Shaw Communications Inc
TSX:SJR.B
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Shaw Communications Inc
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Thank you for standing by. Welcome to the Shaw Communications First Quarter Fiscal 2018 Conference Call and Webcast. Today's call will be hosted by Mr. Jay Mehr, President of Shaw Communications. [Operator Instructions] And the conference is being recorded. [Operator Instructions] Before we begin, management would like to remind listeners that comments made during today's call will include forward-looking information and there are risks that actual results could differ materially. Please refer to the company's publicly filed documents for more details on assumptions and risks. Mr. Mehr, I would now like to turn the call over to you.
Thank you, operator, and happy New Year to everyone joining Vito and myself on the call today. We appreciate everyone being flexible regarding the call -- the timing of the call this morning. Given last week's bad news of the passing of Shaw Communications' Vice Chair and Former CEO, Jim Shaw. Brad and the family are in preparations for his service tomorrow and, therefore, are understandably unavailable related today's conference call. However, Brad did ask me to convey his deepest gratitude to everyone for their kind and thoughtful messages that he's received over the last week. On a personal note, I wanted to take just a moment to express the immense impact that Jim has had on my career and me personally as I spent most of my 23 years at Shaw working alongside Jim. Those of you listening who knew him knew that -- know that he has a larger-than-life personality and was an icon within our industry and the overall Canadian business community. Jim was instrumental to our company's success as he led Shaw Communications as CEO for 12 years and has been part of our business for over 35 years. Jim's significant contributions to this company are evident today and are reflected in our position as a leader in the Canadian industry. Jim was one of my most influential mentors for sure, and I will carry fond memories for -- of him. Our hearts remain heavy with sadness as we say goodbye to a visionary leader and friend. Jim, you will be dearly missed. And I know I speak for every Shaw employee, including myself, when I say we're focused on not letting you down as we continue to build this great company.Moving on to the formal remarks. We've entered fiscal 2018 in an enviable position. Last year, the optimization of our asset base continued as we disposed ViaWest and secured valuable spectrum that enabled us to continue the execution of our long-term strategic initiatives. Our financial position has never been stronger, and we're making significant progress with respect to our wireless and wireline investments. Our customers are our motivation, guiding our actions and are at the center of every decision we make. We continue to invest in our business so that we can offer innovative products and services that will meet their demands and future expectations as well as create value for all stakeholders. Our Wireless business is well situated to deliver growth as we build on the foundation of our LTE-Advanced network; the refarm of our 10 megahertz of AWS-1 spectrum, which was recently completed in Vancouver, Calgary and Edmonton; significantly expanding Freedom's addressable market as this spectrum supports nearly all LTE devices currently in use in Canada. This work is also well underway in Toronto and the GTA. At the same time, the company has also begun deploying the recently acquired 2,500 megahertz spectrum, further improving network quality. With this efficient use of spectrum, over 4 million Canadians in our wireless footprint not in contract can now bring their own device to Freedom Mobile and enjoy the benefit of our LTE-Advanced network. More than ever, customers are acutely aware of the cost of their wireless bills, and until recently, they were forced to accept limited amounts of data as part of their premium-priced wireless service. We launched our Big Gig data plans in October, and consumers, the media and the competition took notice. Not only are we providing customers with options for 10-plus gigabytes of data in their monthly plan but we can do so at a price that is both sustainable for us and affordable to Canadians. We launched the i Phone in early December and have already seen significant improvements in the levels of our acquisition and retention of customers. We are excited that we were able to offer this iconic device prior to the holiday season, and in fact, December sales of iPhones have exceeded our expectations. The increased customer demand since launching Big Gig and the i Phone continue to highlight the desire from customers to get more data for less and supports our overall wireless growth strategy. Throughout F '18, we will continue to enhance the wireless experience as we deploy our 2,500 and 700 megahertz spectrum across our footprint, improving both the quality and coverage aspect of the network, as well as launching VoLTE by the end of the fiscal year. We also continue to improve the breadth of our current wireless distribution, including increased marketing support for our recently launched online sales channel. We believe all of these factors, including our network and distribution improvements, iPhone carriage and attractive data packages, will have a meaningful impact on our subscriber loading compared to the historical results since completing the acquisition of WIND in March 2016.In our Wireline Consumer business, we've delivered a sixth consecutive quarter of Internet RGU growth, primarily due to the success of our flagship WideOpen Internet 150 product, which is available to over 99% of our footprint. Today, over 90% of our new Internet customers are taking speeds of 75 megabits per second or higher, and over half of those are opting for a 2-year ValuePlan. The strength of our network is evident in our broadband subscriber results, and we expect the trend to continue as we meet and exceed the demands of our customers. Video results reflect our balanced approach to subscriber growth and retention. We have reduced our promotional activity and focused our efforts this quarter on higher-value video subscribers. We continue to be excited about our premium TV service, BlueSky, now fully integrated with Netflix; and the BlueSky roadmap, which enables further innovation, transforming the video landscape. Shaw Business continues to deliver consistent growth, and the success that we're experiencing in this segment is primarily due to our smart portfolio of managed services that focus on small to medium-size businesses. In December, we launched a fourth product in this portfolio, Smart Surveillance. Through our best-in-class partner approach, we will continue to provide innovative products and services that complement our connectivity services. I will now turn the call over to Vito to review the Q1 fiscal 2018 results.
