BCE, Inc.

Good morning, ladies and gentlemen. Welcome to the BCE Q3 2024 results conference call.

I would now like to turn the meeting over to Mr. Thayne Fotopoulos. Please go ahead, Mr. Fotopoulos. Thank you, Matthew. Good morning, everyone, and thank you for joining our call. With me here today, as usual, are Mirko Bibic, President and CEO of BCE, and our CFO, Curtis Millen. You can find all of our Q3 disclosure documents on the investor relations page of the bce.ca website. which we posted earlier this morning. Before we begin, I'll draw your attention to the safe harbor on slide two, reminding you that today's slide presentation and remarks made during the call will include forward-looking statements and information and therefore are subject to 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, over to Marco.

Thank you, Thane, and good morning, everyone. Our operating results for the third quarter demonstrate that we're pursuing growth in a financially disciplined and responsible manner in what's arguably been the most competitively intense market we've seen. Against this backdrop, we remain focused on better quality long-term margin-accretive subscriber acquisition and reducing costs to help offset short-term revenue impacts from sustained competitive pricing pressures, expected revenue losses from the source, which we've discussed in the past, slow economic growth, and a media advertising market that's still in transition, particularly on the linear side. this focus on disciplined customer growth and ongoing efforts to drive cost savings across the organization through our advanced broadband networks expanded digital and ai capabilities as well as other transformation work streams is reflected in our q3 consolidated ebitda growth of 2.1 percent and a 1.7 point margin increase to 45.6 percent Notably, this was our best quarterly margin performance in over 30 years. This contributed to 10.3% higher free cash flow in Q3, which was in line with our plan as profiled in our quarterly budget at the start of the year. So really good execution by the Bell team in a highly competitive marketplace. I'm going to move now to our operating results, starting first with wireless. You'll see combined mobile phone and connected device net ads in Q3 totaled 158,412. Our objective was to strike a balance between subscriber loadings and economics. We also tried to reset rate plan pricing to more rational levels, reflective of the tremendous value our services provide to customers. Despite some green shoots, those didn't stick throughout the quarter. Nevertheless, we held firm to our strategy and we chose not to match every promotional offer just for the sake of capturing a higher number of subscriber activations. Rather, as I said, our focus was on acquiring margin accretive customers and increasing our service bundle penetration, given its importance as a churn management and value driver tool. In fact, all of our new postpaid customer net activations this quarter were on the main Bell brand. Moreover, in an effort to strike a better pricing tier balance between our various brands, we stopped selling prepaid service on Virgin Plus at the end of September and we plan to discontinue Bell branded prepaid service in Q4. Now on to residential wireline. Not surprisingly, fiber continues to anchor new internet subscriber growth and drive higher multi-product penetration, contributing to a 15% increase in households subscribing to mobility and internet service where we have fiber. Notably, internet revenue growth improved to around 5%, which represents our best quarterly results since Q2 of 2023. And it's a direct reflection, again, of our balanced approach to broadband market share growth and disciplined pricing. Now I'll talk about media. Digital revenues were up 19% over last year, and that helped to offset the secular pressures in traditional media platforms. And digital now comprises 42% of total media revenues. This result was driven by continued growth in products such as Crave with ads and connected TV, strong client demand for Bell Media's advanced advertising solutions, and ongoing direct-to-consumer streaming growth. And investments to sustain the strategic shift to digital are continuing, with the availability of TSN and RDS content on Amazon Prime Video channels in Canada, and the expansion of Bell Media's existing licensing agreement with Warner Brothers Discovery, announced in 2023, to extend Cray for multiple years as the exclusive home of HBO and of Max content. Bell Media also recently secured a content and licensing agreement with NBCUniversal to bring USA Network and Oxygen True Crime cable channels to Canada for the first time. Discovery Canada will be rebranded as USA Network at the start of next year. As for our transformation initiatives, we're making significant progress modernizing how we operate across the company by leveraging technology, automation and simplification in a way that's more agile, digital and lower cost. And all this is designed to drive significant CapEx and operating cost efficiencies. Although these initiatives have required upfront investments, and more investments will be made as we further accelerate this transformation, we're already seeing the benefit in terms of CAPEX efficiencies. In fact, we're ahead of plan in decreasing CAPEX by more than $1 billion over the 2024-2025 timeframe, including a year-to-date reduction this year of more than $600 million while working towards our fiber-built target of 8.3 million locations by the end of next year. However, as we move more workloads to the cloud, it will result in a shift of dollars from CapEx to OpEx that will moderate margin expansion in the short term, but this will be meaningfully cash cost accretive longer term. And we remain on track to deliver in-year savings of approximately $200 million from workforce reductions announced in February. These are just a few examples of the initiatives and work streams currently underway at Bell that are contributing to better efficiencies and lower costs. We also continue to advance our transformation to a tech services leader in the B2B space with FxInnovation's acquisition last month