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spk01: ongoing advertising recession and a declining legacy distribution business. And the Canadian regulatory environment is marked by policies on fibre resale that are negative, specifically Target Bell, and a broadcasting framework that curiously still does very little to assist Canadian media companies. Because of the CRTC's targeted actions, we are halting the elevated capex spending program that we've been operating under since 2021. As a result, we are notably slowing the pace of our fiber footprint expansion and we're capping fiber speeds at three gigabits per second. This also led to $105 million less capital being invested than planned for in Q4 of 2023, and we intend to reduce CapEx by at least an additional $1 billion over the next two years, including a minimum $500 million year-over-year decrease in 2024 alone. Given the lack of government and regulatory support for the historic capital investments Bell has made since the onset of COVID in 2020, and an unwillingness or inability to level the playing field between domestic competitors and global tech giants, we're also shifting our focus away from overly regulated parts of our business towards key growth areas where we plan to accelerate investment, such as cloud and security services, advanced advertising and digital transformation, just to name a few. And consistent with this refocusing, we're today announcing the sale of 45 radio stations and the closure of 107 source stores. To succeed in a landscape that's being reshaped, it's more important than ever to continue to align our operating model and cost structure to customer expectations and the revenue profile of our business segments. And for these reasons, we're undertaking a significant workforce restructuring initiative, our largest in nearly 30 years, that will eliminate approximately 4,800 positions, including 750 contractors, or 9% of all BCE employees. This restructuring initiative will yield in-year cost savings in the range of $150 to $200 million for 2024 or $250 million on an annualized basis. Now, restructuring the business is never an easy decision. but it's what we need to do to simplify our organization and accelerate our transformation. Where possible, we are leveraging vacant positions and natural attrition in order to minimize the impact on our team. We'll remove overlaps and consolidate certain functions across different teams, reducing corporate functions by 20% and over-indexing reductions in non-customer facing roles. While we're eliminating positions in areas where demand and revenue are declining, we are continuing to hire in growth areas. And this restructuring program is enabled in part by our accelerated investments in automation, digitization and AI, strategic acquisitions, new partnerships and service launches to improve our competitiveness and innovation agenda. Given the transformation investments we've made since 2020, we're in a better position now to drive costs out of the business. These transformation investments will continue in 2024 and beyond, and they'll drive more OPEC savings in the medium to long term than those being realized as a result of today's announcement. Now moving to slide six. I want to provide some color for you on how we're driving our operational transformation from a traditional telco to a tech services and digital media leader with a number of examples of investments, partnerships, and initiatives we've been undertaking. In wireless, as we've already announced, we've entered into a long-term strategic partnership with Best Buy Canada to rebrand 165 source stores to Best Buy Express. Bell will remain responsible for store operations, while Best Buy assumes responsibility for consumer electronics merchandising, procurement, marketing, inventory ownership and management, logistics and supply chain, as well as other support functions. Importantly, Bell will continue to control all mobility and internet sales. At Bell Business Markets, we've advanced our capabilities in cloud computing solutions and digital workflow automation with the acquisition of FX Innovation last year and our partnership with ServiceNow, the global leader in digital workflow solutions. Our collaboration with ServiceNow creates unique value for the Canadian business market and will elevate the end-to-end experience for our customers. And on the media side, it's about reducing our dependence on overly regulated businesses like radio and pushing even more aggressively into digital targeted ad platforms through scaling ad-supported subscription tiers on Crave, expanding addressable advertising across more media properties, and acquiring out-front media as Canadian out-of-home business. And as I've mentioned, we'll distribute Crave on Amazon Prime Video channels, which will enable even better Crave growth looking forward. Against the backdrop of accelerating investments in key growth areas, we're also laser focused on transforming our existing core business. And we're looking at things like how to build better and more resilient networks, providing better service through enhanced distribution channels and sales coverage, speeding up innovation and time to market, modernizing and rationalizing our suite of products, and embracing digital solutions and automation. And a key piece