Rogers Communications Inc Q3 FY2023 Earnings Call

Thank you for your patience. This is the conference operator. Welcome to the Rogers Communications Inc. Third Quarter 2023 Results Conference Call. Please note that all participants are in listen-only mode and the conference is being recorded. I will now hand the call over to Paul Carpino, Vice President of Investor Relations with Rogers Communications. Please proceed, Mr. Carpino.

Great. Thank you, Ariel, and good morning, everyone, and thank you for joining us. Today, I am here with President and Chief Executive Officer, Tony Staffieri; and our Chief Financial Officer, Glenn Brandt. Today's discussion will include estimates and other forward-looking information from which our actual results could differ. Please review the cautionary language in today's earnings report and in the 2022 annual report regarding the various factors, assumptions and risks that could cause our actual results to differ. With that, let me turn it over to Tony to begin.

Thank you, Paul, and good morning, everyone. I'm very pleased to report that we delivered industry-leading results in the third quarter, our seventh consecutive quarter of growth and momentum. We also made substantive progress on integration and we are now tracking six months ahead of our synergy targets and deleveraging plans. Our team is clearly firing on all cylinders, executing with discipline, and delivering on our commitments. Turning to results, we grew total service revenue by 40% and adjusted EBITDA by 52% in the third quarter. Our consolidated adjusted margin performance of more than 47% is 340 basis points higher than our competitor BCE, and almost a thousand basis points higher than TELUS. We are clearly delivering through a consistent strategy that focuses on the quality of our assets, operational efficiency, and disciplined execution. In wireless, we delivered industry-leading financial and operating results. We attracted 261,000 mobile phone net additions, up 40,000 from a year ago. This reflects the best combined postpaid and prepaid loading in our company's history. This phone-only loading represents 94,000 more than BCE and over a hundred thousand more than TELUS. We did this while growing ARPU. Simply put, we continue to out-execute our peers and have done so consistently for the last two years. We also delivered impressive financial results in the quarter. Wireless service revenue was up 15%. Adjusted EBITDA was up 18%, and wireless blended ARPU was up 4%. It's clear, Canadians are choosing Rogers more than any of our competitors. In cable, we saw market share gains accelerate across the East and the West. These gains are driven by our new bundled offers, our network investments, and our 5G leadership. In the quarter, we added 18,000 internet customers. While we need to grow revenue, we've turned the corner on subscriber trends. Looking ahead, Alberta and British Columbia represent our fastest-growing revenue markets and we see good growth opportunities ahead. It's clear we're creating more competition in the West and Canadians are responding. We also delivered cable margins of 54%. This represents a margin expansion of 650 basis points compared to last year, and clearly demonstrates our focus on driving profitable growth despite a highly competitive market. Let me now turn to the Shaw integration. We just passed the six-month milestone, and I'm very pleased with our momentum. Impressively, at the six-month mark, we are tracking six months ahead of our synergy targets and deleveraging plans. By year-end, we now expect to realize $600 million in synergies and reach a debt leverage ratio of 4.8 times. As you will recall, we had planned to reduce our leverage by 1.6 times in 36 months after close. In just six months, we've already reduced our leverage by 0.5 times, well ahead of plan. Operationally, we've achieved some key milestones. We introduced Rogers' internet and TV services along with bundled offers. We consolidated our retail footprint, rebranded our corporate retail stores, and started selling both wireless and residential services in our retail channels. Importantly, we have largely integrated the two teams and we are executing with one clear focus and plan. Overall, we've made significant progress in a short period of time. In the third quarter, we also led the industry with new technology and more affordable services. In Q3, we were awarded the best and most reliable 5G network in the country for the fifth year in a row. We launched 5G in the busiest sections of the Toronto subway system and we're now upgrading the rest of the legacy network to 5G. Working around the clock, our teams will expand the network to the remaining 75% of the tunnels where no wireless network exists today. We introduced new technology to help detect and prevent forest fires. Partnering with SpaceX, satellite-connected sensors can better predict wildfires in remote areas without wireless networks. We're also deploying AI cameras on cell towers to detect smoke up to 20 kilometers away. We expanded connected for success, our low-cost internet program to Western Canada, and we just introduced connected for Success Wireless across the country, available to 2.5 million low-income Canadians. The program builds on our commitment to make our services more affordable and accessible. We also introduced 48-month device financing with 0% interest and no mobile contract, only on a Rogers credit card. This Rogers-owned bank credit card platform reduces the monthly phone payments for our customers by 50%. Beyond that, the card offers a host of additional meaningful value add for our customers, including free roaming and starting this holiday season up to 3% cash back. The most valuable credit card aimed at rewarding, keeping, and attracting customers to Rogers Wireless and cable services. With today's inflationary pressures, we're working hard to bring down prices and present more value for Canadians. According to the stats can consumer price index, wireless prices have declined over 30% over the past three years. Looking ahead, we will harness the power of Canada's largest and most reliable 5G network to bring Canadians even more. This along with our 10G and DOCSIS 4.0 internet roadmap will ensure we deliver the next generation of world-leading services for Canadians. The future isn't just about more speed; it's about the convergence of products and services across networks. 10G will bring multi-gigabit speeds along with reliability and low latency to deliver a seamless customer experience in and out of the home. There's a national cable operator that covers the majority of Canadian homes. We have a unique advantage. We don't have to rip out and replace our existing network or dig up neighborhoods with 10G; we'll easily and economically upgrade our network with little to no disruption for the customer. Before I turn it over to Glenn, let me make a couple of closing comments. Overall, it was a record quarter reflecting a clear focus and consistent execution. We delivered industry-leading results, exceeded Shaw integration targets, and delivered industry-leading innovations to Canadians. We have momentum and we are winning in the market. Could not have done this on a consistent and sustained basis without the commitment, tenacity, and ingenuity of our Rogers team. And for that, a big thank you to the most talented group I've ever worked with. Well done team. With that, I'll turn it over to Glenn.

