Earnings Call Transcript - BCE Q1 2024

Operator, Operator

Good morning, ladies and gentlemen. Welcome to the BCE Q1 2024 Results Conference Call. I would now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead, Mr. Fotopoulos.

Thane Fotopoulos, Chairman

Thank you, Matthew, and good morning, everyone, and thank you for joining our call. I'm here, as usual, with Mirko Bibic, our President and CEO, BCE; and our CFO, Curtis Millen. You can find all of our Q1 disclosure documents on the Investor Relations page of the 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 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, President and CEO

Thank you, Thane, and good morning, everyone. So, backed by the Bell team's consistent execution in leading networks and products and cost discipline, we effectively navigated a dynamic competitive environment and the sluggish economy to achieve operational results in line with our internal plan for the quarter. As expected and as we profiled in our quarterly budget at the start of the year, revenue was down slightly year-over-year due to a favorable one-time revenue adjustment at Bell Media in Q1 of 2023 that did not repeat this year, and some marginal revenue loss at The Source as certain stores began their transition to Best Buy Express, which we've discussed in the past. Normalizing for these two items, revenue was basically flat this quarter. Notably, adjusted EBITDA margin for Q1 was higher than forecasted. BCE's margin expanded 0.8 percentage points to 42.7%, which demonstrates the team's focus on driving operational efficiencies across the organization, realigning costs to address near-term competitive and economic pressures, and effectively balancing growth with profitability in a highly competitive marketplace. So in terms of operating results, fiber continues to be on a roll. We're gaining share in all our markets because we have a superior product with a symmetrical speed advantage over cable, and that drove our best Q1 retail Internet net additions in 17 years. It contributed to a 22% year-over-year increase in households subscribing to mobility and Internet service bundles where we have fiber. On wireless, we did a great job striking the right balance between volume growth and economics in what was a very competitive Q1. This is evidenced by strong growth in total gross mobile phone activations, which increased 25% over last year, together with healthy consumer service revenue growth of 4%, reflecting our focus on premium brand customer loadings and careful price plan management. Of note, our industry is delivering the highest quality services at decreasing prices despite persistent inflation. The latest stats show that the price of all goods and services in aggregate across the Canadian economy has increased 2.9% over the past year, while the cost of cellular and Internet access services has declined 26.2% and 15.5%, respectively. This downward trend was also corroborated by this week's federal government annual price study. We're continuing to bring more affordable wireless options to Canadians. Bell recently entered into a retail partnership with Loblaw to launch no name mobile in No Frills grocery stores across the country, which is being powered by PC Mobile and will run on Bell's network. In Business Enterprise, we're continuing to invest in new IT products and services to significantly advance our capabilities and the growth factors I've been talking about recently, namely cloudification, security, and managed automation, and the growth strategy has accelerated with our acquisition of FX Innovation last year and partnerships with ServiceNow, Google, Microsoft, AWS, and Palo Alto Networks. You can see it in our results. In fact, when excluding the favorable acquisition impact of FX Innovation, our Business Solutions and Services revenue grew 12% organically this quarter. Building on this, we recently announced new partnerships with Microsoft to bring Bell's voice network to Microsoft Teams and with SentinelOne, a global leader in AI-powered security to provide advanced data protection services for Canadian businesses. Just a couple of weeks ago, we announced the launch of Google Cloud Contact Center AI, which is a cutting-edge suite of AI solutions for contact center transformations that enable intelligent customer and agent experience leveraging Generative AI-infused technology. These are just the latest building blocks strengthening Bell's position as a tech services leader