of HGC Technologies, a leading ServiceNow managed services provider based in Montreal. This investment builds on our purchase in July of Cloud Kettle, based in Halifax, to further strengthen FXI's expertise in process automation, cloud technologies and digital transformation. And in line with our strategic goal to become a cybersecurity managed services leader in Canada and North America, complementing our acquisition of tech services company Stratagem in July, we expanded our relationship with Palo Alto Networks in a first of its kind partnership to offer their full suite of managed security services. This agreement directly supports our Bell Business Markets growth agenda and is already evident in key wins with some of our largest Canadian customers. Against the backdrop of these investments, on Monday we announced our acquisition of Ziply fiber, the largest broadband and fiber internet provider in the U.S. Pacific Northwest. The acquisition marks a bold milestone in Bell's history. It's a significant investment that will help us take our competitive edge beyond Canada, and it will enhance long-term growth for Bell by providing us with a foothold in the under-penetrated U.S. fiber market while increasing our scale, diversifying our operating footprint, and establishing a platform for further expansion opportunities. The acquisition is immediately accretive to cash flow from operations, enhancing BC's financial growth profile. We expect the transaction to be free cash flow accretive post the completion of Zimpli Fiber's planned fiber build-out to more than 3 million locations. All in, it will help to support our long-term capital markets objectives. We intend to finance a transaction largely with the $4.2 billion of net proceeds from the pending sale of MLSC. Effectively, what we're doing is monetizing an asset with no impact on BC's operating results to fund the acquisition of an asset aligned with our core business and our fiber growth strategy, which is, again, very strategic, growth-focused redeployment of capital, and one that will be accretive to free cash flow in the long term. Importantly, as part of the condition of sale of MLSC, as you all know, Bell Media secured access to content rights for the Maple Leafs and Raptors for the next 20 years, and that will solidify TSN's position as Canada's sports leader. The pending sale of Northwest Tail that we announced earlier this year is another clear indication that we'll take seriously any opportunity to monetize assets where and when it makes sense. I'm turning now to slide 5, reviewing with you some key operating metrics for the quarter, again starting first with wireless. We added 102,196 new net mobile phone subscribers in Q3, down from 167,000 in Q3 of last year. Although post paid net ads of 33,111 were down compared to an exceptionally strong prior year, consistent with our operating strategy to focus on margin of creative subscriber ads and disciplined device subsidization, like I said at the beginning, all new customers were on our main Bell brand. While post-pay churn this quarter was up against the backdrop of elevated competitive activity relative to seasonal trends and higher than we'd like, it did represent a third consecutive quarter of deceleration in the year-over-year rate of increase. So we're moving in the right direction when it comes to churn. Prepaid net ads were up considerably versus last year, increasing to 69,085. This represents our best quarterly results since Q3 2019, and it's a direct reflection of the strategy to increasingly address the flanker and newcomer market with our prepaid brand. To close off on wireless, ARPU was down 3.4%. As expected, this result represents the accumulation of excessive rate plan discounting and promotional offer intensity over the past year. Until prices stabilize, we'll continue to focus our efforts on delivering enhanced customer experiences and value and on improving wireless ARPU and margins. Although we believe that Q3 should be the peak quarter of decline, the magnitude and timing of ARPU recovery will depend on how aggressive Black Friday and holiday promotions will be this year. Now to wireline. In internet, we delivered 42,415 new net retail subs. Although the environment remains ultra competitive and overall industry growth is slowing, we continue to capture the majority of new growth in our markets because of our superior fiber internet service offering. We also added around 9,200 new net IPTV subscribers. And lastly, I'll turn to Bell Media. Total advertising revenue increased for a third consecutive quarter on the strength of digital, the strength of live sports, and our acquisition of OutEdge that we completed in June. Crave subscribers were up an impressive 12% to more than 3.4 million, driven by a 34% increase in direct-to-consumer streaming subscribers. TSN and RDS digital subscriptions collectively grew subscribers by 45%, thanks to premium sports content, including the President's Cup, Euro Cup Soccer, Copa America, and the Summer Olympics, which helped TSN and RDS retain their number one rankings in Q3 yet again. Bell Media once again led all competitors in the French language entertainment and pay specialty market, while Nouveau continued to grow market share with prime time audiences increasing 4% compared to the same fall to date period last year. In summary, the Bell team continues to consistently execute our plan with discipline in the most competitive market we've seen in years to grow subscribers responsibly, to serve our customers with the best pure fiber and mobile 5G networks, to further improve the customer experience through digitization, and of course to reduce costs to align with the revenue profiles of each of our segments. Due to top-line pressures in the first three quarters of the year stemming mainly from lower than anticipated product sales, which Curtis will discuss, as well as an unconstructive wireless pricing environment, we're revising B.C. revenue guidance for 2024. And again, Curtis will cover that with you in a second. On that, I'll turn the call over to him. Thanks for the time, everyone, and looking forward to the Q&A after Curtis presents.