of our product modernization program is leveraging our existing all-fiber network to provide better service to customers, saving money on maintenance costs, and of course, reducing our environmental footprints. We've made progress migrating customers and equipment to our fiber network, as well as consolidating and removing copper cables and equipment no longer required in the field. We've launched fiber migration now to 105 central offices, transitioning 110,000 residential customers in 2023. And in 2024, copper customers in Manitoba and Atlantic Canada who need a repair will be transitioned over to fiber where we have fiber, as we already do in Ontario and Quebec. We introduced a new next generation 5TV service powered by Bell's in-house software on an Android TV set-top box, and that importantly sets the stage for a move to a single IPTV platform and addressable TV capabilities at scale everywhere we operate. This new service is currently available to residential customers in Atlantic Canada, and that will be rolled out, as I said, to other regions across our footprint in the coming quarters. We're also consolidating real estate, reducing the number of vendors we deal with, and very importantly, simplifying our ordering and billing technology platforms by moving all core consumer products to a single billing architecture. This has now been launched at scale to 1.3 million customers in Ontario and Quebec, and will continue to migrate more customers on the new billing platform as the year progresses. Each of these programs, and I've given you several examples, each of them will drive growth, better serve customers, and take costs out of the business. Importantly, they'll support a stronger EBITDA growth trajectory, margin accretion, and free cash flow expansion in the years ahead, and that's going to help support our dividend growth objective. And that brings me to slide 7 in our dividend announcement for this morning. We're increasing the BCE common share dividend by 3.1% for 2024. It's our 16th year of uninterrupted growth, demonstrating our unwavering commitment to dividend growth. Dividend growth remains central to our value proposition and we'll continue to prioritize it in our capital allocation. And it's apparent from our dividend yield that at this time, BC's share price is not being rewarded for the higher 5% dividend growth profile. We appreciate that our shareholders want a stable and a growing dividend, and we're delivering on that expectation. The 3.1% increase for this year 2024 will allow us to better balance capital allocation priorities with the ultimate objective of getting our payout ratio below 100%, and that provides us additional financial flexibility at the same time, given the higher interest rate environment, significant workforce restructuring we're undertaking, and the acceleration of our techco transformation that will serve as the future catalyst to growth and deliver the financial results that we continue to deliver for our investors and that you can continue to expect from us. And on that, I'll turn it over to Curtis.
spk00: Thank you, Mirko, and good morning, everyone. I'll begin on slide nine with BC's consolidated financial results. We had a strong quarter to end the year with 5.3% higher adjusted EBITDA that drove a 1.9 point increase in margin to 39.7% and 7% adjusted EPS growth. This EBITDA result was achieved despite ongoing media advertising headwinds and a step up in consumer promotional offer intensity and moderated service revenue growth this quarter. Regarding CapEx, due to the deceleration of our fiber network build-out in the back half of the year, CapEx was down $609 million in full year 2023. As Mirko pointed out, we reduced planned capital investment by an additional $105 million in Q4 as a direct result of the CRTC's fiber resale decisions. Our strong EBITDA growth, substantial capex reduction, lower cash taxes, and the positive change in working capital that we had signaled to the street throughout the year drove a $913 million year-over-year positive swing in Q4 free cash flow. Turning to Bell CTS on slide 10, starting with a high-level summary of Q4 subscriber metrics. Overall, I would say they were doing a very good job in wireless, striking a healthy balance between volume growth, acquisition cost, and ARPU. We delivered a record quarter for postpaid mobile phone growth activations that drove 128,715 new net subscribers. This result, which comprises our second highest Q4 for consumer postpaid net ads after last year, was achieved even with a higher number of switchers, reflecting aggressive offers from our competitors that we chose to match selectively. This disciplined approach was reflected in our promotional offers, where handset subsidies were, on average, 32% lower than they were in 22, driving a significant improvement in wireless product margins. Wireless ARPU is up .4% this quarter, driven by our focus on premium 5G subscriber loadings and further growth in outbound roaming. A great result in light of the more aggressive rate plan offers during the Black Friday and December holiday sales period, demonstrating our reliance on network quality and distribution strength rather than promotional discounting to drive profitable subscriber growth. Switching to our industry-leading broadband segment. Bell Internet