for enterprise customers in Canada. I'll turn now to media. We have weathered near-term pressures relatively better than peers, as you can see by positive year-over-year advertising revenue growth for Bell Media this quarter. Underpinning this result are Bell Media's leading assets and our focus on live sports content. More importantly, we're the only Canadian media company that's pivoting to digital at scale, which is reflected in the impressive 72% increase in digital ad revenue in Q1. The strong performance was fueled by Bell Media's programmatic advertising marketplace. We're growing customer usage of our expanded SAM TV sales tool that led to a doubling of revenue this quarter, as well as by ad-supported subscription tiers on Crave. Our addressable TV functionality and investments to sustain the strategic shift to digital are continuing with an expanded distribution footprint for Crave on Amazon Prime Video, where initial sales have been very strong, and the recent launch of 10 FAST channels spanning news, sports, and entertainment. I'm now going to turn to Slide 5 of our presentation. We added 45,247 new net postpaid mobile phone subscribers. That's up 4.5% from last year, representing our best Q1 performance in six years. It's a strong result considering the competitive environment where we balance market share with economics, demonstrating our network quality and distribution and brand strength rather than promotional discounting to drive the subscriber acquisition. This disciplined approach can be seen in our ARPU results as well, which remains stable year-over-year. It's a good outcome, especially in light of the more aggressive pricing we saw in the market during the quarter. Further expansion of our 5G customer base is also helping us to support ARPU; at the end of Q1, 56% of all postpaid customers were on 5G-capable devices, up from 44% last year. Now over to Wireline. It was another strong RGU quarter. We delivered our highest Q1 retail Internet net adds since 2007, up 13.9% versus last year to 31,078. In particular, we saw very strong market share growth in Québec. Moreover, where we have fiber, our bundle sales continue to grow and they exceed our internal budget targets. In Q1 alone, new customers subscribing to mobility and Internet service bundles increased 39% year-over-year. It was also another very good quarter for Bell IPTV, which added 14,174 net new subscribers, up 30% from last year. This strong performance reflects the pull-through benefit of fiber Internet, our TV product leadership, and our strategy of making content available where the consumer demands it, as evidenced by our app streaming service, which delivered its highest number of Q1 activations since launch. In rounding out our Wireline subscriber results, home phone net losses improved by 6.3%, reflecting fewer customer deactivations as that customer base gets smaller over time. Note that starting this quarter, we are no longer reporting satellite TV subscribers as that business is not financially material in the overall context of BCE. Lastly, turning to Bell Media. As I've already mentioned, total advertising revenue was up year-over-year on the strength of digital, marking our first quarter of growth since Q4 2022. Although Q1 was better than we anticipated, the ad market improvement is expected to be uneven. Digital revenues increased 33%, now comprising 41% of media revenues compared to 29% last year. Underpinning the strong result was robust growth in usage of our programmatic ad marketplace and continued expansion of our Crave direct-to-consumer streaming subscriber base. TSN and RDS maintained their #1 rankings in Q1, thanks in part to this year's Super Bowl, which had record ad sales and viewership underscoring the value of premium content to advertisers. CTV also remained Canada's top network in winter, while on the French language side, Bell Media led all competitors in the entertainment and pay specialty market, and Noovo continued to grow market share with full-day audiences increasing 4% over Q1 of last year. In summary, our performance this quarter reflects a focused company in the midst of transition with financial results for Q1 that were on plan. We remain laser-focused on day-to-day execution to serve our customers, to grow subscribers profitably, and to prudently manage costs as we said we would at the beginning of the year. With that, I'm going to turn the call over to Curtis, who will provide more details on our financial results.