Great. Thank you, Marco, and good morning, everyone. I'll begin on slide seven with BC's consolidated financial results. We delivered positive service revenue growth for a second straight quarter on the back of stronger internet revenue growth, as well as the continued successful execution of our B2B tech services and digital first media strategies. Total revenue was down 1.8%. Similar to the last quarter, this was due to a 14.3% decrease in low margin wireless and wireline product sales. which included the loss of revenue from the source store closures and conversions to Best Buy Express. Our positive service revenue result was achieved despite an intensely competitive pricing environment, particularly in wireless, where we intentionally slowed down subscriber acquisition to strike a better balance between volume growth and economics so as to not lock in customers on low ARPU contracts. Against this competitive backdrop, the transformation investments Mirko described are helping to drive very meaningful OPEC savings, as evidenced by a 4.8% reduction in operating costs this quarter. This drove a 1.7 point improvement in margin to 45.6%, which bears repeating was our best result in well over 30 years. Net earnings and statutory EPS declined in Q3. This resulted from approximately $2.1 billion in non-cash asset impairment charges, mainly for Bell Media's TV and radio properties. to reflect continued market-related pressures on the traditional advertising ecosystem. Advertising EPS was down six cents versus last year. This was due to higher financing costs and depreciation and amortization expense as profiled in our plan at the beginning of the year. Consistent with our plan to reduce capital spending by at least $500 million in 2024, CapEx was down 205 million in Q3, bringing year-to-date CapEx savings to more than $600 million. This helped drive a 10.3% increase in free cash flow for Q3. The greater year-to-date CapEx savings can be attributed to the realization of efficiencies from our prior investments in digital transformation initiatives. Importantly, these efficiencies will enable us to operate at lower capital intensity levels in future years while continuing to invest in key strategic areas. Turning to Bell CTS on slide eight. Product revenue was down notably this quarter, decreasing by $114 million compared to Q3 2023. More than half of the year-over-year decline was due to lower sales at the source that I just referenced. The remainder can be attributed to lower mobile phone transaction volumes, which are down 25%, and the timing of mobile and data equipment sales to large enterprise clients, particularly in the government sector. Importantly, the EBITDA impact was not material, as these product revenues are very low margins. Internet revenue is up approximately 5%, representing our best quarterly growth rate since Q2 2023, an encouraging result that shows we are striking a responsible balance between broadband market share and subscriber profitability. The decrease in wireless service revenue this quarter was largely expected, given sustained price compression over the past year, which has had a significant cumulative impact on ARPU. This quarter's performance also reflects a step up in data overage decline and lower outbound roaming revenue as customers continue to move to larger capacity and North American data plans. We also saw continued strength in business solutions, where revenue grew 10% over last year as our enterprise strategy further progresses. This was driven by higher sales of cloud-based computing, managed automation, and security services, as well as our recent acquisitions of Stratagem and CloudKettle, which complement our acquisition of FX Innovation last year. In fact, when excluding the favorable impact of those acquisitions, business solutions revenue still grew a strong 7% organically. Bell's CTS EBITDA was positive, growing by 0.2% to yield a strong margin of 46.7%. That's a 160-point increase over last year, and the direct result of our significant and ongoing focus on cost management, as evidenced by a 6.2% reduction in operating costs this quarter. Over to Bell Media on Slide 9. Strong financial performance marked by a second consecutive quarter of revenue and EBITDA growth. Total advertising revenue was up 7.9%, driven by stronger TV sports specialty performance, continued robust digital advertising growth, and our acquisition of OutEdge Media. Subscriber revenue growth of 13.5% reflected retroactive adjustments related to contract renewals with certain Canadian TV distributors. as well as continued DTC crave and sports streaming growth. Consistent with the increase in revenue, media EBITDA was up 25.1%, driving a substantial 3.9 point increase in margin to 32.5%. Even when normalizing for the retroactive revenue adjustments, Bell Media EBITDA was up a very solid 5% this quarter. Turning to slide 10, balance sheet remains quite well positioned with $4.4 billion of available liquidity, a well-structured debt maturity schedule, and a strong solvency surplus of $4.1 billion for all BC defined benefit pension plans. At 3.7 times adjusted EBITDA, our debt leverage ratio is essentially unchanged compared to Q2, even with the recent acquisitions of OutEdge, Stratagem, and CloudKettle. Importantly, the funding for our planned acquisition of Ziply Fibre is being structured to maintain our net debt leverage ratio relatively unchanged and our credit ratings investment grade. No incremental debt will be required to finance this transaction. Rather, we intend to fund with MLSC net sale proceeds totaling $4.2 billion, together with cash generated from implementation of a discounted treasury drip program, that is commencing with BC's Q4 2024 common share dividend payment. In the event that Ziply Fibre acquisition is completed before sale of MLSE, we have secured a fully committed delayed draw term loan facility to meet the cash funding requirement at closing. Lastly, on slide 11, as you read in our press release this morning, we are revising our revenue guidance target for 2024. As I referenced earlier, Bell's CTS product revenues are down approximately $200 million year-to-date, which is substantially more than anticipated at the start of the year. Moreover, we have been facing sustained wireless price compression over the past year, which has increasingly put pressure on ARPU and wireless service revenue growth. As a result of these near-term top-line pressures, we now expect total BC revenue to decline by approximately 1.5% this year, down from our previous expectation of 0-4% growth. Importantly, all other financial guidance targets for 2024, as announced in February, remain unchanged. We believe this revised revenue outlook is appropriate and responsible, given the current competitive and economic environments that we are currently navigating, and provides an appropriate amount of flexibility to make the right business decisions for the long-term health of the company. On that, I'll now hand the call back to Thayne and the operator to begin Q&A.