added 55,591 total new net retail subscribers, our second best Q4 result in nearly two decades. And on the TV side of things, we added 23,537 net IPTV subs, which is approximately 17,000 lower versus Q4 of 2022. This was an expected result as our result last year benefited from a significant number of customer activations driven by the World Cup. moving to Bell CTS financials. This is a very good set of results to end the year. Top line revenue grew a respectable 1.7% in Q4. This was achieved despite ongoing legacy declines, a tough year over year calm for business product sales, and a richer residential service bundle discounts, reflecting a more intense promotions market compared to last year. Total consumer wireless revenue increased 5.5%, profiting from a higher sales mix of premium mobile phones on the product side. and positive ARPU growth on the service side. Residential internet revenue was up 5.4%. CTS revenue also benefited from higher sales of security and cloud-focused managed and professional service solutions to businesses, as well as the financial contribution from our acquisition of FX Innovation in June. The combined impact of continued consumer strength across our wireless residential home services together with improved business wireline results better wireless promotional offer discipline and lower weather related cost pressures grow strong ebitda growth of 4.8 percent clearly there's a financial highlight for q4 on to slide 11. now media continued its digital revenue growth and in aggregate performed better than we expected during the quarter Digital revenues were up 27% over last year. Underpinning this result was Crave, which grew direct streaming subscribers by 14% on the back of market-leading content, as well as continued strong growth of our SAM TV sales tool, which saw a 70% increase in sales in Q4. Despite strong digital ad growth in the quarter, total ad revenue was down 13.7% as advertiser spending, particularly for TVs, continued to be impacted by the economy and now resolved Hollywood strikes. Furthermore, revenue generated in Q4 2022 from the World Cup contributed to the year over year decline. Normalizing for the World Cup ad revenue net of displacements was down 9%. That performance is better than our peers, which is a testament to Bell Media's programming strength, diversified mix of assets and focused execution of our digital first strategy. Despite the unfavourable revenue backdrop, EBITDA increased 14.7% in Q4. This result was supported by the favourable impact of various restructuring initiatives undertaken in 23 to help right-size our cost structure and asset portfolio, along with lower TV programming costs due to the Hollywood strikes and last year's World Cup broadcasts. I'll now turn to our 2024 financial outlook, starting with revenue and EBITDA on slide 13. Based on the latest economic forecasts and industry outlooks, our revenue and adjusted EBITDA growth ranges for 2024 take into consideration potential recessionary risks, competitive pricing pressures, and business product sales lumpiness. Additionally, our strategic distribution partnership with Best Buy Canada will see the elimination of approximately $300 million in largely consumer electronics revenue from our consolidated results in 2024. The impact on EBITDA will not be material given relatively low margin for consumer electronics. As a result, we're setting our guidance growth ranges for 2024 at 0 to 4% for total revenue and 1.5 to 4.5 for adjusted EBITDA. Given this outlook and benefiting from the cost savings we expect to realize from the transformation initiatives that Mirko outlined earlier, including a 9% reduction in our workforce, we predict BCE's margin for 2024 to remain, at a minimum, stable year over year. And notably, if you exclude the financial impact of the Best Buy transaction, our target guided ranges are consistent with last year, showing the relative stability of our business and the confidence we have in our proven ability to execute under any circumstance. Underpinning the steady growth is our continued focus on premium mobile phone subs with increased emphasis on market growth as we capitalize on our wireless network leadership, ongoing 5G upgrade cycle, and strong integration levels. We also plan to continue winning the home by leveraging our industry-leading symmetrical internet speed advantage over cable, delivering the best customer experience with our products, and driving greater cross-cell penetration of higher value mobility and internet households. In our B2B sector, our objective is to build on our momentum from 2023 by accelerating growth in cloud security and workflow automation solutions in the large enterprise space, while also expanding key channels and leveraging our fiber footprint in SMB. At Bell Media, although the timing of an advertising recovery remains uncertain, we'll continue to drive advanced advertising digital products like Crave, as well as new distribution initiatives, such as Crave's partnership with Amazon, to further grow our market share of digital ad spend. These digital opportunities, together with the financial contribution from our pending acquisition of OutRun Media and restructuring cost savings, should drive improved media financial performance in 2024. Moving to slide 14. Despite growth in