RCI Earnings Call Transcriptbeta

Operator: Welcome to Shaw Communications Fourth Quarter 2020 Conference Call and Webcast. Today's call will be hosted by Mr. Brad Shaw, Executive Chair and Chief Executive Officer of Shaw Communications. At this time, all participants are a listen-only mode and the conference is being recorded. Following the presentation, there will be a question-and-answer session. [Operator instructions] Before we begin, management would like to remind listeners that comments made during today's call will include forward-looking information and there are risks that actual results could differ materially. Please refer to the company's publicly filed documents for more details on assumptions and risks. Mr. Shaw, I will now turn the call over to you.

Bradley Shaw: Thank you, operator. Good morning, everyone, and thanks for taking the time to join us to discuss our results for Q4 and fiscal 2020. With me today are members of our senior management team, including our President, Paul McAleese; and our Chief Financial and Corporate Development Officer, Trevor English. As we close in on almost eight months since COVID-19 was declared a pandemic, it has undoubtedly altered many of the everyday tasks in our lives and injected a new level of uncertainty across all industries and businesses. We've also been impacted at Shaw. However, throughout this crisis, we've demonstrated the strength and resilience our business and strong execution and engagement from all of our Shaw employees throughout the time of significant change. With the help and safety of our employed as a priority, we shifted to work from home, effectively manage the significant increased traffic on our networks, accelerated digital programs including self install and supported our communities. In fiscal '20, our critical high quality connectivity services have never been more central to the lives of our customers as usage soared and remained purely above pre-COVID levels today. During the pandemic, we launched new broadband services including fiber-plus gig internet service, diversely all customers in our operating footprint. Importantly, our gig internet service is now available to over 1 million more customers than our main competitor, showcasing our leadership position with respect to the breadth and capability of our robot fiber plus network, the direct results of years of facilities-based investments. As a further validation, just last week Ookla named Shaw the fastest and most consistent internet provider in Western Canada. Our digital initiatives are being embraced by our customers in this environment. In Q4 79% elected to self install their broadband service compared to 45% a year ago, the result of which is an improved customer experience and cost-effective solution has proven valuable and social distancing remains a priority. Our focus on profitable interactions and cost management resulted in an improved wireline margin for both the quarter and the year. Changes in our broadband pricing and disciplined promotional investment impacted subscriber activity in addition to COVID. However, we believe our focus on customer profitability is a prudent and effective approach considering maturity of our wireline products and services. Shaw business delivered approximately 2% revenue growth in F'20 as the COVID impacts were more pronounced in the small and medium-sized business sectors. However, the team did an excellent job of proactively working with our customers to finding neat and personalized solutions that continue to support them through this difficult period. Small businesses are at the heart of our economy we are proud to serve and support them, particularly through these hard and difficult times. More recently, Shaw business added to its unique line of smart products providing customers with additional tools and solutions that support our robust and secure work from home environment. Earlier this week, we announced our partnership with Tech Resources and Nokia to launch Western Canada's first dedicated 5G ready private LTE network for mining projects. Just another example of how our business unit is adapting to and embracing the evolving needs of our business customers with new services and technology. In our wireless business, Q4 marked an important milestone for our company with the introduction of Shaw Mobile on July 30. Customer manager's innovative service has outpaced our expectations and has remained strong. The launch of supporting the new Shaw branded stores as well as additional sales channels through our national retail partners, including the expansion of our partnership with the Mobile Shop, who now offers both Internet and wireless services. Although COVID-19 has an impact on wireless customer loading and the competitive environment continues to intensify, we delivered strong wireless net additions of approximately 60,000, 18% growth in service revenue and 25% unit growth in the quarter. We were also one of the only wireless providers in Canada with ARPU and ARPU growth for the year, including our strong Q4 performance that saw these metrics increase approximately 7% and 4% respectively. We believe we're well positioned with our two wireless brands to drive continued subscriber growth, increased retention through our bundling initiatives and improve customer account profitability. Our significant accomplishments in fiscal 2020 were achieved while managing through a pandemic and simultaneously growing our business. As Trevor will discuss in a moment, we are very pleased with our financial performance in 2020 delivering consolidated EBITDA growth of 3.7% and an increase in free cash flow by nearly 40% to approximately $750 million. These results are a culmination of our robust facilities-based networks. Our focused strategy and our strong execution by the team. I want to thank our employees who are going above and beyond every single day and particularly those on front lines, tracking teams to serve our customers. Now I'll turn over to Trevor to discuss the financial results in more detail including our expectations for F'21.