Great. Thanks, Curtis. So before we start, so we can get to everybody in the queue, I would ask to please limit yourselves to one question and a brief follow-up. So with that, Matthew, we are ready to take our first question.

Thank you. Our first question is from Sebastiano Peti from J.P. Morgan. Please go ahead.

Hi. Thank you. Mirko, obviously, you know, Ziply, EBITDA, you know, Proforma or Ziply, that would only constitute call a low to mid single digit percentage of BC's current EBITDA. As you think about the BC's new, let's call it a US based strategy, how should we gauge the company's appetite for further M&A in the US long term? How meaningful of a contribution could this US fiber strategy be to consolidated financials over call it the medium long term? Maybe said differently, is this a one-off opportunity to pursue high-growth assets that just happen to be in the U.S., or do you think the U.S. could become a more meaningful driver of BCE's growth algorithm over time? Thank you.

Thank you for the question, Sebastiano. So maybe I'll start by kind of basic first principles and then work down to the specific question. At the highest level, fiber is at the core of what we do. We've turned ourselves into a fiber-first company. Fiber is superior technology to anything else that's out there. Sorry about that. If you could hear me, I'll start again, Sebastiano. I was partially on mute there. We're a fiber-first company, and fiber is at the heart of what we do, and fiber is the superior technology compared to anything else out there. We start with that premise, and we've invested billions in Canada on becoming a fiber-first company, and you can see it quarter after quarter, the performance that we're delivering, including this most recent quarter that we're reporting on in a very, very competitive environment. We're generating 5% internet revenue growth and positive ARPU, so it keeps winning, and then Based on that, having become a fiber-first company, you look at where the growth opportunities are. When we looked at the U.S., like I said on Monday, we're so much further ahead in Canada in terms of how much fiber has been built. and in terms of the value being delivered to customers here on a price and value perspective. And the U.S. is just behind us, so it's a great growth opportunity that's right in our swim lane. And so now on Ziply specifically, there is a high growth potential within the asset itself, particularly in those kind of IGDP attractive customer kind of states. But it also has, you know, the Ziply management team has done a tremendous job transforming what was a legacy asset into a modern asset, not just from a fiber network perspective, but how they serve the customer and their IT stack. So as we look at other opportunities, if other opportunities come up, we'll take a look. And what Ziply Fiber has built would allow us, if there were other opportunities that came along, to include those within the Ziply Fiber platform and be able to kind of consolidate and merge other assets into what Ziply Fiber's built in an elegant way. So I think all to say, if there are other opportunities where we can turbocharge the already high Ziply Fiber growth, we'll take a look.

Thank you.

Thank you. Our next question is from Vince Valentini from TD Securities. Please go ahead.

All right, thanks very much. Can I come back to your core business and try to clarify a couple of things? First of all, the write-down on TPIA subs. So 106,000 customers in your footprint are currently writing on cable TPIA, so you have to shut down that business and do you have to turn off the customers or you just don't count them in your sub base anymore and a second part of that would you not fully intend to try to just migrate those to your own network seeing as you have a network in to every home in in these regions i'm a little surprised why you'd need to take the subscriber right down there and what's going to happen to these customers going forward Similar on the prepaid, if you can just clarify, if you take out $78,000 for Virgin prepaid, I assume you'll take another sub right down in Q4. If you're going to shut down the bell prepaid, can you just level set us on what that does to ARPU? I assume that should mean that ARPU mathematically will get a little bit better in Q4 and Q1. Thanks.

