Rogers Communications Inc Q2 FY2024 Earnings Call

Thank you for your patience. This is the conference operator. Welcome to the Rogers Communications, Inc. Second Quarter 2024 Results Conference Call. I now hand it over to David Naccarato, Director of Investor Relations with Rogers Communications. Please proceed, Mr. Naccarato.

Thanks, Galen, and good morning, everyone. Thank you for joining us. Today, I'm here with our 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 our 2023 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, David, and good morning, everyone. I'm very pleased to report that Rogers delivered another strong quarter of leading financial and operating results. For 10 straight quarters, we have executed our plan with discipline in a healthy and competitive growing market. Our results speak for themselves. In the second quarter, wireless service revenue and adjusted EBITDA were both up a healthy 4% and 6%, respectively. Our focus on efficiency and disciplined market share growth is reflected in our industry-leading loading and industry-leading wireless margins of 65%. In Wireless, we led the market with 162,000 mobile phone net additions. This included 112,000 postpaid mobile phone net additions and 50,000 prepaid mobile phone net additions. The increase in prepaid net additions reflects our strategy this quarter to increasingly address the flanker market with our prepaid brand, which has also had a successful value proposition for the new to Canada market. This approach allowed us to continue to do well in the flanker category while at the same time keeping our focus on penetration growth on the Rogers brand where the majority of our subscriber loading occurred. As a result, and importantly, we continue to post positive ARPU growth, this quarter at 1%. Overall, we are delivering industry-leading loading with industry-leading financials in Wireless. This robust performance over the past 2.5 years is not an accident. We have a clear plan and we're executing with discipline day after day, week after week, quarter after quarter. And it's underpinned by our robust national distribution network, the value and flexibility of our Rogers 5G plans, and our record industry-leading investments to build Canada's largest and most reliable 5G network. Just this week, two global leaders in network benchmarking reaffirmed our network leadership position. Excuse me, Umlaut once again awarded Rogers Canada's most reliable 5G network, finding that our wireless networks outperformed those of our competitors in reliability, which is increasingly what matters most to our customers. In a separate benchmarking study, Opensignal recognized Rogers for delivering the most reliable wireless services in Canada. Opensignal also named Rogers Canada's fastest and most reliable Internet. The report found we consistently delivered the most reliable experience, the fastest overall download speeds, and the best streaming experience in Canada. With a clear strategy, sustained effort, and smart investments, we're delivering the most reliable network experience to Canadians. In Cable, we remain focused on returning to modest growth in the fourth quarter while maintaining industry-leading financials. Cable revenue was down 2% in the quarter, reflecting a slight sequential improvement from down 3% in the first quarter. Adjusted EBITDA was up an impressive 9% and Cable margins expanded to 57%, a company and industry best. Our teams continue to work diligently to drive efficiency throughout the business and we are targeting additional improvements throughout this year. In Internet, we delivered 26,000 net new subscribers, up slightly from one year ago. The environment remains competitive in both the east and west and we continue to drive growth through enterprise, MDUs, and the expansion of our TPIA and 5G home Internet offering. In addition to our fixed wireless access launch earlier in the year, we've just expanded our TPIA offering in Quebec with the launch of TV and Internet services in the province. It's early days, but we see a big opportunity to grow in Quebec, just like we do in Southwestern Ontario where we've also launched. With Shaw, we doubled our cable footprint to reach just over 60% of Canadian households. Now, with our fixed wireless access and TPIA network offerings, we're expanding our home product and coverage to reach almost 100% of Canadian households. We see this as an important strategic expansion as our wireless network covers almost 100% of all Canadians. Our satellite initiative will also further solidify our coverage leadership. We also continue to advance our DOCSIS roadmap. We're successfully trialing DOCSIS 4.0 modem technology in select Calgary customer homes using our enhanced cable plan. This is a global first and it's delivering 4 gigabits download and 1 gigabit upload speeds at an extremely low cost per home. In the more immediate term, we continue to execute on our plans to return the cable business back to organic revenue growth by year-end. We will pursue this growth in a disciplined and targeted manner. Finally, in Media, top line grew by 7% led by revenue growth at the Toronto Blue Jays and adjusted EBITDA was breakeven. The third quarter is seasonally strong for our media business and we fully expect Media to return to profitability in the second half of the year. At the same time, we continue to invest in the future and long-term growth. Our landmark content deals with Warner Bros. Discovery and NBCUniversal is part of that investment. Through these deals, we will bring Canadians the most-watched lifestyle and entertainment shows on their platform of choice. Before I turn things over to Glenn, let me say that our teams have worked extremely hard to deliver strong results in a competitive market. Rogers continues to consistently deliver industry-leading financial results and best-in-class customer growth. In the past 10 quarters, we've added an impressive industry-best 1.7 million mobile phone and Internet net additions. More Canadians are choosing Rogers than any other carrier, full stop. We've done this by out-executing our competitors and making strategic record investments to grow our business. I'm proud of our team, and I'm confident in our plan to drive continued growth while maintaining our track record to deliver disciplined financial results. Let me now turn the call over to Glenn.