Thanks Tony, and good morning, everyone. Thank you for joining us today. Rogers' third quarter results reflect strong, disciplined execution, driving growth, and accelerated delivery of the balance sheet. Six months into coming together with Shaw, we are doing what we said we would do. We have grown consolidated EBITDA by 52%, roughly six months ahead of schedule. In wireless, our third quarter service revenue was up 15% reflecting strong execution and healthy underlying organic growth. Excluding the $91 million customer credits from last year, wireless service revenue growth was up 9%. Postpaid mobile phone customer net additions in the quarter were 225,000. Our strongest postpaid mobile phone loading on record and an impressive 37% increase year-over-year. Coupled with our positive prepaid loading, total mobile phone net adds this quarter were 261,000, up 40,000 year-over-year and the strongest loading ever by a Canadian wireless company. We have welcomed approximately 0.5 million new postpaid mobile subscribers to our network year-to-date, reflecting 64% more subscribers than our next closest rival, all while delivering growing EBITDA and ARPU. Our leadership in wireless is clear. We have consistently led our peers in wireless loading for two years now with Canadians choosing Rogers Wireless more than any other carrier. Wireless ARPU for the quarter was $58.83, which is up 4% year-over-year. The 4% increase reflects the prior year's $91 million in customer credits, which in turn was partially offset by the absorption of the Shaw mobile customers in this period. After adjusting for the integration of the Shaw mobile customers, combined with removing the prior year's $91 million customer credits change, ARPU was once more up slightly year-over-year. And we expect this momentum to continue. Postpaid mobile churn in the quarter was 1.08%, up slightly year-over-year, reflecting a competitive market. Wireless adjusted EBITDA was up 18%, and our adjusted EBITDA margin of 64% was up 180 basis points year-over-year. Excluding the credits from last year, underlying wireless adjusted EBITDA growth was up an impressive 9% year-over-year. We are gaining subscribers in all segments of the market and in all regions of the country, driving sector-leading financial and operating performance on the back of disciplined execution in a healthy growing market. Importantly, sector competition remains vibrant and strong as ever, largely centered around value, service quality, and multi-service bundling discounts. We are encouraged by our sustained wireless performance and we will look to continue that momentum in the quarters to come, by delivering exceptional value and service quality to Canadians. Moving to our Internet and Cable business. We delivered strong profitability despite intense competition and promotional pricing from our national peers. Our integration of Shaw and driving cost synergy targets are both well ahead of plan. We have largely completed our integration of Shaw's departments and employees into our combined end state, driving significant cost synergy savings, and we are seeing strong revenue synergies with our Cable and Wireless growth in the West. Cable revenue for Q3 was up 104% and Cable adjusted EBITDA was up 132%, reflecting the addition of Shaw's operations, as well as the prior year's $59 million in customer credits. Excluding the impact of the customer credits, total revenue was up 93% and adjusted EBITDA was up 106%. Impressively, our work on driving efficiency across our national cable footprint has delivered EBITDA margins of over 54%, or a 650-basis point improvement from last year. Organic revenue and adjusted EBITDA growth across the combined operations was negative 3% and plus 8%, respectively. Cable is growing customers in every region. Internet loading was 18,000, up from 6,000 last year, and video net additions grew by 23,000 compared to an increase of 7,000 in the prior year. The wireline market remains very competitive in the East and West, and we continue to balance subscriber growth with disciplined financials. Six months into coming together with Shaw, we are very excited by the Shaw opportunity. It is reinvigorating growth across our national cable footprint. And finally, our sports and media business has also seen continued growth and improvement in our financial performance. Sports and media revenue is up 11% this quarter as a result of higher sports-related revenue, primarily driven by the Toronto Blue Jays and Rogers Sports Net, and we delivered adjusted EBITDA of $107 million, up a very strong 41% year-over-year. On a consolidated