Okay, so I'll start first on the TPIA resale business, and Curtis will cover the wireless question. Vince, good morning. Look, on the resale business, the reseller business, it's the ruling from the CRTC essentially puts a stop to that resale business. So the reason for the subscriber modification is that we can no longer add subscribers on TPIA as part of that collection of brands that we were operating, Distributel, et cetera. The 106,000 customers that are ours today under those various brands that are served off of the cable network, We can continue to serve them for as long as they choose to remain our subscribers on those networks because they are grandfathered, but we cannot add new subscribers on TPIA, so that business is essentially shut down. Now, on the migration from cable to fiber, that was the business, you know, one of the significant elements of the business case of those acquisitions all along, was migrating, where we have fiber footprint, migrating those subscribers to fiber. And we've done quite a bit of that already. So I don't have off the top of my head how many of the 106,000 customers are also in fiber footprint. But for those that are, we'll continue to migrate them. And where we don't have fiber, we're going to keep them on TPIA for as long as they remain our subscribers or our customers. So that's the answer on that one, Vince. And I'll turn it over to Curtis for wireless.

Then, Vince, on the second one, you're right. So in terms of the prepaid stop-sell on Bell, so we'll stop selling that service on Bell. And you're right, it's a very small impact, but there will be a small benefit to ARPU.

Thank you. Thank you. Our next question is from David Barton from Bank of America. Please go ahead.

Oh, good morning. Thanks for taking the question. It's Matt sitting in for Dave this morning. I just wanted to ask about the broadband business. I think you referenced in your remarks, or maybe it was just in the press release, higher deactivations. due to promotions and competition and so on. But there's also reference to success in increasing the percentage of subscribers who are bundled, which usually would have, I would think, a churn benefit. So maybe if you can put those into context and maybe share what kind of churn reduction or other benefits you're getting from bundling these subscribers together, it'd be helpful. Thanks.

So what you're seeing is the general market is generally slowing, whether or not it's on the wireline or the wireless side, and there's a number of factors there. One is population growth, particularly newcomer growth is going to be you know, more sustained than what we would have thought given new policies, you know, that has an impact on housing starts, and as penetration increases in both segments, you'll just kind of see a slowing of market growth, although the markets are continuing to grow. In that environment, we're continuing, on the wireline side, continuing to take share away from our competitors or taking a larger share of new market growth. And that's because of our product superiority with fiber. And we have a particularly strong mix of customers coming in on the high speed tiers. Now, it is a highly competitive pricing environment right now, again, both in wireless and wireline. So you're seeing when you're talking about deactivations, you're seeing the impact of some of our competitors choosing to protect market share at any and all costs. And you're seeing that in some results of our peers. where particularly, since you asked me about wireline, you're seeing serious compression on both revenues and ARPU on the wireline side. We're doing it differently. As you can see, our revenue growth is growing nicely. On our internet, ARPU has been growing. And that's a factor of our go-to-market approach Matt, we're loading customers in at the high speed tiers, which has higher ARPU. We are being very diligent in the customers we're bringing in on the premium brands, so always favoring Bell over Virgin. And that applies both to internet and wireless. And of course, there's the benefit of lower churn for customers who buy more than one product from us. So I said it probably five times in my opening remarks. It's that you've got to be really disciplined in an environment like this, getting the right loads on the right brands and not chasing every single load at all costs, because that's not a winning formula. And we made that call. And I think you see it in the margin expansion. And I think in the long run, it's going to help us, particularly as prices stabilize, because they're going to have to.

Thanks. And maybe a quick follow-up. Your views on convergence. I mean, there's some who view it as a more of a defensive strategy, but you kind of referenced your share gains and so on. Like for Bell, are you looking at your converged offering as more of an offensive strategy or is it defensive to protect what you have?

It's, well, we're doing both and it's just kind of managing the entire kind of portfolio across the board. Now, our mix of customers who buy both, either the, you know, an existing wireless adding internet or an existing internet adding wireless or a new to Bell buying both at the same time, that's increasing. So that mix is increasing, but if you look at our overall base, you know, the bundled customer is still the minority of customers in terms of the overall mix.

Thank you so much. Thank you. Our next question is from Drew McReynolds from RBC Capital Markets. Please go ahead.