Thank you, Tony, and good morning, everyone. Thank you for joining us. Rogers' second quarter results reflect another quarter of disciplined industry-leading growth and strong operating and financial performance. As Tony has said, this marks our 10th consecutive quarter leading the Canadian telecom sector in performance. We are focused and we are determined to meet our commitments. Succinctly, we are consistently doing what we have said we would do. Wireless service revenue in the quarter grew 4% year over year, driven by disciplined execution across all of our sales channels from coast to coast. Our targeted strategy of driving higher value for our customers through feature-rich 5G services from our Rogers premium brand remains critical to driving this growth. Postpaid mobile phone customer net additions were 112,000 and prepaid net additions were 50,000. We anticipate our total net additions of 162,000 customers will once again lead the industry in market share and subscriber growth while, very importantly, still leading on financial performance. Through a very active and competitive flanker brand market, Rogers has led across a combination of postpaid and prepaid mobile phone net additions. Our prepaid net additions reflect our commitment to compete across the entire breadth of the market, and our feature-rich 5G service plans remain exclusively available under the Rogers premium brand, which remains core to sustaining our strong margins and leading performance in a growing and competitive market. Once again, our mobile phone ARPU was up 1% year-over-year, again reflecting our disciplined approach to the market and our emphasis on the premium Rogers brand. In a very competitive market, we remained disciplined in finding a path to leading growth while emphasizing premium services to protect margins. Postpaid mobile phone churn in the quarter was 1.07%, a modest increase of 20 basis points year-over-year, further reflecting our balanced, disciplined approach in the growing and very competitive market. Wireless adjusted EBITDA was up a strong 6% year-over-year, and our adjusted EBITDA margin grew by 160 basis points over the prior year to 65%. This is a company all-time high, reflecting our team's exceptional work on driving cost efficiencies. Moving to our Cable business, we remain committed to returning our Cable business back to organic revenue growth by the fourth quarter of this year, and this quarter's results reflect those efforts. Cable revenue was down negative 2% year-over-year, sequential improvement from the negative 3% decline in Q1 and prior quarters. We will continue our drive to overall cable revenue growth through the second half through a combination of subscriber growth and disciplined pricing. Cable adjusted EBITDA was up a very strong 9% year-over-year, reflecting our continued success in driving scale efficiencies and cost synergies. This strong 9% adjusted EBITDA growth drove a very strong adjusted EBITDA cable margin of 57%, up from 51% in the prior year and up from 56% sequentially from the first quarter. We anticipate additional efficiency gains and margin improvements through the second half. A key element to returning our Cable revenue to modest growth in Q4 of this year will be through customer growth, and we are encouraged by our continued improving performance in retail Internet net additions. Internet net additions were 26,000 in the second quarter, a slight increase from one year ago and consistent with our first quarter performance. This level of loading combined with our industry-best margin performance further reflects our balanced approach to driving growth while maintaining disciplined pricing. This will continue through the second half. Finally, our Sports and Media revenue was up 7% and adjusted EBITDA was breakeven. We expect our Sports and Media business to be profitable through the seasonally strong second half and for the full year, driven primarily by revenue growth at the Toronto Blue Jays and Sportsnet. The completed renovations at Rogers Center have been very well received by fans, and while the Blue Jays season has not lived up to expectations through the first half, Sportsnet performance remains very strong, driven in large part by the Blue Jays and by the Edmonton Oilers Stanley Cup run. At a consolidated level, Q2 total service revenue increased 1% and adjusted EBITDA was up 6% year-over-year. This drove our consolidated EBITDA margin up by 230 basis points year-over-year to 46%. Free cash flow also remains strong, reaching $666 million in the quarter, which is up 40% from the prior year, reflecting higher adjusted EBITDA, lower capital expenditures, and lower interest on long-term debt. Capital expenditures were $1 billion in the quarter, down $80 million or 7% from last year. Turning to the balance sheet. At June 30, we had $4.3 billion of available liquidity, including $450 million in cash and short-term deposits and $3.9 billion available under our bank credit facilities. Our weighted average interest rate on all borrowings is 4.7%, down from 4.9% at year-end, and our weighted average term to maturity is 10 years. Our 4.7 times debt leverage ratio was flat to Q1 of this year, made more notable in that our Q2 leverage includes our $475 million investment made in the first half for the 3800 MHz spectrum we won at the auction last year, $380 million of which was made in Q2. Absent this $475 million investment, leverage in Q2 would have improved to 4.6 times. We remain focused on reducing leverage through the second half, targeting 4.2 times by year-end. Our target is to reduce leverage by roughly half a turn each year, supported by a combination of earnings growth and paying down debt with available free cash flow and proceeds from asset sales. As we have indicated in prior quarters, we have processes currently underway to sell targeted non-core assets, predominantly real estate assets, worth an estimated $1 billion. These asset sales are taking longer than originally anticipated as a result of continued softness in the market ahead of anticipated interest rate reductions. We remain committed to this initiative. However, we are also focused on ensuring we drive maximum proceeds. And finally, as you read in our press release this morning, we are reaffirming all of our 2024 guidance range targets. We remain confident in our continued disciplined execution, working to drive cost efficiencies and improved margins while investing in our growing markets and services. We are focused on driving growth and on deleveraging our balance sheet as reflected in this quarter's strong results. As I indicated in my opening and as you heard in Tony's remarks, we are meeting our commitments. We are doing what we said we would do. Let me conclude by congratulating and thanking our incredible team of dedicated and proud employees for their leadership. For the 10th consecutive quarter, we have delivered leading performance in a growing and highly competitive marketplace. Thank you for your time this morning, and with that, Galen, can we please commence with the Q&A. Thank you.