Trevor English: Thank you, Brad and good morning, everyone. Considering the unique and challenging environment that emerged throughout the year, we're very pleased with our Q4 results and our overall fiscal 2020 performance, which delivered growth that was larger in line with our original guidance that we issued last October. We're proud of our results and the execution by the team concerning the amount of uncertainty that we face as the virus spread, commodity prices collapsed and part of the economy shut down. Our consolidated Q4 performance continue to deliver stable results, with adjusted EBIT growth of 3.7% due primarily strong orders performance in the quarter, our wireline segment has been resilient throughout the COVID pandemic including business revenue the has stabilized. However, uncertainty does remain. While wireline use was soft in Q4 the broadband pricing that implemented at the end of May alongside reduced promotional investments that supported ARPU growth across all products. Combined with the overall competitive cost management we grew adjusted EBITDA by approximately 1.4% to on a free up for 16 basis and improved our wireline operating margin in both the quarter and year to over 43% on a reported basis. Wireless service revenue increased approximately 15% in the quarter on the back of continued subscriber additions as well as ABPU and ARPU growth of 6.6% and 4.2% respectively. On a pre IFRS 16 basis, Q4 wireless adjusted EBITDA growth was approximately 25% over the prior year. Turning our attention to F'20 annual results, while customer activity was impacted by the pandemic our wireless business, pardon me, our wireline business remains stable throughout the year. Adjusted EBITDA grew approximately 1% and profitability improved. Our wireless segment, which continue to face an intense competitive environment added over 160,000 new subscribers and we delivered service revenue growth of over 17% in F'20 to $850 million and adjusted EBITDA for the growth at over 30%. Consolidated capital investments of approximately $1.1 billion are larger than as planned. There were no material changes in our capital project for F'20, considering our business performance. Wireline spending continues to decline even with record usage on our network. This reflects decades of significant facility-based investments. Wireless capital spending in 2020 supported the deployment of Spectrum. Additional retail locations related to Shaw Mobile and preparations for the delivery of our 5G wireless service. Our focus this year resulted in substantial free cash flow of almost $750 million. This represents significant growth over prior years and is a direct result of our focused strategy to enhance our connectivity business and the transformation of our organization become more agile and capitalized on efficiency. With a strong free cash flow in F'20, we returned approximately $610 million to shareholders in the form of dividend payments and additional $140 million for the repurchase of $5.6 million Class B shares through our NCIB program. As we look forward to fiscal 2021, we maintained a great deal of confidence and the strong fundamentals of business as well as we're excited about the new initiative that will support our growth and strategic focus going forward. In F'21, we started to generate continued positive EBIT growth, capital investments of approximately $1 billion and free cash flow of approximately $800 million. While historically we've provided the EBITDA growth range with our outlook, we continue to be faced with ongoing uncertainty related to COVID, and the unknown impacts key areas of our organization, including Shaw Business and overall sales activity within our Wireless and Wireline segments. However, we remain focused on delivering stable Wireline results and growing our Wireless business supported by a robust facilities based networks and a continuous focus on capturing efficiency opportunities. Our consolidated capital investment profile is moderating and we're generating more than double the free cash flow, compared to just three years ago. Yesterday, our Board approved the renewal of our NCIB program, which enables us to repurchase up to 5% or approximately 25 million Class B Shares. While our NCIB activity was paused in April as COVID was unfolding and we elected to preserve liquidity, we continue to have considering - considerable balance sheet strength, with leverage of 2.3 times, which is again below our target range and significant liquidity including cash balance of $760 million with no near-term debt maturities. With the stable performance of our business and improving and strengthening free cash flow profile and attractive dividend, we continue to believe that an NCIB program is a flexible and efficient means to return additional capital to shareholders. Brad, back to you for closing remarks.

Bradley Shaw: Thank you, Trevor. I'm so proud of our performance in our team over this past year. We are moving forward with our strategy on our front foot and remain committed to enhancing the customer experience, while providing additional value to Canadians. Fiscal 2021 will bring new and enhanced services to both Wireline and Wireless customers. We will focus on bundling opportunities with Shaw Mobile to deepen existing relationships and build new ones. We will continue to enhance our Wireless network with the deployment of critical spectrum to enable 5G service this year. And we will further advance our digital initiatives to improve the customer experience and reduce the overall cost to serve. While we have accepted that our new environment is different, we are excited to continue playing a critical role in the lives of our customers. In closing, I'm very pleased to announce the nomination of Steve White to our Board of Directors. Steve has an extensive background operations and deep knowledge of the cable industry. For the past 11 years, he has served as President of Comcast Cable division in the Western United States, and has held senior positions at AT&T Broadband and Telecommunications. We look forward to Steve's contributions beginning in January. Thank you, Operator. We will now take on some questions.

Operator: [Operator Instructions] The first question is from Vince Valentini with TD Securities. Please go ahead.

Vince Valentini: Three questions, I'll throw them all, at least, you can think about them and decide how to order - how to answer them in order. One is on dividends. So if we look at your $800 million in free cash flow target for this upcoming year, that would mean dividend payments of about $605 million would be 76% payout ratio. If you increase the dividend 5%, that would take a payout ratio up to 79%. It's not a meaningful difference, still well covered, and as you know, your balance sheet is very strong. So your perspective on if and when we can get back to dividend growth would be very helpful. And number two would be on Internet, probably for Paul. Q4, obviously, wasn't very pretty in terms of Internet sub adds, but you didn't watch Shaw Mobile till August, and I think there was a lot of distortion in June and July from consumer activity and pricing changes you did relative to tell us. So if you can give us any context on how, maybe September and October look relative to the weaker Q4. I think that would help people a lot. And last, may be please, well, Paul, on Wireless churn being up 10 basis points. Can you talk about what's going on there and specifically I'm not sure, I'm sure how you treat it when you have these bounty offers from the incumbents trying to steal your customers, if somebody just wants to sign up for freedom for two or three days and then which to an incumbent to get one of their discounted offers. Would you treat that as a gross add and then churn or does that not impact the higher churn that we're seeing? Thank you.