Curtis Millen, CFO

Thank you, Mirko, and good morning, everyone. I'll begin on Slide 7 with BCE's consolidated financial results. Adjusted EBITDA was up 1.1%, which drove an 80-point reduction in operating costs. Total revenue was down 0.7%. If you adjust for the one-time retro benefit of Bell Media last year and the loss of revenue from The Source this year, revenue was flat. We've actioned a number of cost and efficiency initiatives, including a sizable workforce restructuring that remains on track to generate in-year savings of $150 million to $200 million. Of this total, only a small amount was realized in Q1. As these OpEx benefits ramp up progressively and are fully realized, we anticipate stronger EBITDA growth in the back half of 2024. Despite higher EBITDA, net earnings declined in Q1, reflecting a large severance charge related to the workforce restructuring as well as a noncash mark-to-market equity derivative loss due to the decrease in BCE share price this quarter. Consistent with our guidance assumptions for the year, adjusted EPS was down versus last year as a result of higher financing costs, increased depreciation and amortization expense, the higher capital asset base, and over $50 million in gains from the sale of land in Q1 of 2023 related to our real estate optimization strategy. In line with our plan to reduce capital investments by $500 million in 2024, CapEx was down $84 million this quarter. The year-over-year quarterly step-down in spending will be more pronounced for the rest of the year as we advance spending in Q1 given favorable construction conditions this winter. Our Q1 free cash flow was flat compared to last year, reflecting higher EBITDA, lower CapEx, and a related positive change in working capital attributable to lower supplier payments. These factors were offset by the timing of cash tax installments and severance paid to employees who departed the company in Q1. Turning to Bell's CTS on Slide 8, service revenue was fueled by some of the highest Q1 mobile phone and retail Internet net subscriber loadings in years, which drove both wireless and residential Internet revenue growth of 3%. We saw continued business solution strength supported by our acquisition of FX Innovation. When excluding the favorable impact of that acquisition, Business Solutions revenue still grew a strong 12% organically. Great result that speaks to our market momentum in the key growth areas of cloud-based computing, managed automation, and security solutions. However, overall revenue performance in the quarter was moderated by aggressive wireless rate plan pricing and higher residential service bundle discounts, reflecting a more intensive competitive market environment compared to last year. Wireline product revenue was down notably this quarter, decreasing 35% as sales volumes normalize following an exceptional year in '23 due to the global supply chain recovery. CTS EBITDA grew 1.7%, yielding a 45.5% margin. That's an increase of 70 basis points over last year and a direct result of our focus on cost management and disciplined customer growth. Over to Bell Media on Slide 9, total advertising revenue was up 1.6%. This performance, better than our peers, can be attributed largely to Bell Media's diversified asset mix, which comprises Out of Home and Radio properties that returned to growth this quarter, premium programs such as live sports content, and strong execution of our digital-first media strategy. Notwithstanding the advertising improvement, total media revenue was down 7.1%, and EBITDA decreased 11.4%, due mainly to the one-time retroactive subscriber fee adjustment in Q1 of '23. Excluding this one-time item, Q1 EBITDA was up 15% over last year. Notably, OpEx was down 6.2% in Q1, mainly on restructuring cost savings and lower TV programming costs. However, content costs are expected to increase in future quarters with the normalization of content deliveries from the major U.S. studios now that the Hollywood strikes have been settled. Turning to Slide 10, our balance sheet is healthy with $4.7 billion of available liquidity and pension plan solvency surpluses totaling close to $3.9 billion at the end of Q1. Our debt maturity schedule also remains well structured, with an average of debt maturities of approximately 13.2 years and an after-tax cost of debt that remains below current interest rates at around 3.2%. In February, we took advantage of strong market conditions to tap the U.S. public markets, raising the Canadian equivalent of approximately $1.9 billion, which effectively completed our refinancing requirements for 2024 insurers. Our leverage ratio remains manageable at 3.6x adjusted EBITDA. We updated our internal target leverage policy to 3x adjusted EBITDA. We believe this new target objective is reflective of our operational size and strength, optimizes cost of capital, and is aligned with expectations for stability. While currently in excess of this level, it is consistent with a strong balance sheet, ample financial flexibility, and investment-grade credit ratings. To wrap up on Slide 11, we remain confident in our proven ability to deliver under any circumstances, backed by the best networks and products, our digital transformation journey with consistent operational execution and cost discipline. With Q1 consolidated financial results that met our internal plan, we reconfirmed all of our financial guidance targets for 2024. I will now turn the call back over to Thane and the operator to begin the Q&A portion.

Thane Fotopoulos, Chairman

Thanks, Curtis. Before we start, I want to remind everyone that due to time constraints this morning because of our Annual General Meeting that's taking place right after this call to please limit yourselves to one question and a brief follow-up, so that we can get to as many queries as possible. With that, Matthew, we're ready to take our first question.

Operator, Operator

The first question is from Tim Casey from BMO Capital Markets.

Tim Casey, Analyst

Mirko, could you talk a little bit about margins as they flow through the quarter because it looked like you had some pretty good cost control. But in light of your comments that the benefits of the restructuring are not really in the numbers yet, how should we think about that kind of cadence through the rest of the year?