The first question comes from Drew McReynolds with RBC. Please go ahead.

Yes, thanks very much and good morning. Two for me. First, maybe, I guess, Tony or Glenn. With respect to just on the wireless side and what appears to be kind of continued demand for the Rogers main brand kind of value proposition, can you just give us a little sense of what's driving that particularly because, obviously, given kind of the ARPU performance, there's demand there and uptiering still happening. Just curious, from a consumer perspective, is it speed, quality of service, data buckets other premium kind of content that's offered? I would love to kind of get a sense of that. And then second, Glenn, good to hear, just kind of continued expectation of margin expansion within Cable. It looks like you're probably spending about $1 billion on TV programming costs, which is a relatively big number. And I know you and Tony have talked about kind of modernizing kind of the TV proposition in consumers home for what people actually want to watch. Just wondering how your expectation is on bringing down those programming costs over time or maybe set a different way, optimizing those programming costs just to align with what consumers want to watch. Thank you.

Thanks for the questions, Drew. I'll start with the first one on Wireless. As you pointed out, and I said in my opening remarks, the majority of our net subscriber additions continue to be on the Rogers brand. A while ago, we set out on a strategy to focus on the Rogers brand and drive growth on Rogers. So, there are a few things that we're seeing that are contributing to our success there. First and foremost, it's the network. As I said in the comments, reliability is becoming more and more important, and we were extremely pleased to see Umlaut and Opensignal reaffirm our network performance and best reliability. That is the single biggest driver of churn reduction as well as new acquisitions. Secondarily, we continue to lean on our distribution network across the country. It had been extremely effective for us in all the channels in both large markets as well as in what we would call smaller markets as well. In terms of offerings on the Rogers brand, we introduced Disney Plus, and that's been helpful to it. But the other piece is convenient financing of phones. With the Rogers Mastercard, consumers can finance their acquisition of phones over 48 months and effectively cut their monthly bill in half when it comes to paying for the phone. And so, that's been extremely helpful as well. So, those are some of the big factors. And then the last one is the power of bundling our wireless together with our home products, particularly in the west. The ability to now bring more competition to the west has been a good source of growth for us. Alberta and BC continue to be our fastest growing markets with healthy market share, and that's contributed to the overall Rogers loading.