EBITDA, we projected adjusted EPS to be in the range of 2.98% to 3.13% per share in 2024, or 2% to 7% lower versus last year. This year-over-year decline can be attributed largely to an approximate $200 million step-up in interest expense due to higher rates and more debt outstanding from investments in our growth strategy, an estimated $100 million increase in depreciation and amortization expense consistent with the growth in our broadband network capital asset base, higher pension financing cost, and gains on the sale of real estate realized in 2023 related to our multi-year consolidation and conversion program that totaled $67 million or 5 cents per share. Turning to slide 15, we expect to generate 2.8 to 3.05 billion of free cash flow in 2024. This is 3 to 11% lower compared to 2023 and reflects around $400 million IN ONE-TIME SEVERANCE PAYMENTS RELATED TO THE 4800 EMPLOYEE REDUCTIONS THAT MERCO DETAILED. NORMALIZING FOR THE SEVERANCE PAYMENTS ASSOCIATED WITH OUR ANNOUNCED WORKFORCE RESTRUCTURING INITIATIVES IN 2023 AND 2024, FREE CASH FLOW GROWTH IS IN THE RANGE OF 0 TO 7% THIS YEAR, PROVIDING SUPPORT FOR THE 3.1% DIVIDEND INCREASE WE DECLARED THIS MORNING. This underlying growth in free cash flow is the result of higher year-over-year EBITDA and a $500 million decrease in capex that will drive a capital intensity ratio of 16.5% or less in 2024. Although we have currently budgeted approximately $4.1 billion in capex spending for 2024, this amount can possibly be even lower depending on government policy decisions during the course of the year that may further disincentivize investment. 2024 free cash flow also reflects higher interest paid, stable to higher cash taxes as the federal government's accelerated CCA program is phasing out beginning this year, and lower projected cash from working capital. working capital drag is attributable mainly to the significant improvements in ar and inventory levels realized in 23 which normalized following substantial covid and supply chain impacts in 2022 as well as potential recessionary impacts on customer collections that may materialize with a harder economic landing moving to slide 16 as we begin the year we are in a very strong financial position We have access to $5.8 billion of liquidity and a balance sheet with a sizable pension solvency surplus totaling $3.6 billion, which provide good overall financial flexibility to execute on our business plan and strategic priorities for 2024. Our net debt leverage ratio at just under 3.5 times adjusted EBITDA due to several years of generational capex spending and critical spectrum investments is projected to remain more or less stable this year. Our debt capital structure also remains very well structured with an average term to maturity of approximately 12 years, an after-tax cost of borrowing that is below prevailing interest rates at around 3% and a floating interest rate exposure that is below our historical target range of 20 to 30%. At these levels, together with no material debt refinancing requirements until Q1 2025, interest rates that are expected to ease and access to lower cost short-term financing options We can be opportunistic in accessing the debt capital markets this year if market conditions are favorable to pre-fund upcoming maturities and mitigate interest rate pressures. Lastly, I wanted to note that capital leases are expected to begin declining this year, having reached a peak in 2023, which will drive lower principal repayments beginning in 2025. To conclude on slide 17, 2024 is an important transformation year for Bell. It's a year where we look to maintain operational momentum while balancing growth with financial performance as we continue our transition to a tech services and digital media leader. Within that context, the guidance targets we're providing today are appropriate given the current economic, competitive, and regulatory backdrops while also reflecting the impacts of our workforce restructuring and other transformation initiatives that will better position the company for future growth and financial success. I will now turn the call back over to Thane and the operator to begin Q&A.
spk09: Thanks, Curtis. So given the volume of information presented this morning, I'm sensitive to the time we have left for Q&A, so I would please ask that you limit yourself on questions so that we can get to everybody in the queue. With that, Matthew, we're ready to take our first question.
spk06: Thank you. The first question is from Mayor Yagi from Scotiabank. Please go ahead.
spk11: Thank you for taking my question. Believe it or not, I won't ask you about Q4 or 2024. I think we need to discuss the elephant in the room here. One can set aside the regulatory environment when looking at pricing pressure hitting Canadian telcos on both wireless and wireline. I mean, we have seen similar issues in the Canadian broadcasting industry due to slow evolution on regulation. Mirko, I wanted to ask you, you know, is your telecom service in Canada at risk of seeing similar long-term profitability issues if regulation continues to lack technological advancements? You know, and underlying my question is this question. Beyond 2024, should we expect future years to see additional material cost reductions to continue to stay ahead of these regulatory pressures? Thank you.