Yeah, thanks very much. Good morning. For you, Marco, a big picture question, and it just kind of ties, I think, a lot of the earlier questions together. And it's on the outlook for industry growth in Canada. And within that, just trying to kind of gauge an EBITDA growth profile for BCE. You know, you had the revenue headwinds this year, which you've characterized as transitory. You're holding the line on 2% consolidated EBITDA and doing, you know, great work on lowering the cost to serve. So, The two questions is, do you see industry revenue growth in Canada staying positive, given all the kind of maturity, competitive, substitution, regulatory dynamics? And then second, are you able to, within that environment, sustain positive EBITDA growth on the core business here in Canada?

Okay, good question. Thank you. Look, if you break down the revenue, two chunks, product and service. On the product side, we really have the impact of, as Curtis said, the shutdown and conversion of the source stores. And there has been also lower phone sales generally as customers have shifted to bring your own device. And in our case, on the wireline side, we've had some wireline equipment revenue declines. And there's been some timing issues on recognizing some of the revenue on the wireline side. So that's a product which, you know, it's understandable. And of course, it's low margin. So the flow through impacts are relatively small. On the service side, it really is a question of needing the pricing to more appropriately align to the value that we are delivering to customers. I'll give you some examples. We've had to I mentioned this I think at the last quarter, making sure that there's proper stratification across prepaid and postpaid and across the various brands, therefore, and also across the two brands and postpaid. I think everyone lost its way in that regard in the early part of this year. And so that's why I spent some time in my remarks talking about that. Now, if you look at October, October pricing was lower year over year, but better than what we saw in Q1 and Q2. And part of that is kind of that proper stratification across prepaid, flanker postpaid, and premium postpaid. Is there... going to be you know growth going forward yeah i think so i think uh it's you know pricing is going to need to stabilize number one and then we'll get through some of the some of the other impacts that we're seeing in our case data overage decline like we've managed our data overage very very tightly over the last four or five years uh so you know our data overage decline has been over a much longer period of time than some of our competitors and that was a good thing And then we'll get through the outbound roaming pressures. But I think I would focus on the areas of growth. You know, the areas of growth are the key things. That's what you've got to do. So in our case, it's fiber. 5G, wireless, it is going to grow. It's just, you know, the pricing environment's got to stabilize. Business solutions revenue, which is another growth factor for us, some impressive growth. as Curtis mentioned, and that hardcore pivot in media from traditional broadcasting to digital is paying off now, and you can see it in the results. So it's continue to invest in those growth areas, and I've talked about this throughout the entire year. You've got to align your cost structure in those segments that are declining to align the cost to the revenues. And if some assets are going to perpetually decline, we might shed those lines of business, like some of the radio stations. So we're being pretty diligent. in managing the declining segments in order to continue to kind of harvest those in an accretive fashion. And we're continuing to invest aggressively in the growth areas. And Monday was an example.

Thanks. That's great context. Thank you. Our next question is from Mayor Yagi from Scotiabank. Please go ahead.

Great. Thank you for taking my question. I believe that stepping back from loading low-profit wireless subs is the right strategy, but it's hard to extirpate yourself from this long term because you are a national incumbent player, and if you don't stay competitive, it could lead to... a material market share loss. So how should we think about the strategy going into 2025 as we look at these issues? And, you know, how can you solve these issues if we're not seeing a clear sign that the competition, which is pressuring those prices, is looking to change their approach to the marketplace? um so i'm just uh you know because when we headed into 2024 you're seeing um you know decent wireless pricing and strong subscriber loading and as we head into 2025 we're seeing negative pricing and declining momentum in subscriber loading very very low subscriber growth at all so how can we generate revenue growth um in 2025 in in that approach and that approach that you're the strategy that you're taking thank you

Thanks, Mayor. Simple on fiber continues to grow. So our market share is growing, our revenue is growing, our ARPU is growing. So continue to invest there. On wireless, on the Bell brand, The market share is strong, and the market share is stable to growing. So we're going to continue to focus on the Bell brand. So I am looking at the numbers behind the numbers, and like I said, all the loadings were on the premium Bell brand, and that's a good thing, and that sustains market share. The significant growth that we've had on prepaid, particularly on the Lucky brand for us, means you bring the customers in and then we're going to have to focus on lifecycle management and get the customers from, migrate them from the prepaid, their entry point, over to the premium brand over time. So that's going to sustain kind of growth and market share stability. And the third element to that is lower the cost to serve. and you do those things, we'll be okay. But to your point, or maybe underlying what you're saying in your question, there is no hiding from the fact, and this is an industry point that I'm going to make now, there is no hiding from the fact that the impacts of low pricing will be felt for quarters in the future. You feel the impacts of a low pricing environment six, nine, and 12 months later. There's a trailing effect on that. And some are going to feel that more dramatically than others based on chasing low accretive loads at all costs.