Mirko Bibic, President and CEO

Thank you, Tim, for the question, and good morning. I'm going to pass it over to Curtis to answer for you.

Curtis Millen, CFO

As you said, it's two-faced, so I do think the team did a pretty good job of driving margin expansion in Q1, as you mentioned, in this competitive pricing environment. And you're correct. The workforce restructuring is underway. It's not complete, but we haven't seen much of a benefit yet in Q1. So the estimate on our side is that as we continue to finish that project, we'll ramp up some cost savings over time.

Mirko Bibic, President and CEO

I want to emphasize that while there's a related but distinct issue regarding careful business management, particularly focusing on margins. Last time we discussed some ongoing transformation initiatives, and these efforts will continue. They are designed to deliver immediate results while gradually improving over time. The focus is primarily on digitizing and automating processes, and we plan to accelerate this transformation. This includes consolidating all core consumer products into a unified ordering and billing system, enhancing customer experience through digital platforms, and implementing features like virtual repair and customer self-installation, utilizing Generative AI to provide better plan personalization. Throughout this process, we will maintain a very strong emphasis on margins.

Operator, Operator

The next question is from Maher Yaghi from Scotiabank.

Maher Yaghi, Analyst

Mirko, I wanted to ask you a general view on wireless in Canada. We've seen churn ramp up significantly over the last couple of quarters. More customers are BYOD and are taking advantage of the strong offers you guys are making in the marketplace. Longer term, what's your view if churn remains elevated like this? How will that impact your overall wireless margins and the cost to operate in that business? Specifically, can you discuss what's causing that churn elevation? Is it specific to any provinces, and how are you doing in Québec in wireless?

Mirko Bibic, President and CEO

Thank you for the question. That's a really good question, and the churn issue is certainly concerning. Because of that, it remains an area of focus. Before I provide specific answers to your question, let me take a step back to discuss how we are operating in this highly competitive wireless marketplace. We delivered our best postpaid results for Q1 in six years in a lower-price environment where we continue to see consumer wireless service revenue growth at 4% and improved product margins. What that tells you is that as we execute, we're not overspending to deliver the results that investors expect of us. We're going after the right loadings. The majority of our wireless loadings are on the Bell brand, and at the same time, we've seen very strong flanker growth on Virgin Plus. So we are managing all the levers very well. We're going after the bundled household, which is something I highlighted in my opening remarks. This is because, with a bundled household, we get better churn results and better lifetime value. So back to the specific elements of your question now. I think you've identified it. Right now, in the near term and in the near past, you've seen a customer that is feeling the pinch from a struggling economy and is shopping for deals. There is aggressive price activity by certain of our competitors in the marketplace. So that's encouraging consumers to switch from among those carriers. Thus, those carriers are basically swapping customers, and I'm not sure anyone is particularly winning. That's why we're saying we're going to take a different approach, which is to focus on the premium loadings and on the household bundles. Over time, you asked me about in the long term. We're going to continue doing what we're doing. So it’s premium product, premium loading strategy, household bundling, and better personalization to continue to drive a better customer experience, which has been a core focus of ours for the last four or five years. And I think it's working. You can see it again in the latest CCTS results. The last thing I'll say is that we have, by far, the best Internet product in the marketplace. Customers who are choosing fiber churn at a lower rate. Customers who are on gig-plus speeds are also churning at a lower rate, and customers who are buying gig-plus speeds and mobility from us are turning at a lower rate. That's how we're going to continue to manage this. So on the Québec market, thank you for that. I didn't reference that in my opening remarks as well. So we’re deploying everything that I said, and we’re certainly executing the same playbook in the province of Québec and seeing the results. Fiber in Québec has been the star of the show for Q1. Our fiber Internet net adds were very strong in the province of Québec. We've punched through in creating general consumer awareness that fiber is better than cable. That comes through the promotional work we've been doing, both in advertising and pricing. Our distribution has been strong. When you have the better product, a very strong distribution, a focused strategy on winning households, and you're communicating that, I’m going to go back to customer experience. Our NPS results in the province of Québec have improved significantly, and you’re seeing that in our subscriber results. So again, Québec on fiber Internet has been the star of the show this quarter.