Bradley Shaw: This is Brad. I just - I'll talk about the dividend, and you guys take the other two questions. As we know at a macro level, it's - the dividend increase from a Board decision in both management and the Board are committed to long-term sustainable dividend growth. I would say right now, today we pay very healthy 5% yield. And that being said, we certainly are confident about the long-term free cash flow profile of the company. But I'd say in these uncertain times in this environment, we really prefer the flexibility of a share repurchase to return excess capital to shareholders. And I would also say that just looking year-to-date that the Class B Shares were down 14%, which creates an attractive price to do the buybacks. And I would just say that we have a great significant cash balance, which we can deploy $760 million, which I think is very good news. And we continue to - well, I would just say we continue to make sure we - in this environment, you want to have sustainable dividend growth over the longer term, and it's something we feel that we'll continue to address as we go forward and leave that with the Board to make the right decision.

Trevor English: Hello, Vince. Paul, if you're good on that, I'll pick up on the other two. On the Internet subs, you're right to comment that we had during the early part of the quarter, a significant price disadvantage relative to Telus. You'll recall that we move to the launch of our Fibre+ Gig program on late May, May 27th, and Telus didn't respond in any way into the first week of July on pricing and not - and they didn't at that point come all the way. So we maintain a price premium through the course of the quarter. So we had a relatively slow start to the quarter. And of course, we didn't launch Shaw Mobile until the very end of July. So the things that we expect that will over time help improve our Wireline market share and in our market share. I describe as a process. We've been very clear about what our objective this year, and that starts with returning our Internet based positive subscriber growth. But it's a process with a very deliberate set of moves, not dissimilar to what we did in the Wireless business over the last two or three years. And well I'm impatient, these are all things that are now underway. So the first thing we did during the quarter, you've already seen is, is to make sure that we improve the products foundation for Internet, and that began with the launch of those two new high-speed tiers getting Gig into the market to make sure that we were there to address the emerging needs of work from home and the other pressures that we're seeing at the residential Internet level. But overall, we felt it through the course of the quarter, we made and continue to make and will continue to make in this quarter significant product enhancements for the customer experience. Those product changes are going to be supported by a broadened and improved distribution model for Internet. You'll have seen that Brad commented that this week we brought our Mobile - Mobile Shop have been a fantastic partner for us on our Wireless business in recent years. They've been a fantastic supporter of Shaw Mobile since its launch in late July. And you can expect to see us continue to build on our third-party distribution capability for Internet this quarter as well as continuing to open more of our very effective and stunning new corporate store, Shaw branded corporate stores in EC and Alberta, where we frankly lack in appropriate retail presence in a lot of markets. We just haven't had been where people wanted to buy us. So those are all things that happen over time. Finally, we see the bundle here, Vince, as a really important part of our growth strategy. It has enormous potential to complement our Wireline profitable Internet business. But we face the competitor and Telus a very, very well managed competitor, who continue to spend very aggressively to acquire customers in a mature market. You don't have to look at too far to look to find out $500 Visa gift card for signing up to Telus Internet bundle. You've heard me in the past [indiscernible] plain about our view on the level of swapping between the two companies in a mature market and we continue to think that's unnecessary in last economic event. So we - as long as we face that economic pressure, those sort of acquisition pressures, we now have a tool in Shaw Mobile that we will deploy as necessary to meet our business objectives. You will have seen earlier this week, we launched $25 unlimited plan, and we'll see how that goes. But know that we have our hands kind of firmly on the throttle and as necessary if we continue to see hundreds of dollars of investment from the other side of the house. We all use that type of those tools accordingly to make sure that we reach our numbers. So, but we have - we operate in a market where our competitor has their bundle and we have ours, we prefer ours, we think mobile is a more compelling proposition from the consumer standpoint. And we'll see how it plays out over the next sort of while. We do not expect to see a dramatic turnaround in our numbers over the course of this quarter, it is a process and it's going to take some time. It doesn't - these things don't happen overnight. But I like the plan that we have. And we've been able to execute similarly in the Wireless business before. So I think there's some good lessons that we can bring from Wireless to Wireline here and that process is underway. On your Wireless question, yeah, we continue to see kind of a disappointing lack of discipline on our - on Wireless competitive front, it feels like the market is chasing frankly pretty considerable expense of a very small pool of available growth. With less integration and the financial pressures in the economy right now, I think real growth is at a very, very modest level. And the promotional pricing, you're seeing out there is intense. You'll have seen this week, that all three competitors now have what I'll loosely call an EPP, but I think we all know is broadly just an available plan that has 20 gigabytes out at $50, that was $180, 18 months ago. We are the fourth player in the market. We have less than 20% of the subs of the big three each. We do not drive this ship. And if we're going to see that lack of discipline, it's - I think any casual observer would come to the conclusion that you can't solve the service revenue problem and ARPU problem by discounting at this level, particularly when there is not a lot of market growth. So, in the end, if we're going to see these bounties back and forth as a new entrant with a smaller, less mature network, we're going to need to be priced below the incumbents. So there is a real risk that if this continues. It will drive us to price lower. I'm an optimist, so I'd like to think that the market pressure on service revenue growth will ultimately prevail here, but we'll see - we'll have to see. And answer to your specific question, if a customer get back and forth to take advantage of bounty, we count that as a negative gross add. It doesn't affect our overall churn. So the 10 basis point inflation in churn was related to the impact of this kind of activity and just the general macro competitive pressure.