basis, Q3 revenue was up 36%, while service revenue grew 40% to over $4.5 billion. Consolidated adjusted EBITDA was $2.4 billion in the quarter, up a very strong 52% versus prior year, growing our adjusted EBITDA margin by 500 basis points to 47.3%. Excluding the impact from customer credits last year, total revenue was up 31% and adjusted EBITDA was up 39%, reflecting strong disciplined execution on driving the Shaw cost synergies and competing for leading market share. Q3 adjusted net income increased by 56% to $679 million, reflecting the flow-through of higher adjusted EBITDA. Net loss for the quarter was $99 million, which included a one-time non-cash $422 million loss recorded on a future obligation to purchase at fair value, the non-controlling interest in one of our joint venture investments. The Q3 net loss also reflects higher depreciation and amortization, finance and restructuring, acquisition and other costs primarily related to our Shaw acquisition. Capital expenditures in the quarter were up 17% year over year to approximately $1.0 billion, with roughly half of that invested in cable. Notwithstanding this increase, average capital intensity declined in the quarter by 330 basis points to 20%, predominantly split across cable and wireless. Despite the increased investment, we were able to more than double our free cash flow in the quarter, delivering an after-tax free cash flow of $745 million. And finally, we returned $264 million in dividends to shareholders this quarter. Starting with our October dividend payment, we have amended our dividend reinvestment program or DRIP to introduce a small discount on the DRIP share price and to allow for the issuance of treasury shares to settle the DRIP dividends. With that change on October 3rd, 2023, we issued 1.5 million Class B non-voting shares, or $74 million worth as partial settlement of the dividend payable on that date under the terms of our DRIP. Reflecting a participation rate in the DRIP program of 28% on an annualized basis that translates to a dividend cash payout ratio of approximately 30% of after-tax free cash flow. Turning to the balance sheet, in September 2023, we issued $3 billion of Canadian bonds across three-year, five-year, seven-year, and 10-year maturities. As a result, at September 30th, we had over $7 billion of available liquidity, including $2.5 billion in cash and cash equivalents and a combined $4.8 billion available under our bank credit and other facilities. Our weighted average interest rate on all borrowings is 4.9%, and our average term to maturity is 10 years. Our adjusted debt leverage ratio at quarter end is 4.9 times, and by year-end, we will have taken a half turn off our leverage, roughly six months ahead of schedule. We anticipate leverage will continue to sustainably decline by approximately 0.1 times to 0.2 times each quarter going forward. Early on, after coming together with Shaw, we had targeted reducing leverage by approximately 1.5 times over 36 months. We are well on our way and pacing ahead of schedule to achieve this target. For our 2023 guidance targets, we anticipate free cash flow coming in at the middle to upper range of our guidance of $2.2 billion to $2.5 billion. As well, we are reaffirming our 2023 guidance ranges for service revenue growth of 26% to 30%, adjusted EBITDA growth of 33% to 37%, and reaffirming that capital expenditures will be at the upper end of our guidance range of $3.7 billion to $3.9 billion. And finally, our integration with Shaw is running smoothly and ahead of plan. Our Q3 results reflect approximately $140 million of cost synergies realized in the quarter, building on the $48 million realized in Q2. This brings the year-to-date total to $188 million realized, year-to-date, well ahead of our previously stated $200 million in synergies realized by year-end. We now expect over $360 million in synergies to be realized in calendar 2023, which is 80% higher than previously guided, and we expect to be at our $600 million annualized synergy run rate by the end of 2023. Again, roughly three to six months ahead of schedule. I will close by saying that our third quarter results reflect disciplined market leadership, operational excellence, and strong financial results across all business lines. Our Shaw integration is proceeding extremely well, and our investment thesis becomes stronger with each quarter. We have never been more excited about our future and we are encouraged for what lies ahead. Thank you for your interest and attention this morning. And with that, Ariel, can you please commence with the questions and answers? Thank you.