Thank you, Jay, and good morning, everyone. Before I get into the detailed financial results, I would like to remind listeners that effective Q1 of this year, our reporting consists of 2 separate segments: Wireless, which has not changed from previous disclosure; and Wireline that now combines Consumer and Business. We will continue to provide separate revenue and RGU metrics for each of Consumer and Business, and EBITDA will be a combined result on the basis that costs have become increasingly inseparable between the 2 segments.On a consolidated basis, first quarter revenue of $1.25 billion increased 2.7% and EBITDA decreased 4.6% to $481 million over the comparable period. Let's review each segment in more detail. Starting with Wireless. Revenue of $175 million in the quarter increased by $37 million or 26.8%, and EBITDA of $35 million increased 16.7% over this same period in fiscal 2017. The improvement in Wireless is primarily related to the increase in subscribers of approximately 130,000 relative to a year ago for a total wireless customer base of almost 1.2 million as at the end of November. It's important to note that many of the positive developments Jay referred to earlier, such as the iPhone launch and the spectrum refarm, are subsequent to the quarter end and, therefore, has no impact on the current quarter results.In Wireline, Consumer revenue declined to $935 million or down 1.3% while Business revenue increased 6.1% to $140 million. Wireline EBITDA of $446 million declined 5.9% over the comparable period. The decline in year-over-year results was primarily driven by consumer video as the impact of increased promotional activity that took place in the second half of fiscal 2017 as well as higher planned corporate costs more than offset growth in Internet and Business. While overall Wireline results were down year-over-year, Consumer Internet and Business remained important growth drivers. Capital spending in the quarter increased to $353 million or $84 million higher than Q1 fiscal '17. More than half of the increase was driven by wireless network investments, including spectrum refarming, deployment of 2,500 small cell coverage and maintenance. Free cash flow in the first quarter of $51 million compares to $158 million in the prior quarter -- excuse me, in the prior year. The decline in the current quarter is due to increased network investment and lower Wireline EBITDA. Net income for the quarter of $114 million compared to $89 million in the first quarter of fiscal 2017. The increase reflects the prior period nonoperating loss, partially offset by lower EBITDA and higher income taxes in the current quarter. We continue to have significant flexibility as leverage remains at under 2.0x, and we have approximately $445 million of cash and $1.5 billion in liquidity through undrawn lines of credit. In summary, we delivered first quarter results in line with our expectations and consistent with our message from last quarter. We remain committed to our balanced approach in Wireline, and we'll focus our efforts and spend on higher-quality subscribers. We can also confirm that we remain on track to meet F '18 guidance, whereby we expect consolidated operating income before restructuring costs and amortization to go to approximately $2.1 billion, a year-over-year projected increase of approximately 5%; capital investments of approximately $1.38 billion; and free cash flow of approximately $375 million. I also want to remind everyone that we expect the majority of the EBITDA growth to come in the second half of fiscal '18, consistent with our messaging that we provide -- when we provided guidance back in October. Let me provide you with a bit more detail on the growth drivers in the balance of the year. Wireline EBITDA growth ramps in the second half of the year due primarily to improved broadband margins. We see continued migration to higher Internet tiers. And as you saw in November, we increased the effective average Internet pricing, including ValuePlans, through a combination of a reduced promotional period and pricing increases. We continue to believe that our Internet products have pricing power as customers increasingly expect a fast and reliable Internet service. Our Business segment is expected to deliver consistent top line growth with strong margins. And in our Wireless business, we expect to increase our subscriber base and load more customers onto $50-plus rate plans as a result of the network enhancements and the Big Gig data plans. With that, I'll turn the call back to Jay for some closing remarks.
Thanks, Vito. We spent several years laying the foundation for growth, and the potential opportunities for our business have never been better. Amidst the unrelenting pace of change, disruption and competition, we remain focused on execution and staying the course. I firmly believe we have a winning combination of products and services combined with the talented management team that will deliver growth for all stakeholders.Thank you. And we'll turn it back to the operator for questions.
[Operator Instructions] Our first question comes from Vince Valentini of TD Securities.
Let me start by just saying Jim will be dearly missed and pass on my condolences to everybody at the company and the family. I know it's a tough time. My question, to start with, maybe for Vito, the -- can we just level set expectations on the Wireline side? So you went back to 3- and 6-month promotions versus the 12-month promotions in November. Does that mean we should see ARPU and, therefore, margins immediately snap back in Q2? Or does it take a little while for that to filter through your billing cycles?