Operator: The next question comes from Drew McReynolds with RBC. Please go ahead.

Drew McReynolds: Vince covered off a lot of my questions. Maybe two or three follow-ups here. I think first, from a CapEx standpoint, Trevor, you alluded to, obviously a nice reduction in overall CapEx. I think it was $1.4 billion a few years ago, now $1 billion guided for this fiscal. Just can you comment on kind of the degree of sustainability of that level of CapEx given both of year Wireless and Wireline segments. Just second, maybe to you, Paul, on 5G I think Brad just mentioned that will be kind of launched in market. I think of you said this year. I'm assuming that's just this fiscal year. Maybe comment on where Shaw is currently on? That build out, are you still intending to be a fast follower as more and more 5G developments play out over the next few years. Lastly, on the operating environment, more on the B2B side. You do sound cautious. I think everybody is cautious out there. Maybe, Trevor, could provide what you're seeing as of today in terms of the trend from businesses, that would be helpful? Thank you.

Trevor English: Drew, thanks for the questions, and I'll now start on the CapEx sustainability. Obviously, you've seen our CapEx intensity moderate over the last few years, as you correctly point out, and again, most of that is frankly within Wireline. And I'd say, a big part of that is, is just related to our transformation that we embarked on a number of years ago when we see that is being very sustainable. I would say either continued sort of slight decline this year versus F '20 in terms of what we guided towards, the majority of that is within Wireline again, and again self-install supports that. Our networks are in fabulous shape and our Wireline network and I'd say again that is due to the significant investments that we've done over numerous years. We're going to continue to invest in the Wireline network as we need to. But again, that is moderating. We're sort of looking at more of a 17%, 18% CapEx intensity going forward. On Wireless, we continue to make the right investments, the investments to improve the network and then the customer experience in general. We look at that sort of bucket has been fairly stable this year versus last year around the $300 million mark. And we don't see significant sort of forklift capital required in the future. I think we can really live within the roughly $1 billion sort of CapEx envelope to fund the investments that we need to drive this business going forward. So we're pretty confident, Drew, in that CapEx and that profile that we've got going forward. That, of course, really supports a very, very attractive free cash flow profile as well. So we have a lot of conviction as a management team and the Board about the free cash flow profile of the company, which reflects a moderating capital intensity in the consolidated business, but in fact we're not starting the business of capital either. We're still spending roughly $1 billion, and we think that's the right envelope now and into the future.

Paul McAleese: Drew, hi. On the 5G question. Following on Brad's comments, we will - you can expect to see us live in the market in early calendar '21. So kind of in calendar - early kind of mid-calendar Q1. And we're hugely optimistic and bullish on 5G's potential. I think you've seen from other operators and globally, just the potential that this has. That said, in the short term, while we are essentially a fast followers because of the way that the spectrum auctions work and the fact that 600,000 hasn't been untapped yet. We are excited about this. But I think in the short term, the voice of the customer is kind of what's really important here. We do extensive research, as you can imagine about this. And well, the industry is talking up 5G I think in quite sensible way right now, there isn't really a compelling use case. Even we've done some research in the last number of weeks ago in tenders for the Apple 5G iPhone, the people that are buying it from us, tell us they want the new iPhone, but they're not really that interested in the 5G part of it, because there's not a use case that really driving that at this point. So that will happen and it will happen in time and we will take advantage of that. I think the industry may want to reconsider how it monetizes that over time. We're kind of a little bit disappointed at this point, the signal from the Canadian industry is that it will be not directly monetize, so we just moved up in this specific rate card - rate tiers. That's a strategy, I suppose, I'm not sure if necessary. The best one. But over the early part of that F '21, you'll see us fairly prominently in the 5G game, and until that time, we will be able to service our customers with the Fast LTE network that is more than capable for the vast, vast, vast majority of these is that consumers are applying it to today. So excited about our long term, we think it's got great potential, we continue to believe it's open up all kinds of new doors for Shaw, particularly given some of our other relationships in Western Canada and what it might do for businesses. But at this point, we will be slightly behind the market in terms of timing, but not concerned about that the way.

