BCE Inc. (NYSE:BCE) Q3 2023 Earnings Call Transcript

BCE Inc. (NYSE:BCE) Q3 2023 Earnings Call Transcript November 2, 2023

BCE Inc. beats earnings expectations. Reported EPS is $0.81, expectations were $0.6.

Operator: Good morning, ladies and gentlemen, and welcome to the BCE Q3 2023 Results Conference Call. I would now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead, sir.

Thane Fotopoulos: Thank you, Matthew, and good morning, everyone and thank you for joining our call. Today, I’m here with Mirko Bibic, President and CEO of BCE; and our new CFO, Curtis Millen. You can find all of our Q3 disclosure documents on the Investor Relations page of bce.ca website, which we posted earlier this morning. Before we begin, I want to draw your attention to our safe harbor statement on Slide 2, reminding you that today’s slide presentation and remarks made during the call will include forward-looking information, and therefore are subject to certain risks and uncertainties. Results could differ materially. We disclaim any obligation to update forward-looking statements, except as required by law. Please refer to BCE’s publicly filed documents for more details on our assumptions and risks. With that, I’ll turn the call over to Mirko.

Mirko Bibic: Thank you, Thane, and good morning, everyone. I’m proud of the Bell team’s accomplishments and our performance in the third quarter. These results reflect the outcome of significant and consistent investments in broadband networks and services, continued strong momentum in our core telecom business operations, promotional offer discipline with an emphasis on multiproduct bundling and the streamlining of costs. We delivered consolidated adjusted EBITDA growth of 3.1%, representing our best quarterly results since Q2 of 2022. This was achieved while confronting ongoing media advertising headwinds and a more active pricing environment across all consumer products. BCE’s margin expanded 0.9 percentage points to 43.9% demonstrating our proven ability to drive costs out of the business and to effectively balance growth with profitability in a highly competitive marketplace.

With all new targeted fiber locations for 2023 now either completed or under construction with 5G coverage targets well on track and with continued regulatory uncertainty on a number of files, we reduced CapEx spending in Q3, all of which contributed to stronger free cash flow growth this quarter as profiled in our budget for 2023. This will accelerate even more profoundly in Q4 keeping us on track to achieve our free cash flow guidance of 2% or higher growth for 2023. The strong performance of our CTS segment this quarter is underpinned by our leading broadband networks, which are consistently recognized by third-parties for unmatched symmetrical fiber internet service, fastest 5G speeds, breadth of coverage and affordable prices, as well as increased customer bundling that serves an important churn management tool.

In Wireless, we delivered 231,212 new mobile phone and connected device net activations, which is our second best quarter ever. It’s a great result even when comparing to last year’s record performance and taking into consideration the notable step-up in competitive intensity this year, particularly during the back-to-school period given the new competitive landscape. Consumer wireless service revenue was up a healthy 4.7%, reflecting our focus on high-quality premium brand customer loadings and careful management of our pricing plans. This is being supported by a growing base of postpaid customers on 5G capable devices, the vast majority of whom are subscribing to premium unlimited data plans. At the end of Q3, half of all postpaid customers were on 5G capable devices, which is up from 35% last year.

In Residential Wireline, we continue to win even more broadband customers in fiber areas as we face sustained competitive activity from the cables coax in our DSL copper footprint. We added a quarterly record 104,159 new net fiber-to-the-home customers in Q3, that’s up 7.9% over last year. And of these, 71% signed up for gigabit or higher speed tiers or 22% higher than Q3 2022. Customers are continuing to move to higher Internet speed tiers, recognizing the superior performance of Bell’s pure fiber network, the compelling value of symmetrical speeds and the value and reliability of our multiple product offerings as evidenced by the 24% year-over-year increase in new customers who are subscribing to mobility and Internet service bundles. Our rapidly growing base of Internet customers on gigabit or higher speed tiers, which now represent 52% of Bell’s total fiber-to-the-home subscriber base, contributed to strong 6.1% residential Internet revenue growth this quarter.