Yeah, and just following up on this point, when you look at the post-pay churn that you have in the quarter, what's your expectation about that API? Can you solve it through proactive measures that you can take to protect your own subscribers, or it's more an industry-wide phenomenon that it's hard to bring down?

I think it's a bit of both, Mayor. I'm not happy with where churn is. I don't think anyone... would be given the numbers. However, look, I'm also pleased with the improving trajectory. So kind of two sides of that coin. It is a reality, a marketplace reality that consumers are continuing to shop for deals given the sustained aggressive promotional offers that are in the marketplace. So because of that, you're going to see a lot of switching activity. That said, there are a number of tools at our disposal to minimize that churn. That's why we've seen an improving trajectory. I'm not going to outline a chapter and verse of all the things we're doing because it's competitive. But some of the things we're doing are taking hold, and you're seeing the improving trajectory, which I've now said a couple of times. And we're going to continue to focus on that to make sure that that improving trajectory continues to improve. But, yeah, I mean, churn is where it's at, and we've got to get it lower.

Thank you. Thank you. Our next question is from Simon Flattery from Morgan Stanley. Please go ahead.

Thanks very much. Good morning. I wanted to just talk about the balance sheet again if I could. Obviously, MLSC brought in a lot of or will bring in a lot of liquidity, and then you're reinvesting that and simply getting more production on the EBITDA line and the growth line. Could you just talk about other ways to enhance the balance sheet? What are your thoughts given these deals around tower monetization, additional real estate monetization, and some of these structured equity deals that some of your peers are looking at? Thanks.

Yeah. Hi, Simon. Thanks for the question. So a couple of things there. One, you're right. We announced the acquisition of Ziply Fiber shortly on the heels of announcing MLSC. So ultimately, we're selling off a sports asset at a great value that didn't contribute to our financials and acquiring a fast-growth fibre company that'll expand our footprint and drive, as you say, EBITDA and free cash flow. So leverage neutral, basically, there. I think that's just good capital allocation. And then in terms of other asset sales, you know, we're constantly reviewing opportunities to improve our asset portfolio. And if there's an opportunity to unlock value or capture a growth opportunity, then for sure we're going to look at it. And, you know, Towers is one that you mentioned. You know, asset securitizations, you know, we'll look at it. It's all a matter of use of proceeds. And fundamentally, is it a better allocation of capital? And does it drive EBITDA and free cash flow growth for our shareholders?

Thank you. Thank you. Our next question is from Aravinda Galapithighi from Canaccord Genuity. Please go ahead.

Good morning. Thanks for taking my question. On the CapEx outlook, Mirko, I think that you'd sort of indicated at public conference calls that, you know, there's perhaps even more downside as we kind of look to 2025 and beyond. Given the U.S. venture and obviously the incremental capex that comes with that, do you think that there is even more room to readjust the capital spend in the Canadian market in light of those commitments? and try and perhaps manage the balance sheet and free cash flow payout ratio factors. That was my first time having a follow-up.

Thank you for that, Aravinda. On CapEx, a couple of things. For this year, we're trending to be within our guidance for CapEx, which is essentially around a 16.5% capital intensity ratio. We'd said in the past that Bell, as it is today, Bell CapEx can get to less than 15%. And that continues to be the plan. And we're doing that through a number of things. First of all, modernizing our operations, getting more efficient on delivery, moving workloads to the cloud. And it's things like implementing self-install capabilities, virtual repair, contact centers in the cloud. All these things that we're doing to streamline and modernize our operations and become more efficient is allowing us to run our business efficiently. with a lower capex budget. Then we're going to get to the end of our 2025 fiber build-out target, essentially in 12 months or so. Of course, we hope to and we will continue to build uh in canada but you know we're gonna we're going to determine where we can get a reasonable return on investment from those continued fiber investments going forward but all of that like that capex efficiency and allowing us to run in canada at less than 15 is going to allow give us the room to accelerate the zibli fiber build program and still operate B.C.E., pro forma the U.S., at probably around 16.5% consolidated CapEx. And when we embarked on our accelerated CapEx build in Canada over the last four years, in some years we were over 20%. we'll be able to do the accelerated build and simply fiber footprint and maintain BC at consolidated 16 and a half. So I think that's very good news, both for growth and the efficiency of the investment.

Thanks, Marco. Maybe I'll just use my follow-up differently with respect to the comments you just made about the 16.5 pro forma number. Should we translate that 16.5 as more of a steady-state number? Or, you know, I'm trying to understand whether at the peak of the rollout in the U.S., you know, I suspect it goes a lot higher than that, or am I wrong?