Our first question comes from Drew McReynolds of RBC. Please go ahead.

Thank you for the opportunity to discuss our strong results. I want to focus on two key areas. First, regarding synergy realization, Glenn, could you provide insight into the expected timeline for synergy realization throughout 2024 and any milestones investors should watch for? Additionally, is there a possibility of exceeding the $1 billion mark that some have suggested? Second, on the Wireless momentum, Q3 was remarkable. As we look ahead to Q4, what trends are evident so far, and what are your expectations for the remainder of the quarter? Thank you.

Thank you, Drew. On the synergy target, we are still targeting the $1 billion. I am not going to start targeting a larger number. And I think once we have worked through those targets to get to the $1 billion, the exercise then simply turns to, when and we will turn through that to really what's our year-over-year growth, rather than trying to continue to do the accounting on where would our costs be without Shaw. As we move forward, that exercise becomes more and more difficult to try and unspin. And so, we are still focused on driving the $1 billion synergy cost reductions. The progress to date has very largely been on the departmental and employee integration, we have essentially or largely, very largely completed that part of the synergy exercise, well ahead of schedule. We were first expecting that to run into 2024. That is largely complete as we have closed out the third quarter. And so, that's most of the gains that we have made to date. We are, though, also bringing in synergies from some of the vendor contract negotiations and rationalizations or combinations. The two largest buckets then remaining are for the third-party vendors, just a general category as well as media content costs. And we are leaning in on those. And I expect that those will come to plan at least on pace, if not, also being maybe a little bit ahead. But we have synergy costs well in hand. We will be at a $600 million run rate as we close the year. And Tony, on the Wireless side?

Drew, with respect to the second part of your question, a couple of comments. One, I would say the macro environment for Wireless continues to look strong. We exited Q2 as an industry with growth in Wireless subscribers of over 5%, and we continued to perform well in terms of market share on that backdrop. The growth in the industry of course, better penetration rates, but importantly, the continued growth in the new to Canada category continues to seem strong, even as we exit the third quarter and into October, November now. That category continues to grow, and we do well in terms of market share in that category. And so, from a broad environment, we continue to see good health in the market, as we went through back-to-school, as you would expect, competitive intensity picked up, and we are really pleased with the way we executed in that competitive environment to look at value propositions beyond price, and utilize our industry-leading channels, particularly in retail to execute strong market share performance. And as we exited Q3 and are now into and approaching Black Friday, we continue to see good healthy competition. And our execution in that backdrop continues to do well. So, continued strong environment and performance in wireless for Q4.

Our next question comes from Sebastiano Petti of JP Morgan. Please go ahead.

Hi, thank you. Just wanted to unpack while you're guiding to the higher end of the free cash flow range EBITDA being unchanged seems a little bit conservative, particularly in light of the higher expectation for synergy realization in the quarter or in 4Q and exiting the year. Anything to unpack there? Is that just a bit of conservatism related to just the overall operating environment and maybe some, or is it perhaps investments related to Shaw? And then relatedly, second question on the cable revenue side, a good color on Alberta and DC revenue trends. And Tony, I think you said overall strategy or expectation goal is to drive revenue growth in cable, but how does the East compare perhaps to what you're seeing in the West? And maybe help us think about some of the levers you can pull to get to or reinvigorate the cable growth revenue side. Thank you.

Sorry, Sebastiano, regarding the free cash flow guidance, we expect to be at the mid to high end. I want to emphasize that we are not lowering our expectations at all. We are maintaining a fairly consistent CapEx rate throughout the year. Earlier in the year, we adjusted our EBITDA guidance to tighten the range. If you consider these factors, we should be in the mid to higher end of the guidance range for free cash flow. I am comfortable with a figure around $2.4 billion or $2.5 billion in free cash flow, which provides us with ample flexibility for our delivery plans. I am pleased with the progress we have made in this area.

Sebastiano, on the second part of your question regarding cable revenue, I'll start with it really comes down to the fundamentals. With the coming together of Shaw, we took the opportunity to reset our value proposition. So, it's much more consistent across the entire footprint of Rogers together with Shaw. What you see is us leveraging what has always been our competitive advantage on internet with leading speeds and reliability across the entire footprint. So, that we could offer at a minimum one and a half gigs of speed. And that's always done well for us. We've then combined that with a repackaging of the video product to make it much simpler and a real value add for customers, which has started to resonate. Well, it's early days, but it has started to resonate well, and you see that with the increased video subscribers there as well. As part of that value proposition, we also leaned on looking at everything else that was of value to customers and not just focus on price in various markets. And so, you see year-on-year, even after adjusting for last year's credits in the cable business, you see ARPU actually increasing year-on-year. So, you see coming together a good increase in subscriber performance and a good increase in ARPU. Those are really the fundamental ingredients that we'll continue to push on that in due course we'll see revenue start to climb in cable as well. A couple of things, I would say you were specific about east and west, and I would say what we are seeing is good growth in both of those segments. So, I'm really pleased with the way that's going. The bundled offers are also hunting well particularly in the west, which is a new category for us in terms of bundling. We're really pleased with both wireless and cable market share gains that we're seeing in those markets. So, it's a combination of a few fundamentals, a combination of focused execution on a market-by-market basis to ensure that we're getting the share gains that we need to eventually translate that to growth in revenue.