And I’d like to point out that Bell continues to deliver world-leading broadband services at declining prices. The latest stat scan data shows that the price of all goods and services in aggregate across the Canadian economy has increased 3.8% over the past year. While the cost of cellular Internet access services have declined 7.2% and 7.8%, respectively. I’ll turn to Media now. Digital and direct-to-consumer continue to grow strongly, helping to offset much of the secular pressures from traditional media platforms. Digital revenues were up 26% over last year and now comprise 39% of Media revenues compared to 30% last year. That’s an impressive result given the current industry backdrop. Driving this performance was Crave, which grew direct streaming subscribers by 13% over last year on the back of market-leading content.

Customer usage of our SAM TV advertising tool also grew, seeing sales revenue increased by nearly 50% this quarter. And with the recent introduction of ad-supported tiers on Crave as well as the launch of Addressable TV and Audio advertising, which will enable advertisers to target ads to specific households or devices, Bell Media is well positioned to capture a higher share of industry digital ad market revenue going forward. As we consistently execute on our quarterly business plan objectives, we’re continuing in the background to transform Bell from a traditional telco to a tech services and digital media leader within a new environment marked by more competition, macroeconomic challenges and increased regulatory activity and regulatory uncertainty.

Our sharp focus on operational efficiencies and cost optimization is being unlocked by our multiyear fiber journey, increased levels of digitization and automation across the organization, real estate consolidation, copper decommissioning as well as other initiatives we are undertaking to become more efficient, including, just as an example, moving Fibe TV to a single platform and reducing the number of billing platforms. The investments that we’re making in these cost efficiency initiatives are allowing us to accelerate our well progressed plans to digitally revolutionize our business and to significantly cut operating costs. Investments need to be made to drive this agenda and we’ll make them. But importantly, these investments will support a stronger EBITDA growth trajectory in the medium to long-term margin accretion and free cash flow expansion in the years ahead that will help support our dividend growth objectives.

I’ll turn now to Slide 5 of our presentation, I’m going to review some of the key operating metrics with you for Q3. Starting with Bell Wireless. We added 142,886 new net postpaid mobile phone subscribers bringing total year-to-date net adds to more than 297,000 or 4.3% higher than 2022. It’s a strong result. In fact, it’s our second highest Q3 results since 2010 and this was a function of an 8% increase in gross activations this quarter as churn was consistent with pre-pandemic Q3 levels at 1.1%. ARPU remained stable year-over-year even as roaming tailwinds moderated significantly due to lapping the post-COVID recovery. And that’s a testament to effective customer base management and our focus, again on premium value subscriber loadings. We also reported mobile connected device net adds of 64,282, that’s up 31% over last year.

This reflects continued strong momentum for Bell’s 5G and IoT B2B solutions included — including — sorry, connected car subscriptions that will be an even bigger driver of revenue growth in the future. Now turning to the Wireline side of our CTS segment. Consumer Internet is having a record year. Fiber net adds were up year-over-year, exceeding 100,000 for the first time ever. And recall that Q3 2022 was a record quarter before that. When including the competitive loss of DSL subscribers in our non-Pure Fiber footprint, total retail Internet net adds were 79,327, that’s down 11.5%. But the consolidated result actually reflects a higher number of customer deactivations in our copper service areas. And overall, what it’s demonstrating quite clearly is the competitive advantages and importance of fiber.

And it was also another solid quarter for Bell IPTV, where gross activations grew 11% year-over-year, reflecting the pull-through benefit of fiber Internet and our TV product leadership. However, due to higher customer deactivations on our Fibe App streaming service, which typically occurs following the expiration of previous year’s promotional offers, total net activations were down 2,100 versus last year and are at 36,000. And rounding out our Wireline subscriber results, satellite TV net customer losses increased, driven by higher competitor promotional offer intensity while home phone net losses improved 2.5%. Taken all together, total retail residential net customer adds, including satellite and local phone increased a very healthy 42,662.