spk01: Thanks, Mira. Thanks for that question. There's a lot there. Let me start with, I want to reemphasize what I started with in my opening remarks. We continue to deliver strong results each quarter, and that's because we're always planning ahead. So, we were making investments in 2020, 2021 to get us in a position where we could deliver strong results in 2023, and we're continuing to do that. always plan for the environment that's around us now and where we expect it to go. And that's kind of where your question is going. So that could be technology, that could be, you know, kind of macroeconomic, customer expectations obviously matter a lot, competitive environment and significantly regulatory. So, I mean... If you look at our free cash flow guide, sorry, our capex guidance for 2024, we say less, you know, 16.5% capital intensity ratio or less. And we say that we're kind of reducing capex by at least a billion over the next two years. And the or less and the at least is basically saying if it gets worse on the regulatory front in terms of some of these rules that we know very well, fiber access in this particular case, We will do more, and that could be cutting investments in these areas and then redirecting monies to growth CapEx and transformation CapEx, and it could be more restructuring for sure. The 16.5% capital intensity ratio is about $4.1 billion of CapEx planned for this year, and unfortunately, I had actually thought that we'd be at $4.1 billion in 2026, not in 2024 or 2025. when we were kind of anticipating to build to 9 million fiber locations by the end of 2025. So we've pulled our spending in earlier than planned, specifically because of the regulatory rules and federal public policies. We got to call those out as well. And in the midterm, we can operate this company below that capital intensity, Mayor, given the work we're doing now on our growth and our transformation agenda. I won't relist them. I went that length at them on on in my opening remarks. So now let's go back. On fiber, fundamentally, the question we have to ask ourselves is why continue to invest at the pace that we did in 2020, 2021, 2022, 2022, and 2023 if we're going to make investments that are going to enrich the shareholders of our major incumbent telcos and cablecos. I mean, you gotta ask yourself at some point, why don't we just kind of ride on their networks, right? But ultimately that would be a terrible outcome for resiliency network competition, price competition, et cetera. So yeah, the long answer, short answer is there could be more to come depending on where this goes. And you didn't focus on media in your question too much other than calling out kind of what's been a slow evolution in the broadcasting environment on regulatory. But I mean, think about it. We've been talking about the need for same rules for all in broadcasting, domestic and international competitors for years, and we've still gotten nowhere. We actually had the renewal of our TV licenses until 2026 without meaningful prior consultation. despite the fact that we're mired in an ad recession and an existential media industry crisis. We have the CBC that has greater flexibility on their news obligations than we do, despite the fact that we've made it very public that we lose $40 million a year on news. We want to deliver news, but we want to find a way to make this work. So the list can go on, but I'll stop there.
spk06: Thank you. Thank you. The next question is from David Barton from Bank of America. Please go ahead.
spk13: Hey, guys. Thanks so much for taking the question. I guess maybe Curtis, you know, I think the free cash flow guide was probably the biggest surprise. I just want to make sure I'm thinking about this correctly. If we do a free cash flow walk from 2023 starting at 3.14 billion, and we add a $500 million capex reduction tailwind, we add a $300 million midpoint guidance EBITDA increase, and we subtract the $400 million severance, and then we subtract $300 million of higher interest expense, we get to about $3.25 billion. So that suggests that there's at least $3.25 billion to more, you know, incremental I guess that would be taxes and working capital. Could you kind of address the gap there? And I apologize to Thane for asking a related question, which is if your free cash flows $3 billion and your common dividend is $3.5 billion and your preferred dividends are $200 million, we've got a pretty huge gap there. When do we close it? Thanks.
spk00: Great. Thanks for the question, David. So ultimately, we continue to drive free cash flow growth while we're funding generational investments in our network. You know, there are growth initiatives that Mirko talked about that we're funding, that's cloud and security services and all the digital transformation projects. You know, as Mirko said, we were looking to spend more than $4.1 billion, but $4.1 still remains a pretty significant level of investment. I'd say, you know, it's not a surprise 2024 is a transformational year, given the scale of our workforce reduction. So that's $400 million of severance. That's an exceptional one-time drag on free cash flow. As you mentioned, I mean, there are a couple of one-time timing issues here in terms of working cap, driving some pressure in 2024. You know, one example is we're building out broadband in fiber and broadband subsidy regions. So we incur those costs, and then we get refunded by the government. But there is a timing gap there. Again, it's just a matter of time. We do get the money back, but it causes a pressure in 2024. And then again, as you noted, interest paid is quite a step up this year, right, given interest rates and the bigger balance sheet. So, you know, there are a handful of moving pieces, but ultimately we're pretty confident in our ability to drive free cash flow growth. And our dividend at this level is supported by the free cash flow growth we're going to push forward this year.