Operator, Operator

Our next question is from David Barden from Bank of America.

David Barden, Analyst

I noticed in the release that you have changed your assumption for ARPU growth for 2024 from decelerating growth to a decline. However, in the first quarter, you managed to keep ARPU flat year-over-year. We have observed that pricing activity in the market has eased a bit. Can you discuss how you expect the pricing environment to change throughout the year to support this assumption of negative ARPU growth? Also, it's an unusual time to be raising leverage targets. Could you explain why now is the appropriate moment to move away from aiming for 2% to 2.5% and why the target has shifted to 3%?

Mirko Bibic, President and CEO

On ARPU, it's just a reflection of the fact that we're in the lowest pricing environment basically in the history of wireless in Canada. That's what we're getting from our release with ARPU on references to ARPU. We've got a very dynamic pricing environment. It's influx, and it's still too early to make a call fully on the direction of ARPU. I think you have seen some stabilization on pricing in the past couple of weeks as you mentioned, but we don't know how long that's going to last. It's a bit related to the question that Maher asked me, which is we're going to continue to focus on the premium subscriber loadings and the bundling to generate good household revenue and improve the lifetime value of the bundled customer. That's how we're going to approach it.

Curtis Millen, CFO

Thanks, David, for the question. As you noted, we did update our leverage target to 3.0. As you said, it's an increase, but frankly, we're at 3.6x. I would say this is a stale-dated policy, and 3x leverage we think is appropriate. It reflects strong investment-grade credit ratings, and at the time we instituted that original policy, we had a significant pension deficit. We're now looking at a pension surplus that's north of $3 billion. So we think it's appropriate for our size and strength.

Operator, Operator

Our next question is from Aravinda Galappatthige from Canaccord Genuity.

Aravinda Galappatthige, Analyst

I'll repeat it. The main question is on Internet revenue growth. You've noted 3%, which seems a bit lower than I think the number that you've been citing in your presentations in the last couple of quarters. Maybe just talk to that element. I know that there were some price adjustments that happened at the beginning of the year. I'm not sure how exactly the timing of that plays out; perhaps it steps up again in Q2, but I wanted to get some thoughts on that. A quick follow-up, Mirko, on your Business Solutions organic growth number. Are you able to give us a sense of how much of a base we're talking about so we can assess the significance of it?

Mirko Bibic, President and CEO

Thank you for that. On the Internet revenue growth, my answer is going to be along the same lines as a couple of answers I've already given, Aravinda. That net revenue growth reflects the impact of residential service bundle discounts as we pursue a household bundling strategy. We're also focused, and I've been very transparent over many quarters about this next point. We are focused where we are under-penetrated in our fiber market share. We're going to focus on loading the network and make sure that we get the share that we deserve given the superiority of our product. One of the geographies where we've traditionally been under-penetrated has been in the province of Québec, and that is changing. You're seeing the impacts of that strategy, which I've been very clear about for some time. The bundled discounts that are temporarily impacting revenue do drive better subscriber lifetime value, which I've also mentioned, and it's improved retention long term. So it has a positive churn impact. So that's the story really on the Internet revenue growth. I'm very pleased. I'm pleased with the market share gains we're making. In one province, I'm pleased with the market share that we've been able to achieve over time in other geographies, and I'm very happy with the success of the bundling strategy, which is something we've highlighted in our materials this morning. As for the Business Solutions revenue, it's pretty significant; it would be over $500 million annually.

Operator, Operator

Our next question is from Stephanie Price from CIBC Markets.

Stephanie Price, Analyst

I was hoping you could give us an update on the restructuring in terms of the timing of the cost synergies and how we should think about them rolling out through the year? And the upside you see as you continue the restructuring…

Curtis Millen, CFO

Yes. Stephanie, thanks for the question. As mentioned in the prepared remarks, we've executed a good portion of the workforce restructuring but not all of it. We haven't captured much of anything in terms of benefits in Q1. I’d say it’s a little bit lumpy but will grow over time. Given that more than half has already taken place, it’s fair to assume that next quarter, we'll start seeing a proportion of the upside in that space, and as the program wraps up across the end of the year, it continues to ramp up, if that's helpful for you.