This represents our second best ever result after last year’s record performance. And again, that’s a tribute to the Bell team’s focused execution. Moving now to Bell Media. While the advertising market remained challenging, TV sports advertising revenue increased in the quarter, driven by our broadcast of FIFA Women’s World Cup Soccer, F1 Grand Pre-racing; Wimbledon and NFL and CFL Football, underscoring the value of premium content to advertisers. And this helped TSN and RDS assume their ranking as the top English and French language sports channels in Q3. Digital revenues, as I mentioned, continued to accelerate, growing 26% over last year, benefiting from strong Crave and sports direct-to-consumer streaming growth as well as Bell Media’s programmatic advertising marketplace.

And CTV remain Canada’s top network in Prime Time in the summer broadcast season. And for the first time ever, all four CTV branded specialty stations ranked in the Top 10, including three of the Top 5 and the #1 channel CTV Comedy. And on the non-sports French language front, Bell Media was ranked #1 in full day viewership in the entertainment and pay specialty market in the key 25 to 54 demographic while new maintained stable market share over competitors. In summary, I’m pleased overall with our progress and our momentum in Q3. Subscriber growth was healthy across the board and the generational investments in leading long-life infrastructure assets we have made will continue to support meaningful growth going forward and meaningful cost reduction opportunities across the company.

With that, and for his first time as CFO, I’m going to turn the call over to Curtis to provide more detail on Q3 financial results.

Curtis Millen: Thank you, Mirko, and good morning everyone. It’s a real honor to assume the role of CFO of this iconic company. I look forward to living up to the high standards set by my predecessor, Glen LeBlanc and working with all of you in the years ahead. Turning to Slide 7. Our consolidated financial performance for Q3 demonstrates the Bell team’s consistent execution and focus on profitable subscriber growth and cost discipline in the face of ongoing media advertising challenges and increased competitive intensity across all of Bell consumer products. Total service revenue was up a solid 1.7%, while operating costs improved nearly 1%. This collectively delivered 3.1% growth in adjusted EBITDA and a strong 90 basis point increase in margin.

Although Mirko already pointed this out, it bears [ph] repeating that this result represents our best consolidated EBITDA growth rate in well over a year. Despite higher EBITDA, net earnings and adjusted EPS were down versus last year as anticipated and profiled in our quarterly budget for ’23. This was the result of higher financing costs due to higher rates and more debt outstanding from investments in our growth strategy, higher depreciation and amortization expense from rapid growth in our broadband capital asset base and higher income taxes as Q3 2022 benefited from an approximate $80 million tax provision reversal related to our acquisition of MTS in 2016. CapEx was down $158 million this quarter as we front-end loaded our spending this year, given favorable construction conditions during the winter and spring seasons and realized even better fiber and 5G build-out efficiencies than originally expected.

The decline in CapEx together with a flow-through strong EBITDA growth drove a 17% increase in free cash flow this quarter. In line with our internal forecast and consistent with our guidance target for 2023, we project a $900 million or better year-over-year improvement in Q4 free cash flow. This comprised of several things, but including approximate $500 million favorable swing in CapEx versus last year, lower cash taxes, positive change in working capital, attributable largely to the timing of supplier payments and a further sequential step-up in our EBITDA growth. Moving to Slide 8 to discuss Bell CTS. Service revenue growth improved sequentially this quarter, increasing to 2%, this was supported by a 6.1% increase in Residential Internet revenue and continued healthy wireless growth, reflecting our focus on premium subs and higher year-over-year roaming revenue.

We also benefited from a stronger B2B performance trajectory, driven by higher sales of security and cloud-focused managed and professional services, which will be key growth drivers for us going forward. And the financial contribution from FXI that we acquired in June. In fact, even when excluding the favorable impact of that acquisition, organic service revenue growth was positive, representing Bell Business Markets best quarterly results in almost 15 years. Product revenue was down due mainly to the timing of wireless-related mobile phone and equipment sales to large enterprise customers, particularly in the government sector, which can be quite lumpy and a tough year-over-year comparable as we lap the equipment supply chain recovery that began in Q3 of last year.