spk06: Thanks. Thank you. The next question is from Stephanie Price from CIBC World Markets. Please go ahead.
spk08: Good morning. Thank you. Just following up on the last question, I was hoping you could talk a little bit about the longer-term outlook for dividend growth. Do you see 3% as the new normal here, or is it more of a near-term impact from the restructuring? How should we think about dividend growth going forward?
spk01: Oh, and we'll assess that, Stephanie. Hi, it's Mirko. We'll assess that year by year, of course. Look, we're always going to use funds available to us in a balanced manner in line with the priorities I outlined in my opening remarks. So dividend growth remains number one this year. For this year, the 3% is absolutely appropriate, particularly given where our dividend yield sits at right now. And then we'll always balance that against the growth CapEx that I've talked about, the transformation CapEx I've talked about. There might be some smaller-scale M&A opportunities that come up. They often do. So that'll be how we line up our priorities and we'll reassess it again next year. But I'd say 3% is a solid bump in this environment and it's still competitive with our peer group.
spk08: Thank you very much.
spk06: Thank you. The next question is from Drew McReynolds from RBC Capital Markets. Please go ahead.
spk03: Yeah, thanks very much. Good morning. marco with respect to some of the offline uncertainty whether you know it's it's in your control and but a lot of it's not in your control including regulatory um certainly from our perspective lowering the cost to serve becomes a a pretty big uh protector and driver of either down free cash flow growth and i think you've alluded to that certainly in your opening comments can you just speak to you know, how you're lowering the cost to serve kind of programming or program beyond 2024. And in that, just where do you kind of stand on corporate decommissioning for this year and what should we expect over the next few years? Thank you.
spk01: Yeah, thank you. Thank you for the question. So again, as we line up how we're going to spend our capital most efficiently, you've got kind of dividends on one side, then you've got network expansion, which unfortunately is at a significantly reduced pace, but that'll continue. And then it's a question of allocating the rest as between kind of what I've been calling you know, this morning, the growth CapEx and the transformation CapEx and the right mix there. And as we invest more in the transformation of Bell, we're able to get more efficient with our CapEx dollars over time and, of course, drive costs out of the business and drive growth. So, some examples, and I'm repeating a little bit what I said in my opening remarks, but it's important. Moving core consumer products to single ordering and billing architecture has so many benefits. A more understandable bill, a better customer experience. Obviously, you only have one architecture to manage, not multiple billers to manage. fewer manual kickouts, which means fewer people needing to oversee billing and shorter time to market when you want to make adjustments. So that's something we were really focused on for the last several years and thankfully mid last year we were able to start migrating customers. We're going to continue to invest in our digital apps. We've been talking about that for several years now and it keeps getting better. Customer self-install continues to scale, especially where we have fiber. AI and generative AI are big opportunities that we're going to harness more meaningfully in 2024 and especially beyond. On the copper decommissioning, up to 105 central offices, as I mentioned, and that's going to keep growing over time. We've got too many too many legacy products in especially in the enterprise side and we're going to rationalize that and that's going to kind of make us leaner and better. I highlighted in my opening remarks the move to a single IPTV platform that has multiple benefits. Better product, better customer experience. That's one. A single 5 TV architecture across our entire operating territory. We're not going to have three or four or five TV services, which we currently do. So big cost savings there. And on the growth side of that, is the addressable TV capabilities that are going to drive digital advertising revenue for Bell Media. So that one there has multiple benefits from better customer experience, the better digital ad capabilities to lower cost structure. Real estate, always looking at that. We're consolidating our vendors, managing our supply arrangements very carefully. standardizing contractor rates, insourcing where we can, terminating some long-term partnerships that we've had, some of which have been public. These are all the things that we're doing to drive costs out of the business and actually enable better growth. Thanks for that.
spk06: Thank you. The next question is from Simon Flannery from Morgan Stanley. Please go ahead.