In response to your question about programming costs, we are just beginning to tackle that area. It is a significant category, and it will require time to manage. Some of the contracts we have extend over several quarters, and there are shifts in customer presence and preferences that also require time to adapt to. Nonetheless, we have started a new initiative, exemplified by the Warner deal, where we are purchasing programming directly from the studio. This is just the beginning. Our goal is to acquire leading programming that customers enjoy, making it available to them while operating at lower margins by eliminating intermediaries and dealing directly. We will persist in exploring such opportunities. This process will unfold over several quarters, but we are off to a solid start.

Okay. Thanks very much.

Thanks, Drew.

Thanks, Drew. Next question, Galen?

Yes, the next question is from Vince Valentini with TD Cowen. Please go ahead.

Hi. Thank you. Can you hear me okay?

Yes. Thanks, Vince.

Great. I'm going to ask about prepaid, which is a topic we don't talk about much, but you had a pretty big uptick in prepaid this quarter. And two-part question, one, with the change in your deactivation policy last year, is there a new seasonality, perhaps, of people who would come in and out, in year, like maybe there's some seasonality of people coming in in Q2 and those people quickly deactivate in Q3 or Q4. Just wondering if there's anything we should think about for modeling, because this was a bit of a surprise to us how high prepaid was this quarter. And second part, maybe more important. Can you give us a little evidence and history on your track record of being able to migrate people from prepaid to postpaid? How successful are you in that? How long does it typically take? If there's any percentages you can give, that'd be wonderful, but I don't expect the moon but any color you can give will be helpful. Thanks.

Thanks for the questions, Vince. A couple of items that I'll go through. So, this quarter, we decided to leverage our Chatr brand in the flanker space, and we're pleased with the results we saw there. The Chatr brand is a low cost and very simple to activate type of process, and it's particularly well suited for the new-to-Canada demographic that don't necessarily have a credit history. And so as we leaned on that brand, we found it to be very successful. I should tell you that the average ARPU in of prepaid is just under $30, and most of the customers are on autopay. And so, they very much look and feel like, what I would describe as the flanker category. And so, it's been a very successful entry point into our ecosystem. We continue to focus and do well on the pre-to-post migration. We don't share numbers on that, but we are extremely successful in migrating those customers to a postpaid brand. And surprisingly, many will go right from the Chatr prepaid brand to the Rogers brand. And so, that's been very successful for us. In terms of the seasonality, there is a little bit of seasonal uptick in the second quarter, but that isn't what contributed to the large increase in prepaid subscribers in Q2.

So, just to be clear, we shouldn't expect some sort of spike in churn and negative prepaid in Q3 as an offset; this is mostly organic success.

That's correct, Vince. There is always some seasonality, as you mentioned, in future quarters, but you shouldn't anticipate a net negative in those periods. This growth is organic and reflects our long-term customer relationships.

Great. I'll leave it there. Thanks, Tony.

Thank you.

Thanks, Vince. Next question, please, Galen?

The next question is from Maher Yaghi with Scotiabank. Please go ahead.

Great. Thank you for taking my questions. Encouraging results for you guys in a competitive market. You have stayed onside in terms of ARPU growth in Wireless while others have not. How should we think about your ARPU trends in Wireless in the second half? It looks like pricing is finding a bottom here. What are the risks, in your view, when it comes to back to school and the dynamics over there to pressure ARPU beyond what we have seen already? And the second question I have is on leverage; telcos, it's the hardest thing for them to deliver. And Glenn, you mentioned that you had to pay for spectrum in Q2. I know you mentioned that you continue to look for divestitures to occur before the end of the year with that $1 billion real estate, but any other opportunities beyond that $1 billion of real estate that you can look at that, you don't need necessarily to own but you can rent to run the business? Thank you.

Thanks for the questions, Maher. I'll start with the first one. We continue to focus on not only leading market share but continuing to drive ARPU growth. And so, as we look to the back half of the year, our expectation is, we will continue to be on the growth side of ARPU while there are pressures, as you would expect. We have a number of initiatives that we're driving that we're confident will continue to have solid ARPU growth for us. As we head into back to school, our expectation is, of course, it's going to be competitive, just like it is every year. As we enter the back half, more than half the annual loadings occur, starting with back to school. And so, as that kicks off in the coming days and weeks, you can expect us to focus on the Rogers brand in the back-to-school category, together with bundling with our home Internet and, in particular, our 5G fixed wireless access product for Internet. Our focus has been and will continue to be on the value proposition beyond just price. Our expectation is to continue to be disciplined on handset financing and our approach there. We don't see ourselves moving into subsidizing handsets which one of our competitors is focused on. We have a different value proposition, and we're going to focus on 5G and the Rogers brand, as I said.