Stephanie Price, Analyst

That is. Just on the partnership with Google Cloud announced to power their AI contact centers, how should we think of opportunities around managed services for BCE? More broadly, what are the opportunities within the enterprise business at this point?

Mirko Bibic, President and CEO

Yes. We’re adopting a strategy in the enterprise marketplace where the innovative solutions that we’re deploying internally to improve our business as part of our internal transformation, we intend to go to market and generate revenue with our customers. As we undertake our own significant digital transformation, the expertise we're developing will be monetized with our large enterprise customer base. The Google Cloud Contact Center AI is one perfect example of that. We're deploying that solution and the infrastructure internally at Bell to improve the customer experience, and we're also partnering with Google on a go-to-market basis. Over time, that’s an example of how we'll continue to organically grow our Business Solutions revenues. We have other examples; ServiceBridge with ServiceNow is a good example, and the SentinelOne example from my opening remarks will be a third example. This is now a significant part of the Bell Business markets strategy.

Operator, Operator

Our next question is from Sebastiano Petti from JPMorgan.

Sebastiano Petti, Analyst

Just one question on Business Wireless for a second, Mirko. You talked about some of the different levers that are impacting the consumer side. Any updates you can give us on what you're seeing from a business perspective; whether it's some companies perhaps dropping some lines due to workforce rationalization from some of your peers there in Canada? And then separately, on the leverage target, let me add 3.6x today. Any view in terms of the glide path down to that 3.0 over time? And then one last housekeeping question. I think you talked about a 22% increase in bundled subs on the fiber and wireless where fiber is available. I think, if I'm not mistaken, in Québec you said a 39% increase. Could you update us on where those numbers were a year ago as we think about the success that you've seen in this converged bundle strategy over the last 12 months or so?

Mirko Bibic, President and CEO

Okay, so on business wireless growth, that was one of the softer areas due to slower subscriber growth, and that reflects lower demand. Customers are undertaking workforce rationalization programs of their own, along with other cost rationalization initiatives, which are affecting price, reflecting general economic uncertainty. There has also been a leveling off in roaming due to lower travel, as customers aim to control their discretionary expenses, and data overage continues to be something we're managing well, but it is still in decline, including in the business segment.

Curtis Millen, CFO

Yes. On leverage, you're right. So a 3.0 target leverage ultimately comes down to driving free cash flow growth, which we're focused on. There are several ways to get there, Sebastiano. It's revenue growth as we leverage and monetize our fiber asset and bundling strategy, as Mirko alluded to. It's also continued cost transformation leveraging digital transformation, and ultimately, as CapEx comes down following our heavy fiber build period, we'll look to drive more positive free cash flow, delever, and restart our payout ratio.

Mirko Bibic, President and CEO

Yes, and on Sebastiano, just on Page 5 of our deck. So the 39% reference is in mobility and Internet sales growth, not net adds but sales growth, and that's overall, not just in any one particular province, as we noted. It’s not on Page 5, but the combined mobility and Internet bundle net adds have increased 100% year-over-year. This shows the traction we're getting with that strategy.

Operator, Operator

Our next question is from Drew McReynolds from RBC Capital Markets.

Drew McReynolds, Analyst

Just two for me. Mirko, in your commentary, you alluded to the advertising recovery, which is great to see but uneven. Can you unpack that a little bit for us in terms of where the pockets of strength and weaknesses are and how Q2 looks for you? Secondly, one of your competitors just commented on still continued robust wireless market expansion here in 2024. Obviously, we see that continuation in Q1. What are your expectations for the remainder of the year, and how is Bell improving its share of the new-to-Canada population growth?