EBITDA grew 2.4%, which yielded a 45.1% margin, increase of 60 basis points versus last year. This higher margin reflects the strength and quality of our service revenue growth and easing of year-over-year weather-related and inflationary cost pressures, promotional offer discipline and a continued sharp focus on cost efficiencies. Moving to Slide 9 to discuss Bell Media. While better than industry peers, our top-line financial performance continues to be impacted by a protracted advertising slowdown attributable to the current economic backdrop and Hollywood strikes, a shift of advertising revenue to foreign digital platforms and a more challenging regulatory environment that is not yet adapted to the new realities facing media. This collectively drove a 1.3% decline in total media revenue this quarter.

Our respectable results under the circumstances, which is attributed to our broad mix of assets, premium content and successful execution of our digital-first media strategy. The year-over-year rate of decline in advertising revenue improved sequentially this quarter to 5.2% compared to 9% in Q2, benefiting from strong digital advertising growth of 34%, this was further moderated by a 2.9% increase in subscriber revenue, driven by continued strong D2C Crave and sports streaming growth. In light of this revenue backdrop, we maintained a key eye on cost savings and adjusted our operating cost structure in order to support margins and cash flow generation. This enabled us to deliver EBITDA growth of 11.5% and a strong 3.3 point increase in margin to 28.6%.

Turning to the balance sheet on Slide 10. We ended Q3 with $4.5 billion of available liquidity, which included the proceeds of $1 billion public debt issuance in August and approximately $3.8 billion in available revolving bank credit and other committed facilities. Given our relatively strong Q3 financial performance, our debt leverage ratio remained stable at 3.5x adjusted EBITDA. Our weighted average after-tax cost of all borrowings also remains below prevailing interest rates at around 3% and our average term to maturity is approximately 12.5 years. At these levels, together with a manageable debt maturity schedule in ’24, no further interest rate hikes expected in the immediate term, a sizable pension solvency surplus and substantial recurring free cash flow generation, we’re in a very good financial position heading into next year.

To conclude on Slide 11. With a year-to-date consolidated financial results in line with budget and even stronger EBITDA and free cash flow growth trajectory is projected for Q4, I’m reconfirming all of our financial guidance targets for full-year 2023. I’ll now turn the call back over to Thane and to the operator to begin Q&A.

Thane Fotopoulos: Great. Thanks, Curtis. So before we start to keep the call as efficient as possible, please limit yourselves to one question and a brief follow-up, so we can get to everybody in the queue. There’s additional time at the end, we’ll circle back for more questions. With that, Matthew, we are ready to take our first question.

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Q&A Session

Operator: Thank you, Thane. The first question is from David Barden from Bank of America. Please go ahead.

David Barden: Hey guys, thanks so much for taking the questions. Appreciate it. I guess, Mirko, I think that this quarter, especially kind of in the prepared remarks in the text, you kept calling out the competitive pressures facing, I think especially the wireless industry with the ARPU down about 0.2% year-over-year. Obviously, investors have been closely watching the space in the aftermath of the Rogers, Shaw merger close and Freedom’s acquisition by Quebecor. And we’re trying to get a level set as to what the competitive intensity of this industry now is and what it might be as we look into 2024. And I was wondering if you could kind of maybe elaborate a little bit on kind of how different you feel the competitive intensity is from, say, a year ago and as you budget into 2024, what do you think we should all be expecting will happen? Thanks.

Mirko Bibic: Thank you, David. Look, there’s been a number of — so there are kind of the macroeconomic environment is something we have to keep an eye on as we head into 2024. The competitive dynamic, of course, we have to be mindful of as well as changes in the — potential changes in the regulatory environment, right? So those are the three things at a macro level that we’re keeping a close eye on as we get ready for — well into Q4. But as we manage our way through Q4 and look forward to 2024, I would say, David, more specifically to your question and perhaps with a focus on the more near-term of Q4 again in the back half of Q3. What we’re going to do is continue to be disciplined as we have been in this environment. And our focus, and I said it a couple of times in my opening remarks, our focus is going to be on premium accretive smartphone loadings and multiproduct loading.