Trevor English: And Drew, I think your third one was just on the overall sort of environment with respect to this me and the business market here in Western Canada. And clearly it's something that we're extremely proud of in terms of still delivering 2% growth. During the last year, I think, the team is led by Katherine Emberly did a fantastic job working individually with each one of our customers. We had a lot of customers in the spring that went on temporary suspension of services, a lot of those have come back. However, I'd say they come back at reduce services, specifically within hospitality and the restaurant industry. They lit up their Internet service again but their TV services and some of the others were maybe not to the same levels. Really you can see from the revenue trajectory, it really has stabilized over the last quarter - a couple of quarters, and there is still some uncertainty going forward through it's - the Western Canadian environment is still continues to be challenging. You started to see some consolidation within the energy landscape recently, and I think most are anticipating that that will increase. That being said, the teams have actually done a great job in terms of some additional sort of enterprise wins, new business, and the announcement yesterday I think around the Teck deal is again another example of sort of these innovative solutions that we're providing to the business market. And also I'd just say generally speaking, the disruptor, the value proposition that we're providing to small and medium businesses, we're pretty encouraged by the products that we have in front of us. We've launched an additional products that's really focused on helping businesses and their employees work from home. So there's puts and takes. But it's clearly something that we're very cautious on, Drew, it's one of those things like, one of the reasons why we're not necessarily prepared to come out with more of - as prescriptive this guidance from an EBITDA perspective as we historically have. We've been generally growing that revenue on our business segment around 5% a year over the last number of years. This year was 2% because of the pandemic, and it's really tough to see where that's. But we think we're doing the right thing for our business customers and it has stabilized. So we don't want to scare investors but it's really tough in terms of immediate line of sight on where things are going here.

Operator: The next question comes from Jeff Fan with Scotiabank. Please go ahead.

Jeff Fan: A bigger picture question for Brad, perhaps to start, and then I'll ask the others as well. The big picture question is, I guess, over the last few months, since we spoke last quarter, there has been more news about a potential for cable consolidation here in Canada. So Brad, wondering if you have any kind of high level comments that you want to make about cable M&As in Canada and what role potentially Shaw will play in that? And then the other question is just on the Wireless growth, as we look out in '21 and perhaps even beyond. And this is probably a question for Paul, in light of the competitive landscape that you talked about in light of the Shaw Mobile launch. Do you see a bit of a shift in terms of how service revenue growth, Wireless service revenue growth looks and the contributors to that i.e., subscriber growth versus ARPU growth. You guys have done a good job of growing ARPU in the last couple of years. Wondering if there is a shift there in terms of a greater focus on driving subscriber growth, especially at this environment kind of continues. And also like in light of that, can you still grow EBITDA on margins if ARPU growth slows down? Thanks.

Bradley Shaw: Jeff, it's Brad. Thanks for the question. I kind of expect to something like that would come in this call. Just a couple of things. Certainly as a family, we're very committed to the long-term strategy at Shaw. We have a solid strategic plan. We're delivering on our commitments. We have a substantial and growing free cash flow. And I think when you look at the balance sheet of an MD&A financial position right with strong liquidity tied to that. And I just - when I look kind of going what - where we're going from here and we just launched Shaw Mobile and truly believe we had some untapped growth opportunity realize both on the consumer side and then eventually on the business side, which also includes, of course, 5G service. And then I just - I think about just the technology and the partnerships we have with Comcast and which really allows the enhanced video and broadband services. And finally, I would just say, hey, 50 years in business as a company, we're very proud of our legacy of serving our customers and our communities over that period of time, and we're pretty comfortable where we stand now with where Shaw looks and comfortable in that position.

Paul McAleese: Jeff, on your Wireless question, which we take pride, so if you just indulge me a moment. We've been clear my time here over the last three years that we look to grow our Wireless subscriber base, by something in the range of a 0.25 million subscribers a year, and we will continue to reiterate our expectation that we will grow our Wireless subscriber base by a 0.25 million subscribers a year. So just in case that's unclear to anybody on the call. The means by which we will get that may change over time and you'll certainly see, for example, stronger bias to Western Canada than we would have had in the past. And we've signaled that some time ago historically Western Canada has been about a third - 30% to 33% of our gross adds, that number is clearly shifting upwards with our new priority on Shaw Mobile. And ARPU, and this is probably a longer conversation for another day, but ARPU will of course start to moderate as a result of lower revenue Shaw Mobile customers, but of course it's a value trade there with the Wireline side. So even if you look at the move we made earlier this week, it's $140 plus for our customers to buy that $25 plan on our Gig. So it's going to - that will have a dilutive effect on ARPU, but it will have a materially positive effect at the residential level for Shaw. So we may be prepared or ARPU prepared to trade some of those traditional metrics in a way that enhances value for the organization. So I think there's going to be some kind of reporting things we'll have to get to probably next fiscal, that may change just as you start to watch our metrics know that there is going to be some impact from that over the next little while. I'm thrilled with how well ARPU performed. I think we were nicely about consensus on the beat this quarter, and certainly the more successful we are on in kind of Western Canada, you'll start to see those numbers moderate. We are definitely seeing impairment, not to the same extent of the Big Three, but we're seeing impairment that looks semi permanent on roaming as far as with a larger - rather a smaller percentage of our overall ARPU, but that's difficult to replace and it's certainly difficult to replace against the backdrop of the Wireless intensity that we're seeing. So my earlier comment about my optimism was driven by the fact that I think it's hurting the other guys worse than us. And if you are a believer in how well manage this category has been and I am over the years. You'd like to think that kind of greater sense prevails, maybe it's worth observing that for a long time these have been growth businesses for the Big Three, and right now, they're just not growth businesses. Not really on a net basis. There's a lot of stuff kind of buried in the numbers as we all know, in terms of new subscribers. And maybe they need to be managed more like a mature business than a growth business. And if that was the case that I think we probably start doing stuff like 20 Gig for $50 and chasing around the market. So I'd like to think that MRC is going to be a bigger contributor to ARPU than it has been in the past, it's going to need to be, if overages are gone, if roaming is impaired and those look like unfortunately longer term proposition to this point. So we remain enormously bullish on our Wireless business. We continue to believe that our growth aspirations are manageable and achievable. But we are to end of the market on a lot of things here, right. We are the small player and we don't dictate the terms of market conditions. So, maybe a question you no need to ask some other folks over the coming weeks