Mirko Bibic, President and CEO

I'll start with the second one. We do continue to see strong market expansion, and we're taking part in that quite successfully. The way we're going to take advantage of that growth, whether it's new to category or new to Canada, is through our very strong distribution. We're pleased with the results we're seeing from the Staples partnership, which has been in place for a year now, and that continues to improve. The Best Buy Express is going to start kicking in, in the latter part of this year, and we see that as a high-potential distribution channel. The recent no name mobile program will also offer strong success, particularly for our aim to capture a more significant share in the new-to-Canada segment. We’ve made strong progress in that segment, though we are not where we want to be. When we focus on something, we're able to execute really well. We're putting the building blocks in place, and you're going to see us garner a more appropriate share in that segment. On the advertising market side, in terms of pockets of strength, we saw good growth in radio advertising revenue and in the Out of Home segment as well. This was up nicely. TV advertising revenue was not as strong as the growth in radio and Out of Home, but it certainly showed improvement over what we'd seen recently. So when you put all that together, TV advertising, radio advertising, Out of Home, we saw growth for the first time in a while. That’s positive, and we’re one of the only ones who has been able to pull this off. It's hard to answer your question about what I see for Q2 and going forward; it's just too choppy to call. On the conventional side, some challenges remain on the digital side. It's good. So we’ll keep managing it. We must continue to believe in the strategy that we put in place several years ago, which is the hard pivot to digital. We need the very best content on all the platforms that customers want to use to view our content, and that's how we will drive growth in this business, and we're seeing the early indications.

Operator, Operator

Our next question is from Simon Flannery from Morgan Stanley.

Simon Flannery, Analyst

Could you give us more details on your fiber passings and the expected pacing? It’s clear that CapEx has decreased, but you mentioned favorable winter weather conditions. What are your targets for passings this year? Additionally, can you provide insight into the potential growth with the current penetration rates in your mature markets? How much potential do you see in other markets? Also, regarding fixed wireless, we've noted significant activity in the U.S., and there have been recent discussions from Rogers. How do you perceive competition in the fixed wireless market? Are you considering extending your reach beyond rural areas into regions where you may not currently operate wireline services?

Mirko Bibic, President and CEO

Thank you for that, Simon. On fixed wireless first, we're not seeing any competitive impacts to our core Internet business from fixed wireless competition. As I've said in the past, and I firmly believe, I don't think the fixed wireless product is going to be a competitive substitute in urban markets where there is fiber, which is by far the superior technology, and Tier 1 premium cable. I don’t think it's going to be a product that competes with us. We don't intend to increase the footprint of our fixed wireless product. We were the first to launch fixed wireless Internet at scale, and it's effective in rural areas where there is no broadband option or low-speed broadband, and that's where we're going to continue to focus our product. On fiber passings, on our February call, we moved away from giving projections on an annual basis, and I'll stick with our plan now to pass 8.3 million locations by the end of 2025. That was once a target of 9 million locations by the end of 2025, but we've taken that down as a result of recent regulatory decisions. As a result, we've also taken CapEx down by $1 billion over 2024 and 2025. So if you decrease CapEx to that degree, you're going to take down your fiber passings targets. The 8.3 million target remains, and we are on track for that. We expect strong fiber penetration growth across our entire footprint. We're just not where we want to be in terms of market share yet.

Operator, Operator

Our next question is from Jerome Dubreuil from Desjardins Securities.

Jerome Dubreuil, Analyst

Two for me. First one, I think we all know the answer, but it would be beneficial to have it out there. Any chance that the dividend in 2024 is not what has been communicated for the rest of the year? And then the second question, are there assets that you think you might like that could help you generate accelerated sustainable top-line growth?

Curtis Millen, CFO

On further assets, I'm going to not comment just because any deliberations we have internally on those kinds of things are strategically and competitively sensitive. I do appreciate the question; it’s something we deliberate strategically, but I don't think we should answer it. The dividend is as planned for 2024, and that was communicated in February.

Thane Fotopoulos, Chairman

Good. Since we are timing out, we need to transition to our AGM location. We will call it a day on the conference call. Thank you very much for your participation. As usual, the IR team will be available throughout the day for follow-up questions and clarifications. On that, have a great day.

Mirko Bibic, President and CEO

Thank you, everyone.