Our next question comes from Vince Valentini of TD Cowen. Please go ahead.

Just maybe clarify on that last point. And then another question is when you're talking about market share gains, Tony. I mean clearly 18,000 internet ads compared to what we saw from Bell and TELUS doesn't look like on an absolute basis. You're gaining market share there, but are you talking more holistically about wireless subs in a bundle as well as standalone internet when about market share?

Yes, two things, Vince. Thanks for the opportunity to clarify. One is we do talk about it in terms of a bundle, and the other is given the differing size of footprint, we look at what we're doing with respect to penetration rates of homes passed. What we see is contrary to prior quarters where we had a decline in penetration rates, we're starting to see those penetration rates start to improve. So, that's how we think about it.

Our next question comes from David Barden of Bank of America Merrill Lynch. Please go ahead.

Hi, guys. Thanks for taking my question. So well done on the loadings this quarter. If one were to critique it, one might say that some of the pricing actions that you took during the quarter impacted your ability to take share, and if one extrapolated from that, one might imagine that pricing in the industry is a little less stable than people would hope, and that in reaction to your very strong loadings in the quarter, it is an inevitability that other competitors are going to have to come back with their own pricing actions. And I was wondering if you could kind of extrapolate a little bit or elaborate a little bit on that dynamic in the Canadian market? And then second, if you could share with us what you think the impact and the import of the new CRTC interim regulations on wholesale pricing for broadband are for Rogers and in the industry generally? Thank you.

Thanks, David. Two parts. So, on the first part of the question with respect to pricing, I am not sure I follow the logic that you are looking at. Just to put in perspective, we have been clear in terms of our strategy of focusing our brands and brand evolution on the Rogers brand. What you saw us do earlier in the year is expand the Rogers value propositions to include capped plans, not unlike you see in the U.S. All focused on the Rogers 5G brand. Our competitors decided to expand their value offering in the flanker brands, a different strategy. We will follow our strategy and it seems to hunt well in the marketplace. I think we talked about it on the last call. But for clarity, the intent of introducing capped plans at the $55 entry point was clearly intended to provide a path for customers on flanker 4G to upgrade to the 5G experience, with a nominal increase in price and ARPU. What you saw is actually, in our opinion, a value creation for the segment, and you see that for us, in the organic ARPU side of growth that we have and so, albeit mild, it nonetheless is on the positive side of the growth when you look at the ARPU ledger. We are pleased with that. So, our sense is that the strategy is working not only for Rogers but frankly, for the industry, here in Canada. We are pleased with the trending that we see on that. As we look to Q4, and we are about midway through now, we continue to see, again, positive momentum in terms of attracting customers that are coming in year-on-year higher in terms of ARPU, and when you look at the combination of our targeted approach across the brands and the various, what I would call, value segments, that ladders up nicely to a good and solid ARPU trajectory. And of course, that's all wrapped together in the revenue growth that you see translated to a very good flow-through rate, significant flow-through rate, and strong margin expansion and performance. Hopefully, that provides the color around that. The second part of your question relates to the recent CRTC decision. Not a lot to say on that, I would say a couple of things. One, it's good to see that it levels the playing field. We've been required to wholesale under the regulatory regime high-speed internet for quite some time. So, it's good to see a level playing field. And two, when we look at the rates that have applied, they're not that different from the rates, the wholesale rates that we've had for our network over the last little while. We continue to improve our performance in that regulatory regime and figuring out the right value proposition to perform. As I said, in response to the earlier question, stabilize and start to improve our market share performance.

Our next question comes from Maher Yaghi of Scotiabank. Please go ahead.

Great. Thank you, for taking my question. Good job on the quarter. Congratulations. Looks very strong. I wanted to ask you if you can, maybe just for housekeeping help us understand what was the organic revenue growth and EBITDA growth for both wireless and cable? That would help a lot. Now on the synergy is definitely tracking above and faster than expected. Can I ask you maybe how are you handling the organizational shift? As you said you had a lot of employment, employee changes, restructurings, departmental changes. How are you making sure that the path and the momentum that you have in the marketplace can continue with these significant changes happening inside the organization? And maybe just one last point on the West. When you look at the market share gains that you talked about in wireless, Tony, what's the path? How much more what's the market potential for you there to keep gaining market share and wireless, and who are you taking the share from in your view? Thank you.