Operator: The next question comes from Aravinda Galappatthige with Canaccord. Please go ahead.

Aravinda Galappatthige: Good morning everyone, thanks for taking my question. A couple from me. First of all, I think you alluded to some of the tech deal that you announced I think yesterday. I wanted to kind of build a little bit on that and get your thoughts on that sort of product line, particularly in terms of economics as well as sort of the run rate to kind of expand in that particular area. Private networks is getting more and more popular. So wanted to get your thoughts on that. And perhaps any kind of capital commitments that you'd have to employee to further that area. And secondly on bad debt provisioning, wanted to get a sense of what you're seeing in terms of collections, is there any sort of variances that should be highlighted, and a quick follow-up on the Internet, net ads. I was wondering if you can talk a little bit more about the retention aspect. I mean it sounds like its mostly gross ads, but just on the retention aspect of the high-end where that was continues to be sort of a more meaningful differential in pricing. I look at there. Thank you.

Paul McAleese: Thanks, Arvinda. It's Paul. I'll take the first one and the third one, and Trevor will take the second one. On - yes, I'm thrilled with the tech deal, and confident in the team did a great job of bringing out to market with their first of its kind private LTE deal in this country, and we think the first of a number that will look to announced over the course of the coming quarters. This is a decent sized opportunity and really a great start. It's a great indication of the fact that there is still life in the resource sector in Western Canada in a lot of regards. We are seeing a lot of interest on deals like this has been inbound even since the release, and the team continue to work that file, it is very efficient for us, it's one of those sort of wonderful opportunities that's not spectrum that would have typically been deployed in any residential or consumer way, and the fact that we're able to deploy it in a manner that is so useful for those companies. Is it really, really exciting and it does kind of signal a new opportunity just broadly for our Wireless business. In the CapEx side of it is actually quite efficient oftentimes, we're able to work the cost of that right into the deal. And this is typically equipment that is owned and operated by the companies themselves or third party that they brought in on their behalf. So it's quite addition from a CapEx standpoint, and we are expecting to see more progress here over the coming quarters. But great work from the team there.

Trevor English: Yes, generally speaking long tenure deals as well. But there is - but to Paul's point each deal is somewhat unique from a capital perspective, but most of that is generally covered by the customer. From a bad debt perspective just collections in general. I'd say we continue to be extremely pleased from the payment history both on the Wireline and the Wireless customers over the last number of months or eight months since COVID-19 came about. You know there hasn't been any significant material issues that we've had to deal with. We're watching it on a daily basis. If you remember that we took about a $5 million charge last quarter related to bad debt across the enterprise. We did take some incremental expense related to bad debt in Q4. However, I would say it was fairly immaterial and with less than the charge that we took in Q3. So overall, we think we've provision that appropriately, it's less than about $10 million - just around $10 million, a little bit less for the year, and again we're very, very, very pleased with the payment of all of our customers, and I think it goes to value proposition specifically on the Wireless side in terms of the average ARPU just over $40 million in the utility that we're providing to customers. In their home and businesses, they are paying their bills and we're watching it closely, but it's clearly a risk going forward a vendor will update you in the entire street if there's material changes. But as we sit right now here at new October 30. We feel like we're in good shape.