Regarding deleveraging, we have effectively managed our primary sources which are earnings growth and free cash flow. Typically, a significant portion of our free cash flow is generated in the latter half of the year, particularly in the final four months. We anticipate our free cash flow to be approximately $3 billion, within a range of $2.9 billion to $3.1 billion. Our cash paid dividends amount to about $700 million, which leaves us with roughly $2.25 billion to invest. We plan to allocate around $0.5 billion for spectrum this year, deducted from our available free cash flow, with the remainder dedicated to debt reduction. These two elements are our main strategies for consistently deleveraging over time, and their effects are evident in this quarter and previous ones. We will proceed with asset sales as planned. We do possess some vacant real estate that can be sold, as well as properties that we occupy but could potentially sell and lease back. The most efficient approach involves disposing of assets that do not require leasing back. However, we will consider other transactions if they make sense, but we are not in a hurry to sell. We adapted our strategy at the end of last year, recognizing a softer market for asset sales, and capitalized on an opportunity by selling our Cogeco shares, which resulted in significant debt reduction late last year. This strategy has given us some flexibility to avoid hastily selling our real estate and non-core assets, although we remain committed to progressing those sales.

Thank you.

Thanks, Maher.

Thanks, Maher. Next question, please, Galen?

The next question is from David Barden with Bank of America. Please go ahead.

Hi. Good morning. Thanks for taking the question. It's Matt sitting in for Dave this morning. I have two questions. First, regarding Wireless, I wanted to follow up on Drew's previous question. I know the emphasis has been on the Rogers brand and its improved network quality. Bundling is increasingly common in the market, so considering that, and noticing that churn seems to be increasing, I'm curious about your perspective on it. Do you see the churn as a return to normal, or do you anticipate that as this strategy develops, we should expect to see some benefits from churn going forward that we should incorporate into our models? Second, on Cable, it's positive to see the expectation of growth or a return to top-line growth by year-end. Should we anticipate some price increases in the latter half of the year? I understand there are various factors at play, like the enterprise segment, TPIA, fixed wireless access, and MDUs in the west, but will price increases contribute to achieving that positive inflection point? Thank you.

Thanks for the questions, Matt. Let me start with on the Wireless side. As you said, just filling in from the response I gave to Drew and the impact on churn longer term. If you look at the quarter and the last several quarters, there's been heightened churn. It's probably worth dissecting for you that as we focus on the Rogers brand, what we're seeing is on that brand improving churn and as customers get on the 5G network, and we're very disciplined about 5G being only available on the Rogers brand. And, in particular, as they get to, excuse me, as they get to unlimited plans and the simplicity of the billing of it and certainty of the billing and the performance of the network. Those have been good drivers to improve churn and customer loyalty on the Rogers brand. As you look to the overall combined churn, most of that is happening in the flanker category, quite frankly. And so, what we are seeing is customers moving around in that space as they are more price-conscious. And we also see some customers going from postpaid to prepaid, given the similarity of the product and some of the advantages that prepaid have for them. As we look to the medium term, we've said that we would expect churn levels to continue to be elevated for those reasons. Long term, as we look out beyond the next three to four quarters, our expectation is we will see churn levels likely decline, but we think it'll be some time before we enter that space. Notwithstanding that, the churn is happening against the backdrop of a continuing growing market. And so, while churn is up for the industry overall, gross additions are up significantly, and our market share in gross adds continues to be strong, leading and continues to improve. And so, on a net add basis, we see the market continuing to grow in the roughly 4.3% to 4.5% range for the year, overall for the industry would be our best estimate. And within that, we expect to continue to lead on market share on net adds.

Regarding your question about Cable returning to growth, I won't go into specific details about our marketing strategy, as I prefer not to preannounce anything. However, I can say that throughout this quarter, I've mentioned the importance of discipline. This includes being cautious about discounting rather than just focusing on price increases. We've noticed a highly active and competitive market, and we are being strategic about when to engage and when to reduce discounting. You will see this reflected throughout the second quarter and into the latter half of the year. It's about consistent efforts rather than simply increasing service charges.