Thank you, Maher. I'll begin by addressing your question about growth rates in wireless. Excluding the impact of last year's credits, our pro forma service revenue and EBITDA growth would both have increased by 9%. In cable, when factoring in last year's credits, the pro forma service revenue growth would have decreased by 3%, while EBITDA growth would have risen by 8%. This differentiation highlights that most of the cost synergies are coming from cable operations, with some also reflecting in our corporate offices.

In terms of the second part of your question on synergies as we execute through those, mayor. It starts first and foremost, and I've said this in the past, we are extremely pleased with the set of assets and in particular the team that has come together with Shaw, excuse me, in terms of the talent, the commitment, and as I said in my comments, the tenacity of this team and desire to do the right thing for customers, it's just phenomenal. As we come together, we've been focused on a few messages that I'll leave with you. One is let's keep it simple for the customer. Let's keep it simple for us. We have a very clear focus on the things that are going to matter most, and we try not to overload our execution agenda and stay focused on outcomes. What you see is that coming together in both the west and the east. So, we're really pleased with the way that's come through. As I look to our performance in this fourth quarter now that we're midway through we continue to see good continued momentum on the synergy execution. In terms of the question on the West and where we're getting market share from. I would say a couple of things. We're very laser-focused on the brands, and as I said on the earlier question, we very much focus on a market-by-market and segment-by-segment basis to ensure we've got the right value proposition and the way we carry that through in our channels. In terms of where it comes from, I would say it's coming from first and foremost, the growth in the market, and then secondarily in terms of which competitors are being impacted. I would say it's probably over to them to talk about it now that you've seen all their results. It comes from a number of different areas. We're less fussed about where it's coming from and more focused on what's our relative share performance in total and for each market.

Our next question comes from Tim Casey of BMO. Please go ahead.

Thanks. Two for me. Glenn, just revisiting the notion of keeping your EBITDA guidance unchanged, but the progress you've made on synergy targets and run rates there. Once again, just are you being conservative about the macro environment or Black Friday promotions? Just curious why you wouldn't bump EBITDA guidance up a bit for Q4 given the progress you've made. And second on the synergy progress. Do you still have any heavy lifting to do in terms of consolidating billing systems and customer support systems? I know there was a lot of work with Oracle that had to be done there. Just curious if that's behind you or if that's still on the come. Thanks.

Sure. Thank you, Tim. On the first one, you can appreciate when we set our guidance, we set a range around expectations for the different categories that go into it. The same is true of synergy. I can be conservative and I can also be optimistic when I set those ranges. I assure you that if you look at the dollars, we had telegraphed that or guided that we would achieve $200 million of cost synergies in the year. I'm now guiding over $360 million. It's a significant acceleration and significant progress on a timeline to get to those. But in the consolidated hole where we're running a business that's now essentially at $8.5 billion to $9 billion of EBITDA, a $100 million of progress. It's one in our input range or variables that we use to go into the guidance. Two, relative to the $9 billion, it's a fairly small change. It doesn't cause me to want to bump the EBITDA guidance range. That still applies. We did tighten it. When we came out earlier this year, we tightened the range for the EBITDA growth. We will be in that tighter range and nothing more really to say on that. On your question around the billing or other platforms we have. That project is particularly our enterprise resource planning or ERP program, platform that is underway in terms of consolidating across the two companies. That is progressing well. It is on plan, or on schedule. We have had a couple of modules that we have released. We have a couple more still to come, as we move into and through 2024. That will roll into very early 2025 potentially to complete. It reflects the fact that it will either end just before or just after, the holiday season next year, and you don't do anything with ERP or systems, while you are entering into that key period. On plan with those. Pleased with progress so far. We had an important release just over the past couple of weeks in terms of our financial systems and what have you, it has gone well. I am pleased with the progress there.

Our next question comes from Aravinda Galappatthige of Canaccord. Please go ahead.

Good morning. Thanks for taking my questions and congrats on the quarter for me as well. A question on wireless and then a clarification. On Wireless, obviously very strong loading. We know that historically Rogers is sort of, being quite dominant in terms of new Canadians on immigration. With the focus in that area even greater than it was at an industry level than in the past, can you maybe talk to how that domains or that higher share has sort of sustained over the last several quarters when immigration numbers have been going up and driving the volumes? And then secondly, a clarification for Glenn. Thanks for the organic numbers. I just want to clarify the cable EBITDA growth of 8%. That obviously includes most of the 140 in synergies. It does kind of back out to perhaps a high single-digit decline in Rogers cable organically. I know you don't get too deep into that. But I just wanted to understand if there was anything there that needs to be highlighted. Thanks.