So it’s about the fine balance between quantity of loads and the quality of loads. And that’s what you’re going to continue to see from us. Another thing as an aside is, we’re going to continue to improve the Virgin brand — Virgin Plus brand. And I’m pretty pleased with the trajectory of that brand, especially since we relaunched it in July. And if you think about back-to-school, and things that I’ve said publicly before, it was competitive, not unreasonably so. I think you saw less in the form of hardware discounting and more in the form of data buckets, which I think is a good thing. But it was competitive, discounting was reasonable. And as we came out of back-to-school, I think that discipline remained, and we expect that to continue throughout Q4, and we’re certainly going to continue to behave and we’ll operate not behave, operate in that disciplined fashion, balancing the quality of loads and the quantity of loads.

And I’ll just end by saying like — saw the government’s announcement yesterday, I think there’s still going to be healthy migration in this country, and that should be lifting all boats as we look ahead.

Thane Fotopoulos: Great. Thank you. Next question, please.

Operator: Thank you. The next question is from Drew McReynolds from RBC Capital Markets. Please go ahead.

Drew McReynolds: Yes, thanks very much. Good morning. Two high levels for me. Mirko, back to you with all the focus on TPIA. Wondering if you could provide us with first any update you could have on the timing of that decision? And then in terms of implications for BCE, what are you most focused on with this decision and framework and one of some of the ways you can respond to that? And then secondly, just maybe for you, Curtis. Welcome aboard and good to see you in the seat. Just wondering what your priorities are as CFO and what you’re focused on as you look into 2024? Thank you.

Mirko Bibic: Thanks, Drew. I’ll go first. All right. I don’t know — I don’t really — I don’t have much insight into when the TPIA or fiber access wholesale decision is coming out, Drew. But there’s a sense that it’s sooner rather than later, but I don’t really know what the timing is. But more fundamentally in terms of implications. I’ve been doing this a long time now. And I’ve always said because I fundamentally believe that three fundamental points are all related. Number one is regulatory uncertainty has impacts on investment. Two, regulatory decisions, which create this incentives to investment will obviously lead to a reduction in investment. And conversely, regulatory decisions that promote investment are going to lead to increases in investment.

Certainly, that’s how we behave. That’s how I operate as CEO and how we’re going to manage this company. I mentioned right at the top of my opening remarks, we got a head start in the first six months of this year on our fiber build, and we’re well on track to hitting the targets we had established for ourselves for 2023. And we well knew within Q2 that we would not have a problem hitting our targets. And that’s why when Glenn last spoke to this group, he indicated in the face of a number of questions that we were going to hit our free cash flow guidance for the year, because we knew that we had our head start and we knew what the CapEx profiling was going to be for the back half of the year. In fact, we had some wiggle room there given that we had such a head start, we could have kept going and actually built more than what was in our target plan for 2023, but we decided not to because of the regulatory uncertainty that’s out there.

And so I mean, if the decision isn’t favorable from a fiber perspective or from a wholesale access perspective, you’re going to see us slow down the build as early as next year. It’s as simple as that. And that would be unfortunate because when we enter a community with fiber, we actually increased competition because we all know that DSL isn’t competitive with cable DOCSIS. Conversely, we all know that cable DOCSIS actually isn’t competitive with fiber. So where we enter with fiber, we increase competition against the cable company. And then the cable company knows that in time, it needs to upgrade its networks, build fiber of its own, which actually further increases competition. And you see the results where we enter, the customer gets better service, better value, lower prices.

And that’s what we’re — that’s what’s being put at stake here with the conversation that we’re generally having in the regulatory proceedings around TPIA access. Hope that answers the question.