Paul McAleese: And Arvinda back to me on your question about retention on Internet. And you may be answered a couple of different ways. We - for a number of years, we were thank losing ground to tell us in terms of the way the customers perceived our Wireline network, specifically the Internet product, and the launch of fiber plus and our new rate plans back in May has very quickly started to turn that around. So well, I acknowledge to the softness in Internet net-ads the quarter. I would draw your attention to the fact that we also had a significantly better than expected contribution from that line of business as well. So, we focused a little more on quality during the quarter, while we were rebuilding that game plan that I spoke to earlier. And one of the things that has been a nice outcome is that we have started our 7.15 gig speed tiers and have started to appeal to part of the markets that we were previously losing on a pretty much exclusive basis to tell us. There was more affluent families those folks that are looking to just simply improve and hardened the network quality within their residents, really are now provided with the choice in the market where previously there wasn't one. And we're seeing a nice uptick in our shifting demographics in terms of who is now buying that product. So encouraging signs on that front as we kind of move up into the right on the speed tiers. And then just on a separate related comment on retention. I'd also tell you that. Well, it's early. Shaw Mobile is by definition a tool designed to secure in terms of our relationship with our existing Wireline subscribers. So by definition to be a Shaw Mobile customer, you need to be Shaw Internet qualifying Shaw Internet customer. So as we grow that market over the course of the coming quarters, we will essentially introduce into the math a cohort of subscribers, who are essentially very, very well secured and very well protected from competitive offers, and we essentially fall out of the denominator of potential churners. So while it's early, we're starting to see some nice security on that front. And again as designed Shaw Mobile is there to protect and cover our Internet base at higher margin products.

Operator: The next question comes from Tim Casey with BMO. Please go ahead.

Tim Casey::

.: And the other question was - could you talk a little bit about your digital on boarding ability in Wireless reduced foot traffic, those type of things obviously would hinder a traditional retail distribution model. Just wondering if you can give any stats on how you're progressing with respect to on-boarding people without the traditional model, be it a hybrid model or a pure online on-boarding model. Thanks.

Paul McAleese: Yes, certainly. Thanks Tim, thanks for those. The comment about 5G monetization was more of a reflection that I was hoping that the industry didn't simply absorb the incremental costs of that 5G spectrum and build out into a declining pricing environment, and I appreciate that initially, there was a signal from the market that it would be temporarily suspended and then monetize to some incremental degree perhaps $10 or $15 more for those faster rate plans. And it looks like the market's kind of come off that and now we simply saying we're just going to, as long as you're on a certain level of plan, we will include 5G, it's - I would have liked to have seen a little more of a consumer test there, and to see whether or not there with capacity and willingness to pay for that, anybody that operates in Toronto and drives along the [indiscernible] sometimes you payfor faster lanes and you're willing to do so. There would have been nice if there was an opportunity to kind of test that, and I'm not sure that we're going to get that opportunity. So the risk here is that we spend billions of dollars on spectrum and build out and simply just absorb at all. So from my standpoint, I would have preferred to see something that - may be look at what I'd like to 3G LTE pricing back in the day, where it was a bit of a step-up to the higher speed. But again, we're not the driver of that particular pricing strategy. So we will probably be the kind of the price-taker on that front once the market decides we're it's going to net out. On the Private LTE deal with the terms of those deals are as you imagine our confidential, but suffice it to say that we - as Trevor pointed out, these are long-term deals that are - because they're built into these facilities are very, very secure essentially no churn and very, very encouraging kind of from a pricing standpoint. So we like the partnerships there. Digital onboarding, I would characterize us as being somewhat behind the industry, but I'll kind of character of pivot fill in the blanks on the why, when we look at our Wireless business today, which has been historically 70% in Ontario. We compete against operators there of specifically Rogers and Bell, who have had the opportunity to curate their residential partners and residential customers for credit. So, really a lot of what they - when they talk about kind of clicks and bricks. I think they're often talking about really hybrid of recognizing that they know the creditworthiness of a lot of these households because of their Wireline relationship, and then able to sort of manage them accordingly. So today in Ontario, for example, if someone wanted to buy new iPhone 12, and gave me their address in Oshawa, we have a really difficult time determining whether that household was sufficiently creditworthy and kind of trustworthy from a fraud risk standpoint, because I think we don't have any other relationship with them. One is are Bell, if they have a payment history with them on that home for the last three or five or 10 years is in a much better position to establish whether or not that's a risk they can take. We - so I think on Wireless in Ontario they have an advantage there. That is probably a structurally permanent relative to us. In the western part of the country, we've been busy working with our finance colleagues to develop exactly the same capability, and to make sure that our data analytics and our digital capabilities, our one of our top development priorities. I'd say we rapidly closing the gap that exists between ourselves and the incumbents. But I'm quite comfortable saying that this is an area where we have lagged. Frankly having been the owner of this Wireless business for four years now. Most of our priority early on. Tim was making sure that we brought our network quality and distribution up to speed and these are some of the things that lacked, and it would have been nice to have been more on top of the digital capabilities and I'll take responsibility for not having done that over the last couple of years, because I was in the seat. But it is something that we're now quickly bringing - bring it was up to up to speed on. One of the reasons, and so excited about having partnerships for Wireless in the West that look like Walmart and Loblaws is because, regardless of what might happen in traditional malls as a good friend of mine says people still need to eat. So we will continue to see traffic considerable traffic in Loblaws in Walmart retail footprint here in Western Canada and because of the strength of our partnership with them on the Wireless front. We will continue to have opportunity there as well. So expect us to get better digital recognize that we probably have a structural disadvantage in Ontario and in the West. We will then have a structural advantage.