That's great. Thank you so much.

Thanks, Matt.

Thanks, Matt. Next question, please, Galen?

Certainly. The next question is from Stephanie Price with CIBC. Please go ahead.

Good morning. I had two questions on the Cable business as well. Maybe first, I was hoping you could talk about the uptick you're seeing in the fixed wireless offerings and how you kind of think about that mix of fixed wireless versus TPIA as you move into the 40% of the country where you don't have a wireline presence. And then second, just on Cable margins. Obviously, very strong in the quarter, and commentary was encouraging about the potential to increase that. Just curious about what other initiatives you have underway and how you think about driving margins from here?

Thank you for the questions, Stephanie. Since launching fixed wireless access, we have rolled it out nationally with a focus on areas where we lack a cable presence, particularly in Quebec and Southwestern Ontario. We are very pleased with the product's success and appeal. Consumers and businesses find it easy to purchase and get started almost instantly. The product is performing well not just in those markets but across the country. We have noticed that certain segments, including students new to Canada who are still looking for stable living arrangements, are drawn to the product due to its convenience and mobility. Fixed wireless access is performing well compared to TPIA, which we have just launched. As mentioned before, we acquired Comwave to provide a platform back in the fourth quarter and wanted to relaunch the product to include not only Rogers Internet on TPIA but also the full range of services we offer, especially the entertainment product Rogers Xfinity. It’s still early, and comparing the two is challenging because of the different timelines. Each has a unique use case depending on customer bandwidth needs, especially in homes with multiple users engaging in entertainment and video calls at the same time. Currently, we believe TPIA is the better option. However, as we implement network slicing, the possibilities for fixed wireless access use cases continue to expand. We will offer both solutions and let the market determine which best meets customer needs.

Thank you for your question about Cable margins and our ongoing initiatives. I'm encouraged by your inquiry, especially since we are one year post-acquisition of Shaw. There is still potential for further growth, and I am pleased with the progress made in integrating our teams and managing personnel costs. However, we have several significant initiatives and opportunities ahead of us. We are actively engaged in systems integration, which will bring needed improvements. Our work on ERP systems is ongoing and will enhance efficiencies in our operations, leading to better customer service and reduced costs. We are also continuing vendor negotiations; while we have addressed a considerable portion of those multi-year contracts, more work remains. With our increased scale on the wireline side, this positions us favorably for future opportunities as we engage with these contracts. We are in the early stages of enhancing our wireline or fiber backhaul to replace microwave backhaul. Construction is ongoing, and we expect to reduce microwave costs at our wireless cell sites in the coming years. Additionally, we are just beginning to address media content costs, and as I mentioned earlier regarding the Warner deal, we aim to source content more cost-effectively while tailoring our offerings to customer preferences rather than overwhelming them with a wide array of channels that often go unwatched. We have several initiatives set to unfold not just in the next few quarters but over the next few years, with ample opportunities ahead. Thank you.

Thank you.

Thanks, Stephanie. Next question, Galen?

The next question is from Tim Casey with BMO. Please go ahead.

Thanks. Good morning, Tony. Could you discuss the changes you've observed in competitive pricing in the wireless market and your expectations for how it will unfold during the back-to-school season, especially compared to last year? While we anticipate promotional activities for back-to-school, I'm sure the market and investors would appreciate your insights on the outlook for pricing offers as we enter this seasonal period.

Thank you for the question, Tim. It's always challenging to predict market dynamics. We have a plan for how we want to approach the upcoming back-to-school season. As I mentioned earlier, our focus will remain on the Rogers brand, bundling, and other relevant offerings for students, including the option for adding additional lines to the plan. We will also leverage our distribution channels to compete effectively during this season. In terms of how we expect it to compare to last year, we had four strong competitors in the market last year, and we are facing the same competition this year. Therefore, we anticipate that it will be competitive and at least on par with last year regarding pricing and promotional offers. We'll need to monitor the competition and adapt our strategy accordingly. Overall, our expectation is that this year's situation will likely not differ significantly from the previous year.

Thanks, Tony. Could you provide insights on the bundling environment? Are there any changes you've noticed regarding cable competition, particularly in Ontario compared to what you're observing out west?