spk05: Great. Thank you very much. Good morning. I want to just talk about the macro, if I could, for a minute. You talked a few times about potential recession being included in your guidance. And I want to really see what you were seeing on the ground today. I think you talked about higher business disconnects as well as some lengthening of payable cycles and so forth. So to what extent are you being cautious here? Are you actually starting to see some signs? Obviously, you've talked a lot about media, but more in the communications side of the business.
spk01: Thanks. Right. Okay. So look, our guidance on revenue need are pretty much in line with previous years, but for the the impact of the Best Buy transaction on product revenue. That's one thing I'd say right off the top. We're balancing what we see as the macro environment, but also the areas where we've where we've done quite well, whether or not it be, you know, Internet or wireless loadings, we're seeing on the enterprise side quite strong service revenue growth and kind of what we call the growth verticals, you know, cloud service solutions, security, automation, digitization, that kind of work that we do for our customers. Actually, we saw pretty strong organic solutions revenue growth at Bell Business Markets. And of course, then that's excluding the impact of FXI, which is also going to grow. So, you know, I think on the enterprise side, it's a question of continuing to maintain our position in our core business, kind of the legacy business, while taking costs out of that business, continuing to harness the growth that we're seeing on kind of the new solutions and improving the customer experience. That would be what we're trying to do on the enterprise side. In the small business segment, like we're not really seeing too much downsizing and rationalizing or too much of an increase in business closures. But like I said in previous quarters, we're monitoring that carefully. And then on the wireless side, I'd say, you know, customer payment patterns are okay. We haven't seen a material change, but again, worthy of further monitoring. And the environment remains pretty competitive, but I have to say I was quite pleased in Q4 with how we managed the competitiveness. We did a really nice job leveraging our premium brand strategy to load customers on the better network at higher ARPUs and you can see that in our organic ARPU growth and we've used the Flanker Virgin in particular, to better segment the customer base and serve the value segment. So we're resisting dropping price on the premium brand for the sake of saying that we're loading customers on the premium brand. So, I mean, I think there's still some upside there on the wireless side and, of course, on internet.
spk06: Great. Thanks a lot. Thank you. The next question is from Tim Casey from BMO Capital Markets. Please go ahead.
spk07: Thanks. Curtis, can we go back to your walk down on free cash flow and your comment on working capital? Are you implying there's a relief coming in 2025? Because you're talking about those working capital items being one time in nature. I mean, I just think people are struggling with the walk down on this and how you end up with free cash flow guiding below $3 billion. Thanks.
spk00: Yep, thanks for the question, Tim. I think there are a couple of things and some of these things unfortunately will take more than one year to normalize out. I mean, if you're looking at the one that I mentioned in terms of government subsidy build, so we'll be building out over the next couple of years and then the two years after that it swings in our favor. Another one I'd mentioned, so in 23, you know, as supply chain normalized our AR, excuse me, so receivables and inventory levels came down quite substantially, but that creates a year-over-year pressure where there's no incremental or limited incremental improvement year-over-year. So it was a win in 23, but it's already normal in 23, so there's no incremental win in 24.
spk06: Thank you. Thank you. The next question is from Jerome DuBray from Desjardins Securities. Please go ahead.
spk04: Hi, thanks. Good morning. One on network convergence. You do have a high level of overlap between your wireless and wireline networks, but you're not 100%. You know, we're seeing competitors making strides and putting more focus on fixed wireless. um even in urban areas is this something you are increasingly considering or are you happy with your current addressable market and and maybe also is this possible in the context of network sharing agreement thank you
spk01: Jerome, we've had a fixed wireless product in market since 2018, and we had a pretty aggressive build target initially, which we had to scale back because of some regulatory outcomes, and then forged ahead again when the regulatory rules got a little bit better in 2019-20. By the way, another show is how. Regulatory decisions do matter, but we have a pretty sizable addressable market with fixed wireless. We've been selling our products since 2018. We continue to upgrade it and it works. It works in rural where you don't have very well in rural where you don't have fiber or DOCSIS cable. It's my view fixed wireless access will never be competitive where there is you know, fiber and top tier cable. And then in rural areas, you also have to appreciate compared to 2018, there's now Starlink as an option for customers. So a long way to say I'm happy with where we are with our addressable market on fixed wireless access and how that product performed, especially at the beginning when we launched.