Aravinda, on the first part of the question, the new to Canada category continues to be strong, as I have said earlier on the call. Our performance and dominant market share in that segment continues to be strong as well. That's across the country as you look to those numbers. So, we are pleased with the performance there. I'm not going to get into the tactics that we use to get there for competitive reasons. But overall, I'm pleased on pacing of it and our relative performance in that category.

And then Aravinda on the organic growth within cable, I think we've said consistently that cable is a work in progress in terms of turning around the decline in revenue. We are on that and that will obviously help lift obviously stronger growth in EBITDA as we are successful in turning that around. You're right, a significant part of that 8% is the impact of the cost synergies. That's the strength of our business though. That's now embedded in our business. We'll continue to grow on that as well as continuing to grow as we turn around our revenue. I haven't done the math in terms of whether or not, if I pull out this and pull out that, would it be up or down. The simple truth is we've done some heavy lifting in removing those costs permanently, removing those costs, and you see, notwithstanding what has been a 3% decline in revenue organically, we have had a very substantial 8% growth in EBITDA as we turn revenue around, that's going to be a pretty powerful business case. I'm looking forward to that.

Our next question comes from Batya Levi of UBS. Please go ahead.

Great. Thank you. A question on CapEx with this year coming in at a bit at the high end of the guidance range, should we assume that's pulling forward some of the spending for next year, or can you provide some general color on CapEx trends for next year? Thank you.

Thank you for the question. I think that's not pulling anything forward, that's carrying on with a current run rate and closing at the year. I think, I'm very broadly rounding now, but I think we've been fairly consistent through the year running at or around a billion dollars a quarter. If we sustain that pace through the fourth quarter, recognizing that there's a holiday period in there and some of that spend tends to slow as we move into the winter months, that pace would take you to the upper end of the guidance range. Going forward in 2024, the combined operations we haven't guided yet, but we're not pulling anything forward and we'll come out with our guidance early in year ‘24.

Our next question comes from Stephanie Price of CIBC. Please go ahead.

Hi, good morning. Two from me. First is, you mentioned strength and bundling in the west. Just hoping you can dig a little bit more into what you're seeing in terms of bundling the Western customer base and also how we should think about upside from revenue synergies with Shaw. And then secondly, just on the role of wireless handsets in the Rogers strategy, equipment revenue trends seems to be above ahead of peers here. Just wondering if the ability to finance handsets for the help of the Rogers bank card might be supporting the trend.

Just let me unpack that. I'll start with the last part of the question in terms of the longer-term financing under the Rogers credit card; it's early days. The customer take-up and interest in that has been very strong, not surprising. I mean, the value proposition is to amortize the cost of the phone over double the period when it's on the card. So, the total quantum of financing doesn't change. It's just over a longer period of time. The construct, while there's no contract, the construct is such that the value proposition makes it compelling to be and stay at Rogers customers. That's the way we've designed that value proposition. Importantly, it dovetails with what we're seeing as the longer life of the mobile devices, consumers, and businesses continue to hang onto the device longer. We're seeing that over the last several years as a trend. Dovetailing that longer life with a longer amortization period makes a lot of sense. But again, it's early days and we're looking forward to how that's going to play out over the holiday season. In terms of bundling opportunities in the west. Specifically, the coming together with Shaw where you had Shaw customers that were either Shaw Mobile and or Shaw home product customers and Rogers wireless customers. What you see is not well, you would expect customers that were already clients of Rogers and Shaw coming together and trying to understand how that coming together into one bill was going to impact them. We got what we expected on that, and that was good. More importantly, what we're seeing are customers that had one product set but not the other looking to simplify things and bring together their product suite. And so, again, it's at the end of Q3, six months into it, but it was more demand than we expected this early in the process. So, we're pleased with the market trend and appetite of customers to put together products between wireless and cable. And then the last piece is revenue synergies and how that's coming to some extent, the bundling that I just talked about is one aspect of it. As I said, that's coming in better than we expected this soon in the process. But the second piece is that we've talked about is on the enterprise and in particular the mid- to small business. What we're seeing there is the same thing; a very good appetite of business customers to look to alternatives that they previously didn't have in the West in being able to combine those. Many of the product sets on the business side, more and more are converged. To the extent that they have one easy experience between their businesses inside as well as when they're outside of their business, that seems to hunt well. As we streamline our product set in that segment of the market, we're seeing very good traction there. Hope that covers it, Stephanie.