Curtis Millen: Great. And Drew, thanks for your other question. I’d say my focus is pretty straightforward. It’s how do we continue to drive free cash flow so that we can keep growing our dividend and funding our dividend. And then the second focus I’d say is we’re on a path year of digital transformation and evolution, as Mirko said into a techco. I think that has pretty significant ramifications for our company, our free cash flow potential as well as our customers and the services that we can provide. So as we get more efficient and flexible, it allows us to meet our customers in a digital world and drive free cash flow growth for our shareholders. So I think if I had to call out two focus areas, there would be those two.

Thane Fotopoulos: Great. Thank you. And next question, please.

Operator: Thank you. The next question is from Maher Yaghi from Scotiabank. Please go ahead.

Maher Yaghi: Great. Thank you for taking my question. I want to go back to the wireline side. Mirko, you talked about fiber-to-the-home being very competitive against coax. And we certainly saw the results of fiber-to-the-home in your results this morning, very strong loading. Can you discuss a little bit where you’re taking share from regionally — on a regional basis and the pricing in the marketplace, how competitive it is right now compared to, let’s say, a couple of here, six months ago and your strategy to continue to grab market share? Is it price-based competition or more technology? So — and also on wireless, I wanted to ask you, you discussed your views on the competitive marketplace. I just wanted to ask you in terms of expectations for ARPU in Q4, where do we stand? What are the puts and takes that will drive ARPU growth or decline that we should think about? Thank you.

Curtis Millen: In terms — hi, Maher, thanks for the question. In terms of wireline, ultimately, on a regional basis, it’s really where we have fiber, right? I mean ultimately, fiber is fiber in Quebec and Ontario and about 104,000 loads, it’s strong performance, call it everywhere. And ultimately, it’s not solely driven by pricing. I mean, our pricing is competitive. It’s a competitive market, but ultimately, the network advantage, speed advantage, the up and down speed advantage that we have is what we’re leveraging in the market. And then you start to combine that in a more bundled world where we have more fiber footprint, more wireline footprint. We’re driving mobility and internet bundled subs as well. So it’s a combination of a few of those things.

Mirko Bibic: On wireless, I think our ARPU performance was pretty good in Q3. We kept ARPU stable in the environment that we had. And I think the puts and takes are service revenues ARPU roaming growth did slow down. I called that out. It slowed down year-over-year and sequentially, and data overage continues to decline as customers continue to move to larger unlimited plans. But our monthly recurring charges accounted for 85% of our service revenue growth and also a big driver of our ARPU performance. And that’s a good thing, and it shows the focus that we have on premium loadings on 5G. And I think as you look forward to Q4, just repeat what I said in response to David’s question, but I would — in terms of our approach, you’re going to continue to see us manage that balance between quantity and quality so that we can deliver what you all expect of us, both the strong subscriber performance, but strong financial performance.

Operator: Thank you. The next question is from Tim Casey from BMO Capital Markets. Please go ahead.

Tim Casey: Thanks, Mirko. Given the free cash flow profile you’ve outlined that you’ll meet your targets. But you did recently make an acquisition, you’ve got a spectrum auction coming up. And as you highlighted, there are some economic concerns. How do you put that all together with the shareholder base that continues to expect dividend increases in light of where leverage is? How should we think about that going into next year?

Mirko Bibic: Look, I just — I’d say this. We know what investors seek from us, right? I’ve said this time and again, it’s stability of the dividend first and foremost, and it’s free cash flow growth supporting that dividend. We’re going to continue to be laser-focused on that. We have said for a couple of years now, quite clearly, we telegraphed that we would be operating at an elevated payout ratio so that we could do the things that are strategically important to this company and to shareholders for the medium and long-term, and you’re seeing us deliver on those promises and that road map. And at the same time, we’re going to continue to take significant costs out of the business. If I’ve highlighted that in the past, I’ve reiterated it today.