It's important to set out that the bundled customer is still not the majority of customers across the entire nation, and that's true not only for us but the industry overall. And so, bundling has a lot of appeal beyond just the bundle discount, but it's still, frankly, early days in terms of bundling. As I said, it has some convenience. And part of the appeal of fixed wireless access is you can walk out of the store with a phone as well as home Internet that's just ready to go. And so, it's a simple, easy process. But in terms of the trend we're seeing in bundling between east and west, it's about the same. I would say there's probably a bit more inertia in the west, only because we haven't been able to offer the bundled product previously prior to closing Shaw, and so having an alternative out west has given us a bit of an advantage, and so we're seeing it slightly higher in the west, but longer term, we expect the use case to be the same across the nation.

Thanks, Tim. Next question please, Galen?

The next question is from Batya Levi with UBS. Please go ahead.

Great. Thank you. Can you provide a little bit more color on the drivers of wireless ARPU growth going forward? Do you think that the lower mix of flanker brand in there is still a driver? And how should we think about accounting for Disney Plus add-on? Does that also drive better ARPU? Thank you.

Thanks, Batya, for the question. As I said earlier, our expectation is to continue to focus on not only leading market share but leading ARPU growth as well. And so, there are things we focus on there. One is focusing on the Rogers brand and base management. Glenn referred to it earlier. It's basic blocking and tackling of looking at a customer set. And is there a value proposition relative to the plan that they're on now, proactively outreaching the customer. So, it's things like that. And so, in base management, we like what we see in uptiering customers on the Rogers brand and customers on either the Fido and, as I referenced earlier, on the Chatr brand and uptiering them to the 5G network and the Rogers brand. So that's in and of itself the single biggest driver of continued expansion. The second area is roaming and coming up with roaming alternatives and packages that give the customer more certainty and at the same time gives us more consistency in that type of revenue. And so, as we introduce some of those plans in market, we expect that to have a favorable impact on ARPU as well. Beyond that, I really don't want to get into too many of our marketing plans for competitive reasons other than, those are probably two of the items that are going to be most significant but, frankly, most basic.

Thanks, Batya. Next question, Galen?

The next question is from Jerome Dubreuil with Desjardins. Please go ahead.

Hi. Good morning. Thanks for taking my questions. My first question is about TPIA in Quebec. You're focusing on this strategic move, which is interesting given your extensive coverage of the country in terms of fixed services, especially as we approach the CRTC decision. Your acquisition of Comwave seems to indicate this direction. Could you please share your view on the regulation of TPIA and how you expect it to develop? My second question is about EBITDA growth related to guidance. If my calculations are correct, we need to see some acceleration in EBITDA growth compared to the second quarter. Can you discuss the factors that would contribute to accelerated EBITDA growth in the second half compared to the second quarter? Thank you.

I’ll start with the first question. Regarding our perspective on TPIA, we have maintained a consistent stance. We require a regulatory framework and environment that supports facilities-based investment, which is essential for developing and expanding networks across the country. Promoting rural connectivity is a shared objective, and thus, having wholesale rates that accurately reflect full costs is crucial if we are to have a wholesale regime, which the government appears committed to. Additionally, if we are going to establish a wholesale regulatory framework, it must be fair and uniform across all networks. Those are our viewpoints. As I mentioned earlier, in markets where we do not yet have homes passed, customers are seeking solutions to bundle with their wireless products. This presents us with an opportunity to enter those markets and provide bundled solutions.

And then on your second question, Jerome, on the EBITDA growth through the first half of the year. If you take 2023, and this is true if you go back in prior years, a larger portion of our annual EBITDA is earned in the second half of the year. If you look at last year, 45% of our annual EBITDA was earned in the first half. If you factor in the fact that Q1 didn't include Shaw, you pull that in, it goes up by 1 or 2 points to 47% of the year's EBITDA earned in the first half, just over half than in the second half. I expect that pattern will bear out again this year. Media is very, very strongly seasonal in the second half, and so that's part of the driver. Media is not a significant part of the consolidated EBITDA maybe in percentage terms, but almost the entire amount of EBITDA earned by Media comes in the last four to six months of the year. The baseball season and the NHL season, both are heavy second-half related. And so, I'm confident that we will bear out those patterns in the second half. I'm very confident with the guidance we've given.

Thank you.

Thanks, Jerome.

Thanks, Jerome. Galen, we have time for two more questions.