Our next question comes from Simon Flannery of Morgan Stanley. Please go ahead.

Great. Thank you very much. Good morning. I want to talk a little bit about CapEx if I could. I think one of the opportunities you saw in the West was to extend the network to MDUs that had not been connected. Can you just update us on that and just give us a little bit more sense of the timing, where you are on the DOCSIS 4.0 upgrade? What should we expect in ‘24 and beyond to move that to completion? Thanks.

Thank you, Simon. Regarding the capital expenditure for connecting MDUs in the West, we are currently in progress. It's still early in the process. We are six months into the third quarter and halfway through the fourth. The planning schedules for obtaining permits are moving along well. In some instances, we have begun construction, while in others, it is still forthcoming. Overall, we are on track with our expectations, and we are pleased with our progress.

On the second part of your question, Simon, on the 10G DOCSIS 4.0 roadmap, where we are at on that. We are, as you would expect, fast follow, extremely fast follow relative to where our U.S. cable peers are. The work with respect to mid and high-split, not to get through technical is well underway. Our expectation is that the bigger lift on that is in the East. That work is progressing nicely in terms of it. As we look to the CPE and the chipset availability, we will have that much along the same timelines that you are hearing from the U.S. cable operators. Look to the back half of '24 as the beginning of what you will see in terms of customer experience improvements.

Our next question comes from Jerome Dubreuil of Desjardins. Please go ahead.

Good morning. You have been great to provide details on synergies. But it is not been really easy to figure out on top of what exactly we should put the $1 billion. So, I know it is not the kind of questions management teams like. But, given the forecast that we see out there, do you think it's likely that your Cable margins could be around 60% in 2025?

Thank you for the question, Jerome, and I love your optimism. I am not going to start guiding '24, let alone '25 this morning. Let me answer it this way; we have two capital-intensive businesses in Wireless and Cable with strong margins. Wireless right now is 64%, Cable is 53%. Both are growing or expanding as you would expect for a business that has a larger scale. We have essentially doubled the size of cable with the Shaw acquisition, that brings some economies with it. It brings some additional capital spend with it. Wireless's margins cover its investment in infrastructure as well as its investment from time to time in spectrum. Very satisfied with the balance across all of that, particularly as a result of having increased the scale substantially for Cable to now roughly match where we are with Wireless in terms of national breadth and size of EBITDA and revenue. Do I think there is room for further growth in Cable on its margin? Yes. We have posted the margin we have this morning on the back of a small decline in revenue year over year in the quarter. That's a pretty strong performance. There's more opportunity ahead, but I'm not going to guide beyond that. Jerome, I'm sorry.

Our final question comes from David McFadgen of Cormark. Please go ahead.

Just two questions just on the mobile phone. That adds obviously very strong. Just kind of wondering how many of those are on a bundle specifically in the West? Because it looks like you're starting to really derive some revenue synergies from the Shaw acquisition. And then secondly, on the leverage, you talked about your expectation to be able to drop it by 0.1 times to 0.2 times per quarter. Does that factor in the DRIP participation that you talked about in issuing stock from treasury? And what's the participation rate again? Thanks.

David, I'll start with the first one in terms of mobile net additions and the extent to which they're coming in on the bundle. I'm not going to disclose that type of granularity, but to put it in perspective, I would say, in terms of product convergence and therefore the bundling, it's early days. While we're seeing good success in the overall scheme of total wireless loadings, it's still the minority, not the majority to be clear. So, I just want to put that in perspective. It's disproportionately better in the West only because we now are an alternative in the West. We're new to the category of being able to bundle, and so, we're seeing very good market acceptance there. In the East, we've always been able to offer that bundle opportunity, and that continues to do well in the East as well. So that's how you ought to think about the trends on that and the relative size.

David, regarding the DRIP program, we launched it for the October quarterly payment, and the initial take-up rate was 28%. I'm very pleased with this uptake, which at a 30% run rate translates to approximately $300 million a year in cash savings. I acknowledge that this doesn't mean dividends weren't paid; they were paid with our most expensive capital and shares. This is how these programs operate, allowing us to retain more free cash flow to pay down debt while also driving earnings growth. We consider this in our strategy moving forward. I expect dividends to decrease by 0.1 to 0.2 per quarter, totaling about half a year. We are on track for this. Occasionally, there may be spectrum investments that could affect the quarterly amounts, but we are generating strong earnings growth and free cash flow, which supports our deleveraging efforts. I am very satisfied with our progress.

And thanks everyone for joining us today, and if there's any follow-up questions, please reach out to the IR team. Thank you.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.