So as Curtis. So again, all these things that we’re doing, Tim, they’re going to pay off in the medium term, pay dividends literally another way to put it. And at the same time, when these opportunities come up like tuck-in acquisitions, you saw the one last week, we’re going to take advantage of those because they’re strategically important. So when you take a step back, our priorities for capital allocation, the dividend fiber build spectrum and investments in digital inefficiency enhancing initiatives, that’s what we’re going to do.

Operator: Thank you. The next question is from Batya Levi from UBS. Please go ahead.

Batya Levi: Great. A question on Media. Can you provide a bit more color on the proposed acquisition of OUTFRONT and how that would change the growth profile of the Media unit? And if we should think about any synergies that could come with that? Thank you.

Curtis Millen: Hi, Batya, thanks for the question. So OUTFRONT out-of-home, I mean we announced last week, obviously, we don’t have approvals yet. Expect to pick those up in first half of next year. I would say it’s a relatively small tuck-in acquisition, but it isn’t an actual growth area for our Media business. Transaction is accretive immediately, but again, quite small. I’d say the assets are complementary to ours, it allows us in our out-of-home footprint to be truly national. We will drive synergies there. There are some cost synergies, also some strategic benefits. But again, in terms of changing the overall trajectory, it’s not that big an impact.

Operator: Thank you. The next question is from Aravinda Galappatthige from Canaccord Genuity. Please go ahead.

Aravinda Galappatthige: Good morning. Thanks for the taking the question. Mirko, I just wanted to go back to the comments you made in your prepared remarks about delivering stronger EBITDA growth through cost management and the efficiency initiatives that you’ve kind of outlined. How should we think of Bell’s broader digital transformation initiatives you talked about? Like where are you in that sort of — which innings are you in, I guess, is what I’m asking? Trying to get a sense of what we can expect in the future compared to sort of the periodic cost reductions you delivered in the past?

Mirko Bibic: Yes. So there are periodic cost reductions. We do — we’ve done in the past, including in June of this year, which allow you to change the cost structure. And then there are the types of initiatives that I teed up in my opening remarks, I think you’re asking about which both reduced your cost, but also kind of transform the way we operate and as Curtis mentioned, actually enhance the customer experience. So I can give you some examples that’s just to put a bit of more flesh on the bones. So we had — we did undertake working for the past little while on integrating multiple billing systems that we’ve had in our company down to one. So for example, on the — in the consumer segment, particularly in Ontario and Quebec, we’ve typically had five legacy billers, and we’ve collapsed those into one biller and then we’re starting to migrate customers from the old system to the new system.

And that will lead to consumer goodness that would be just one example. Another example is continuing to evolve our digital platforms and our self-serve apps, which are already rated best-in-class and we’ll continue to make those even more — even better and more intuitive for our customers. There’s real estate optimization, which we’ve talked about before. We’ve launched customer self-install, which we’ve — which we’ve improved over time and as more locations get actually physically connected to fiber, it increases the number of eligible homes to which we can offer self-install. Of course, with the expansion of fiber, there’s the copper decommissioning journey that we’ve talked about. It’s things like that. And then the hard periodic blocking and tackling like streamlining sponsorships, discretionary expense management, vendor consolidation.

All of these things are the things we’re going to do to ensure that we can continue to deliver longer-term margin expansion. And of course, the whole transition to the cloud. We are — we announced our Google Cloud and AWS deals about three years ago and a significant portion of those deals is moving some of our own workloads to the cloud, which will create some efficiencies for us and some customer service improvements. I mean I’ll stop there. I don’t want to give you a full laundry list. But I think those six, seven, eight items give you a sense.

Operator: Thank you. Our next question is from Simon Flannery from Morgan Stanley. Please go ahead.

Simon Flannery: Right. Good morning. Thanks for your time. So I wonder if we could come back to the fiber-to-the-home. Obviously, some great momentum there. There’s been a lot of concern about just increasing cost to build, and it would be great to just get any color on what you’re seeing out there in the marketplace and how you’re seeing the returns on that investment as well as any benefits on the churn side and on the sort of the lower cost of repair and maintenance going forward? Thanks.