No. In terms of the information we shared on Monday, which is that we plan to go from You know, Ziply currently, Ziply Fiber currently has 1.3 million households pass, and we'd like to get to over 3 million by 2028. That would be done with the consolidated 16.5% is my expectation. I mean, more information to come as we close, but that would be the expectation. That's what I was trying to convey in my longer answer at the beginning.

Thank you. Thank you. Our next question is from Jerome DuBray from Desjardins Securities. Please go ahead.

Yes, thanks. Good morning. First, you mentioned in the preferred remarks that you continue to make investments in digitization, modernization of Bell. I'm wondering how much further operational improvement you are seeing in the Bell business as it stands right now. Can we maybe be expecting a program similar to what you announced earlier this year? Maybe this could happen every second year or something, if there's a magnitude that would make sense going forward.

Oh, well, we're, okay, so thank you, Jerome. So let me break that up into two parts. The transformation work or journey continues, right, because we're in the early days of some of the programs to harness the benefits of technology. So moving all our core consumer products to a single ordering and billing architecture, we're in the process of doing that in Ontario and Quebec, and then there's other regions to bring on board over time and other business segments beyond the consumer business over time so that's going to bring benefits as we as we migrate more of our business lines and more of our regions onto a modernized ordering and billing architecture so that would just one example you know the digital platforms and the self-serve apps and virtual agents and contact centers in the cloud and all the benefits we'll get there from churn reduction sales increase and and and cost to serve, that's in the early days. So that's going to ramp. Customer self-install has been quite successful, but again, early days, the more fiber homes we have connected, the more we can enable full self-install in the future. Continuing to move the hundreds, the apps that we have on-prem to the cloud, we're in the early innings of that journey as well. So I could go on. So on that part of it, We're in the early to mid-inning, so more to come. That said, the one thing I didn't mention in my opening remarks, as we move more of our workloads to the cloud, there's going to be a shift from CapEx to OpEx, and so that's going to have some temporary impact on further margin expansion. And then on programs like the one we announced in February, We continue to recalibrate the workforce. So we're going to continue to hire aggressively in growth areas to the extent we shed lines of business, either through closing them down or selling. That obviously has those positions move with the buyer. In other areas, we're going to continue to align our cost structure to revenue streams. We have to do that. So that's how we're going to approach it.

Thank you. Thank you. Our next question is from Batya Levy from UBS. Please go ahead.

Great, thank you. A couple of follow-ups. First, you mentioned that in October you saw a bit of pricing stability. Do you think that we've seen the worst in terms of the artful declines? And for Q, can we start to see maybe better trends from here? And then same question on churn. Still high, but you're having a much higher churn level from last year. So can we expect at least churn to improve annually in the fourth quarter? Thank you.

Yeah, I'm sure, like I said in response to Mayor, we'd like to get it lower and we're going to continue to work on getting it lower, but we're happy, pleased with the improving trajectory. On ARPU, it's going to depend on Black Friday and the holiday period. I think rather than making on where it's going to go, I'll just highlight the obvious, which is, you know, if Black Friday and the holiday period is relatively stable, recognizing that those are heavier promotional periods, you know, by design, I suppose, then we'll be okay. And if to the extent promotions are more focused on hardware than rate plans, then that'll bode well for service revenue and margins. And ARPU.

And maybe, can you maybe just touch on what the guidance assumes in terms of our expectations for ARPU?

Well, on revenues, it's in the revised guidance that Curtis highlighted earlier during his remarks.

Right. Continuation of service revenue points.

Correct.

Got it. Thank you.

Thank you. Our next question is from Lauren Bonham from Barclays. Please go ahead.

Thanks for taking the question. to just ask about immigration impact on wireless net ads and how much of the change in trends that we've seen this quarter, usually we have the sequential net ad uplift in 3Q. So how much of that change is just from being more targeted promotionally, as we've talked about, versus from the decline in foreign students and how you sort of expect those lower immigration expectations to impact industry growth next year and beyond?

Yeah, thank you for the question. I think there are a couple of trends here. One, you know, immigration levels are still positive, but they are going to slow down year over year. And I think we're continuing to see the benefit of our increased focus and distribution channels. So we're doing quite well in this market on a relative basis. But you're right, the overall pie is shrinking. But for us, it's not as big an impact because we are – uh increasing our share in that market on a historical basis you can see it in the prepaid in the prepaid results thank you thank you thank you

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

Thanks, Matthew. So thank you again to everybody for their participation on the call. As usual, our team is available throughout the day for any follow-ups, questions, and clarifications. Have a good rest of the day. Thank you.

Thanks, everyone. Thank you.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.