Tim Casey: Thanks for that. If I could just squeeze one follow-up in. Regarding Internet loading and the aspiration, you had set out earlier this year due to get more of your fair share of net loading in Western Canada. I think that’s an achievable target for fiscal '21 or are we more likely to see something trending of that in '22 or '23?

Paul McAleese: Yes, there is nothing like someone bringing back to your first comment from the being in the new job. Thanks for taking that, and yes, I have enormous aspiration and confidence in our team that will be able to get our fair share. Let me maybe take this opportunity to redefine fair share. It's a tricky piece of the evaluation and we had this conversation yesterday with our Board around what is actually in the denominator for ourselves and TELUS when we report, and without trying to sound like I'm hedging on this, one of the things we struggled with here is the lack of transparency probably both organizations on what's in Internet net adds. And is difficult to make an apples-to-apples comparison. So I don't think there is any debate that we have been in a losing position on market share over the course of the last number of years. But what I want to make sure, we do is accurately as possible is not over or under react to competitive moves that we may not necessarily have even an opportunity of share. And so all our use for example, the market of gold out here where a large ski community that is covered by tell is wireless network, but not really - doesn't have much of a Wireline presence for anybody and TELUS have a very strong presence for their wireless hub product, which I believe gets reported as an Internet net ad, and which we have absolutely no ability to have any market share there because we don't have deployed spectrum in that market. So that likely counts in their net ads. There is the Internet for a good program, which they've been very aggressive with during COVID, which is obviously a very low revenue piece of the pie. Our aspiration here, it seemed to be clear is to ensure that we get our fair share, where we compete, and I should have been more specific about that when I talked about it in April. So our clean that up now. But where we have facilities and where we compete against TELUS and that's what we're looking to get our fair share up.

Tim Casey: Can you put a parameter on that? How much of your footprint, would you say you have the ability to compete?

Paul McAleese: Well, and we're doing that analysis now are when you think about fixed Wireless for example, that's an example - we have probably somewhere between 200,000 and 300,000 households in Western Canada where we have wireless coverage, but not Wireline coverage. I suspect that number is significantly higher for TELUS that's what we're doing that math now. But it's probably going to have to wait for the next call to give for me to give you have more thorough answer on that one.

Operator: The next question comes from David McFadgen with Cormark Securities. Please go ahead.

Q – David McFadgen: I've a couple of questions on Shaw Mobile. I don't know if you can provide us with these data points for there would be helpful. I was wondering if you could tell us what percentage of your net ads were actually Shaw Mobile in the quarter. And then other Shaw Mobile net ads what percent are taking the bundle. I would imagine it's probably 100% or close to 100%. And then lastly, when you look at the Internet performance in the quarter has Shaw Mobile delivered any brand new Internet customers for you or is it just too early because it just launched and all the Shaw Mobile customers are pre-existing Shaw Internet customers? Thanks.

Bradley Shaw: Good questions. Thanks, David. Yes, in order, consistent with what the treatment that incumbent use for delineating between brands. We won't be breaking out Shaw Mobile versus Freedom branded anymore than the others do between their flank or fighter and primary brands. So that just going forward, you won't see us break that out and at any point. If you recall, we launched on July 30. So we only had a month of that activity within the year's numbers. So with, excuse me, within the quarter's numbers. So you can kind of get a sense of how that may have impacted the quarter. You're correct, a 100% of the people that are on Shaw Mobile are in the bundle. So again today a qualifying event for Shaw Mobile is that you need to be within one of the applicable Internet plans. And to be clear, if you were to remove yourself from that of our plan, your pricing changes on Shaw Mobile. So there is essentially our reward for staying within that bundle and so far we've seen essentially everybody stay within it, so that the churn on that group is exceedingly low during the quarter. And then, sorry, the third question was on new subscribers, a new Internet subscribers. Yes, fundamentally the early appeal of this, which you won't be surprised by is for existing subscribers, but increasingly as you see some of the product changes that we talked about in some of the distribution changes, and then the move earlier this week to reward disproportionately people to take our higher value plans that will have a higher pull-through of competitive users I suspect.

Tim Casey: Okay. And then maybe if I could just have one follow-up. Did you see any discernible negative impact of freedom from the launch of Shaw Mobile in the marketplace?

Paul McAleese: I wouldn't call it even negative. There is certainly a small degree of brand migrations, which we are very comfortable with. So we do have people that are on our freedom who may also be a Shaw customer and we were very prepared and quite happy with them coming over moving from Freedom Mobile over to Shaw and locking into the bundle. We love that value trade and if we can secure that we'll take that all day long. It's a relatively small percentage though, David. So I wouldn't characterize it is something that's going to have an impact on any of the Freedom metrics.

Operator: This concludes the question-and-answer session. I would like to hand the call back over to Mr Shaw for his closing remarks.

Bradley Shaw: Great, thank you operator and our best wishes for everyone to stay safe and we'll talk to you in the New Year. Thank you.

Operator: This concludes the time allocated to today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.