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

Good morning. Thank you for taking my questions. I would like some clarification on the growth trajectory of wireless service revenue. The 3.5% growth you mentioned is likely still leading in the sector, given the competitive market conditions. However, previously you were above 5%, possibly even over 6%. I was a bit surprised by this sequential trajectory. Typically, Q2 experiences a seasonal increase in wireless service revenues compared to Q1. Besides the known pricing pressures, were there any specific factors, such as roaming or other fees, that contributed to this? Also, on a broader note regarding long-term cost reduction, I would like to hear your views on the potential for larger cost rationalization in the industry, especially in light of GenAI and the overall opportunities for the telecom sector to manage their margins amid tighter service revenue conditions, as we are currently observing. I would appreciate your insights on this as well. Thank you.

Thank you, Aravinda. Regarding wireless revenue growth, I am pleased with our progress, although we always strive for more. In a highly competitive market, where we've heard significant concerns, we've adhered to our plans and maintained our pricing discipline, managing discounts while continuing to grow our market share and protect our margins. We are comparing against strong performance from the previous year and still achieving good growth this year. You are correct that the 4% growth we reported in Q2 is slightly down from Q1 by a point, but we still achieved 4% revenue growth and 6% EBITDA growth. While I won't say I am satisfied or pleased, those results are strong considering the competitive landscape. We are actively seeking opportunities to upgrade customer service plans and move customers to our premium brand. Data usage continues to grow by approximately 30% year-over-year, and we are leveraging those trends to transition customers into higher service plans, including 5G. Regarding roaming, those trends have mostly been fully accounted for, and while we will explore opportunities, I do not anticipate a significant impact on future revenue. On the second part of your question, Aravinda, on cost reductions, do we continue to see opportunities? And the short answer is absolutely. We will continue to seek efficiency improvements, and the tools that are increasingly becoming available are going to greatly assist. You mentioned AI. We're being very thoughtful and selective about the tools that we will, in most cases, license from larger players that have solutions that are ready to go. And we see that being able to take out a bit of cost, not only in our customer interactions but also in many of our back office and network operations. And those tools are already being implemented with really good early success on it. And the second big part of it is just transacting digitally. As an industry overall, but particularly in Canada, it's probably fair to say that it's still a significant minority of transactions that happen digitally. And we know that consumers and businesses are looking for alternatives that are easier and quicker to transact. And so, as we improve our digital capabilities, our expectation is the customer is going to have a much better experience at a significantly lower cost. And so, we'll continue to invest in those areas. And you'll see that some of it in our CapEx but also in OpEx as we license many of these platforms. But nonetheless, with that, it'll be within the CapEx envelope we have and within our goal to continue to expand margins. So, continued opportunities for sure, Aravinda.

Thank you.

Thanks, Aravinda. Galen, we have time for one more question.

Thank you. The final question is from David McFadgen with Comark Securities. Please go ahead.

Oh, great. Thanks for taking my question. Looking at the Wireless business, I noticed that other operating costs in the quarter decreased by 3% year-over-year. Is there anything unusual about this quarter, or should we expect similar results in the future? Additionally, on the Cable side, there was an increase in video losses. Is this the new normal? In your written commentary, you mentioned satellite losses as a factor that impacted Cable revenue. Since you don't disclose your satellite subscriber numbers, could you provide details on the satellite losses for the quarter and the satellite subscriber base at the end of Q2? Thanks.

Thank you, David. Regarding your question about the decrease in Wireless and other operating costs, we are focused on finding efficiencies and reducing expenses. I wouldn't highlight any specific factor, but we aim to achieve scale efficiencies in Cable and improve overall efficiencies across Wireless, Media, and head office costs. I won't provide further details on that. Concerning Cable and Satellite, while we don't share specific figures, it's well-known that Satellite is a mature business. To quantify it, the negative 2% overall revenue decline in Cable is largely due to Satellite, so without Satellite, that decline would have been significantly less.

And then just on the video losses out of Satellite, it ticked up in the quarter. Is that a new run rate? Just wondering about that.

No, I think it's likely more seasonal than anything.

Okay. All right. Thanks.

Thank you.

Thanks, David. And thanks all for joining us on our Q2 call. The IR team will be around if you have any follow-ups. And, Galen, I'll pass it over to you to close out the call.

Thank you. This concludes the question-and-answer session and brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Thank you all.