very careful as we migrated those customers to the Rogers 5G value proposition, that we did that right. And, some early learnings, but overall, it's proceeding well. We'll, we'll probably have all those customers on Rogers' 5G by the end of this year. That's what we're targeting, and, and we're pacing ahead of what we expected. So that's worked out extremely well.
There is a very—I was gonna say no to very little leakage in terms of customers shutting off any of those lines. So we're really pleased with the way that migration is happening.
How about in Ontario? I mean, Freedom is back in the market after being on the shelf, you know, in effect, for a couple of years. What do you... How did back to school go in Ontario?
It was extremely strong for us. So similarly, we saw a material year-on-year growth in market share, in Ontario and in Toronto in particular. And so when I go back to is, you're probably gonna ask me, "How come?" It's probably a whole bunch of things that we've talked about, but it's all coming together, well. You know, they launched a few, I would say, price points, sub-CAD 40, that we were careful in how we responded, and didn't have a material impact on the market, frankly. And so one of the things we've gotten a lot better at is, let the competition do their thing, we'll do our thing, and we don't have to respond to every move they make. Let's let the customer decide what is important to them.
The fact that we had little to no response on that really speaks for itself.
Okay. Let's just in the interest of time, we should talk about cable for a bit here. Yeah, kind of similar question. How's the business performing in Ontario? And you've touched on it a lot already, but any changes you've noticed within out West in terms of just the overall go-to-market strategy?
Yeah, I would say a few things, because the execution priority is different in each one of them, and I'll start with the West. The priority there, given the low churn, was really on the gross ad side or on the subscriber addition side. Bundling has been part of that strategy, but also having clarity on our go-to-market product. So we're leading with the Comcast Xfinity IP product only now. So the value proposition is becoming clear in the marketplace, and that muscle is just starting on the gross add side. So we're pleased with the market share that we're seeing in the West at very healthy ARPUs. So that's the strategy there.
On the East, there's been two things I would say, heightened churn in the East that we've seen all year, that has been a little bit of price and a little bit of other, I would say, execution things on our part. And so we've been addressing both of those. We are focused on moving ARPU, ARPU up. And so what you have seen, will see, is a reduction in discounting in the marketplace in the East to focus on the value proposition rather than on price. It's early days, but the tactical approach on that is working well. As we think about the cable business overall, you know, just to summarize, we have a very strong network advantage, a very strong competitive advantage with the Xfinity platform.
and so it's really been about customer retention and ARPU growth. If you look at our subscribers, we're pleased with the share we're getting, and that continues to grow in terms of fair share. But the next frontier for us is growing ARPU in the cable business, so we return top line to growth. That's really the focus there, and I mean, the margins will take care of themselves with the cost efficiency and-
Mm-hmm
... and the synergies that Glenn talked about. So good, healthy, margin expansion in cable. But, along with the rest of our total business, everything is about growing, and so not having a top-line growth in cable is a non-starter, and we know what we need to do there.
Okay. We're up against it for time, but maybe just a couple of newsy items. Can you comment at all about the MVNO decision that you're appealing through the courts? What's the timeline and the strategy there?
Just real quick on that, it relates to, for those of you not familiar with it, it relates to MVNO rates between us and Quebecor, and the CRTC arbitrated on it. We have concerns with the process and the logic that they have. Look, we welcome competition, we thrive on it, and we'll go head-to-head in terms of competition, but the rules need to be fair for all the players. To have a regime that suggests that subsidizing a competitor, and it's okay for us to try to make money somewhere else in a different business, justifies logic that we're comfortable with. So, I won't go through the detail.
Mm-hmm.
It's in our pleading, which is public. But we've decided of the options to go through the court process to appeal that, and so that'll take several months, several quarters to work its way through.
Okay.
It isn't gonna be an immediate decision. But, we are very much focused on the principle-
Yeah
... of fair competition.
Okay. How about TTC Wireless? That's something that the minister wants resolved quickly. It's newsy. I know it's not hugely impactful but, you know, can we get a comment there?
Yeah. You saw the comment yesterday. He really wants the others on it, Bell, Telus. We've always said right from the outset, we continue to be open for business to let them on. And so we will have made access available to them so they can start doing their technical work while we negotiate the commercial terms of it. So I would say yesterday's announcement. I don't know that it was anything new other than imposing a deadline to try to get them on. And so we see it more as an impetus for them to get going on what they need to do to get the equipment in there and allow their customers to get on.
Right.
Make no mistake, we think that's the right answer. But, we can't be doing all the heavy lifting on our own on this.
Okay. Last question: Glenn, you mentioned some non-core assets. I don't know if I'd describe them this way, but, Tony, what is the message to the street on the sports portfolio? Because there seems to be a little more engagement on that topic.
Well, it's a tough question now that we're in the wild card, right?
Yeah.
But, uh-
Another game last night, we won't be in the wild card, right?
Yeah. Well, yeah, that's last night.
We'll put it aside. If we think about... It's a bigger question, and it's unfortunate we don't have a lot of time.
Yeah.
But the way we think about it is, when we think about our media business, today we have the complete end-to-end on content production, and ownership, which are the sports teams-
Yeah
... through the Jays and our interest in MLSE, all the way to having it in your home, and it's the complete end-to-end. If we were to look at media, if there was anything that had value, it's sports, and continues to have value. So, you know, our view is, there's something there. It continues to provide us good leverage. As we work through, and as you look to, you know, the headline recently is the ESPN, Disney, et cetera, the pacing of that type of debate and negotiation between the distributors and the content providers, in our view, will only escalate. The model is broken. The model needs to sort of be reset based on what consumers actually watch and want.
And so we're gonna go through a period, and we've already started, because as we negotiate our content agreements and costs, we've taken a different approach in how we wanna do it. And we're very much focused on a variable cost model that is tied to who actually watches this, because we only wanna buy what customers wanna pay for. And so as the world makes that shift, having that sports content for here in Canada is an important leverage for us. So that's one. And then, two, you know, the other part of the question is, is there a better capital model for that to surface the value? And absolutely, we've always said that. But first things first.
Yeah.
Yeah.
We're gonna leave it there. Thanks so much.
All right, thank you.
Cheers.
Thank you. Thank you.
Great discussion.
Yeah.
Super. We'll see you tonight.
Yeah.
See you at the ball game. Thanks, guys.
That was good.
Yeah. That's great. You guys came out swinging.
Yep. Yep.
Yeah. No, that's good. Well, well.
Okay. Are you in any of these meetings or we'll just see you tonight?
No, I'll see you tonight.
Okay, see you then.
Yeah, see you tonight.