Curtis Millen: Hi, Simon, thank you for the question. I’d say on the fiber-to-the-home side, we actually have not seen an increasing cost to build I think ultimately, we’re mitigating inflationary risk here with just more efficiency. And frankly, we’ve been doing this over a decade now. So we just keep getting better and better at building out fiber. So we’re not really seeing an increase in cost. We’re seeing an increase in efficiency.

Mirko Bibic: And some of the benchmarks I look at in terms of the metrics, churn does remain quite a bit lower in fiber territory than not. You can actually see it in the numbers like 104,000 fiber net adds, but 79,000 total net adds, the churn is lower by I’ve said in the past 30 to 35 basis points, lifetime value of a fiber customer significantly higher in service and support costs. I’ve said time and again, as you can expect it to be about 40% lower on fiber than on copper, and that number generally remains generally the same.

Operator: Thank you. Our next question is from Jerome Dubreuil from Desjardins Securities. Please go ahead.

Jerome Dubreuil: Thank you. Good morning everyone. So thanks for taking my question. First one I have is on the wireless environment. With the MVNO rate decision. We have high large data buckets. Now we have the Lucky and Virgin brands being sold at Bell locations. Do we find ourselves in a market where the wireless services is a bit more commoditized maybe than they used to be? And if so, what would that mean in terms of how you operate the business going forward?

Mirko Bibic: No, I think there’s still — first of all, there’s a lot of growth potential in the wireless environment. Now let’s start there. So population growth, penetration headroom, the transition to 5G. Again, people who — customers who migrate to 5G spend more and use the service more, consume more data. There’s goodness for — in particular, on our side with the multi-product household, where I’ve said in the past, we’re underpenetrated compared to some of our peers, and we’re closing those gaps and, of course, the immigration tailwind. So all of that leads to growth. In terms of the other part of your question, I would say that there’s still points of differentiation that we’re going to leverage and we’re going to use against our competitors.

So the fact that we have the best network is a value proposition that customers are well aware of. And even in terms of our own brands, like Lucky is not at all the same as Virgin or Bell in terms of the value proposition. And Bell and Virgin are still separated in terms of value prop. So 5G Plus on Bell, no 5G Plus on Virgin. Multi-gig on Bell on internet and not so on Virgin. Wi-Fi 6E on Bell, not so on Virgin. Internet and mobility discounts not so on Virgin. So there’s still value differentiation there, and we’re managing all three brands quite well.

Operator: Thank you. Our next question is from Stephanie Price from CIBC. Please go ahead.

Stephanie Price: Good morning. Hoping you could dig a little bit more into BYOD and lower device financing trend that was being in the market? Can you talk a little bit about how it’s impacting financing? And whether do you think this device upgrade rate could go even lower in the future? And a related question, what you’re seeing in terms of the new iPhone launch and any implications there for margins in Q4? Thanks.

Mirko Bibic: I’d love a specific comment on the iPhone launch to share. As far as BYOD, obviously, that’s financially accretive. If we can — put ask the customer to pay for the cost of the handset, it’s a good thing and as we improve the network and customer service we can lower the transaction intensity without — certainly lower the level of discounting on handsets, while at the same time, not increasing the level of transaction intensity. So if you can keep churn low because of the superior product offering we have while not having to subsidize deeply discounted devices, that’s a good thing all around. I think the trend is in the right direction there and generally positive, but I think there’s more we can do to make it even better.

Operator: Thank you. There are no further questions registered at this time. I would now like to turn the meeting over to Mr. Fotopoulos.

Thane Fotopoulos: Thanks, Matthew, and thank you again to everybody for attending our call this morning. The IR team, either Richard or myself will be available throughout the day for clarifications and follow-ups on that. I wish everybody a great day.

Mirko Bibic: Thank you, everyone.

Curtis Millen: Thank you. Have a good day.