spk06: Thank you. Thank you. The next question is from Aravinda Ghalibafighi from Canaccord Genuity. Please go ahead.
spk10: Good morning. Thanks for taking my question. It's on the adjusted EBITDA guide 1.5 to 1.5. I just wanted to understand sort of the lower end there. I mean, there's obviously the benefit of the acquisition in media and then know the 150 to 200 translates to you know somewhere between one and a half to two percent roughly um is it is it that perhaps you because of the ad conditions you're assuming a steeper decline in media is that what sort of dragging down that low end i wanted to understand the low end of that range a little bit better thanks
spk00: Yeah, hi, Aravinda. Thanks for your question. I mean, the simple answer is it's the same guidance as last year, but for the adjustment on the low end, which takes into account the range of $150 to $200 million of cost savings. So that $50 million range there driven by our workforce reduction. So in line with last year's guidance range.
spk10: Okay, but then, I mean, the acquisition obviously adds about half a turn. Isn't that the case?
spk00: Yeah, so you're talking about out front? Yeah, out front hasn't closed yet. So, you're right. There's a bit of a balance here between ad market recovery and potential closing of the acquisition.
spk06: Okay, okay. Thanks. Thank you. The next question is from Bhatia Levy from UBS. Please go ahead.
spk12: Good morning, this is Chris for Bhatia. Just digging into the postpaid phone churn result, any color you can give on the performance you're seeing by geography and whether the level of competition has been consistent across regions and any early color you might be able to provide on OneQ has a level of switching intensity ease so far in January. Thanks.
spk01: Yeah, so look on churn, We're not sitting idly by. We've got to watch this very carefully. It has gone up. It feels a lot more obviously like pre-COVID than it has in the last several years. So what we're going to do is continue to leverage our household bundling strategy where we've been pretty effective over the last couple of years, including in 2023. Focus on the premium loadings in the way I suggested a couple of questions ago. Continue to improve customer experience. I think that common billing platform I've talked about is going to help. We're going to use Crave quite strategically, and these are the things that we're going to do to make sure that churn stays under control. But it has to be looked at quite seriously, and that's what we're going to do looking forward. Now, if we look back at Q4, you can see how diligent we were. We managed to deliver record sales. strong service growth, solid nets, organic ARPU growth, significantly better product margin, and basically we didn't have to overspend to deliver kind of the solid results we did. So, again, it's always about balancing the spend on the share you gain while making sure that you're doing all the right things tactically to keep churn in check.
spk09: Great. Thank you. Matthew, we're starting to time out, so this will be our last question.
spk06: Perfect. Thank you. The next question is from David from Coremark Securities. Please go ahead.
spk02: Oh, great. Thanks for asking me. Just a question on the CapEx. I know you don't like the regulatory decisions that have been made, but don't the financial metrics just force you to cut CapEx anyways if you want to get down to a below 100% payout ratio and you have to pay $400 million in severance, $300 million in higher interest expense, doesn't it just kind of force your hand to lower the CapEx anyways? And now it's a lower CapEx, when would you expect to reach the 9 million homes?
spk01: Well, no, we outlined two years ago, in 2021, that our goal was to hit 9 million fiber locations and we signaled quite clearly and consistently to shareholders that as a result, we were going to operate at an elevated payout ratio, but it was the right thing to do at the time given the environment. for the long-term strategic benefit of shareholders. But that was done in the context of the regulatory environment we had in front of us then. So we are reducing CapEx as a direct result of the regulatory environment, because we had clearly signaled that we were going to operate at the elevated payout ratio. Because again, we're always managing for kind of in-year, but we're also managing for the long-term. And we are, we can always, at $4.1 billion of CapEx compared to 4.6, obviously it's a reduction, but we get to choose where to spend that 4.1. And we've chosen to de-emphasize fiber and focus on other growth vectors and transformation. So even within the reduced CAPEX budget for 2024, there are allocation decisions that are totally in our control.
spk02: Okay. All right. Thank you.
spk06: Thank you. There are no further questions at this time. I would now like to turn the meeting over to Mr. Fotopoulos.
spk09: Thank you, Matthew. So thank you again for your participation this morning. As usual, Richard and I will be available throughout the day for follow-up questions and clarifications. So on that, have a great day. Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.
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