Yes. Vince, it's Jay. I'll start and let Vito add some details to it. Yes, so we're doing what we said we were going to do, and we got the results that we expected to get. In fact, our Q1 results were a little bit ahead of budget and plan on EBITDA, although not really notably ahead basically, right on top of the results. There's no question, the way the change of promotional packages and prices work is you get RGU payment in the front end and you get financial gain at the back end, and that 6-month time lag is about right. If you think about the timing of all this, Q1 looks a lot like Q4 did. And on the Wireline side of the business, Q2 is going to continue to look a lot more like Q1 than the second half of the year. I mean, you won't recognize the Wireless side of the business in Q2 because it's different than anything you've seen before. So that part of Q2 will be different. And then the -- primarily revenue growth that comes from all of the pricing and promotional changes are material starting in Q3, and then you get the full value of it in Q4. So it's a time lag, but we believe on the -- we believe we've got the right approach here.
Yes. Thank you, Jay. I mean, I think you nailed it there. Vince, when you look at the EBITDA for the Wireline versus prior quarter, we were actually flat prior quarter, obviously down versus prior year. And I think you can see that that's a start -- as the pricing is starting to take effect and the migration -- continued migration in packaging. And we'll see that continue and improve as we move forward. So definitely, back-half loaded as the base shifts into the higher pricing and the promos fall off a bit.
Okay, great. And if I can shift for a question on Wireless. So to pick up on what you're saying there, Jay, that we won't recognize things in Q2. Are you willing to be any more definitive at this time as to what your sub adds and ARPU have looked like in the 6 weeks or so since Q1 ended?
Yes, sure. Well, I would tell you that I'm going to share a bunch of stuff and you'll probably come away thinking I haven't shared that much because that's what you usually say, Vince. The -- I think if you look at our transition into Big Gig, the launch of Big Gig was certainly successful for us, and we saw some nice but small migration in the base in the months of October and November, end of October, beginning of November. We didn't really see -- in fact, we didn't see an increase in gross sales volume. We saw the adds coming in at a higher price point, in and around -- starting to approach the $50 level at that point. And so we are seeing a healthier base, and we were seeing about 1% of the base a month moving up in terms of $6 or $7 a month in ARPU. So that's what you've seen in November. We might have frozen the market a bit both with our iPhone announcement and then also with our iPhone presales. So starting Black Friday, we did iPhones on presale, but all of those iPhones we sold, you'll see in the December numbers because they were all filled, most of them, in that December, 8, 9, 10 weekend kind of activity. I would say a couple of things about our new business because it does sound -- feel like a new business starting in December. And it was -- on the last call, we said to you that nobody ever underestimated the importance of Apple to our business, which meant to say that we were in active negotiations and we were -- we knew how important it was. To be clear, I underestimated the importance of the iPhone to our business. It has changed all aspects of our Wireless business. We're adding customers, all of them north of $50 monthly recurring revenue. We're selling a lot of phones. And you can see this in our numbers. We haven't historically been a place that sells phones as a high percentage of our net adds, and that has changed. So I think you're going to see a net gain in Q2 that's meaningfully stronger than what you've seen from us at any time and, as important, a really, really healthy revenue component to those net adds. Obviously, we had 4 or 5 days of record disconnects when we had our competitors jump into the space right before Christmas on greater distribution, and to be clear, our 3G base is exposed to those kinds of things. We've been exposed to Public Mobile in the past, and we were certainly exposed over those 4, 5 days. So it's maybe not quite the net quarter that we might have thought at one point it was going to be, but it's going to be very different than what we've seen in the past.
Jay, I'll just add. The ARPU commentary there, Vince, very similar to the Wireline side. I think it's going to obviously take some time for these customers who are coming in at a rate plan greater than $50 to have a more meaningful impact on our overall weighting. And you'll see that more back-half end loaded as -- and into F '19, obviously, as we move forward.
Okay. And if I can add one last clarification there. So you obviously had this huge surge of iPhone sales, given the promotions you had at sort of Black Friday and beginning of December. From your learnings from that experience, do you think you need to be that aggressive in the future, offering sort of $0, 8s and 10s? Or is that viewed as sort of temporary versus your more consistent promotional behavior? How should we think about that?
Yes. I would say this -- I would say to you the thinking this way. The Big Gig pricing is our pricing. And Paul will tell you he doesn't like to change rate plans, pricing. There's lots of complexity in distribution. It takes people a period of time to get in the cycle. It takes customers a period of time to get into the cycle. Our Big Gig pricing is our pricing, and don't expect to see us move from that on a weekly or monthly basis. We're going to have a pricing umbrella. So if we have some things that happen on pricing like happened before December, I think we came down $10, which I think was a measured approach, given the marketplace. We need a pricing umbrella just for where we are in the segment, I think. I think everyone understands that. So Big Gig pricing is our pricing. Device pricing and financing is a lever that we will use as we come in and out of the market. You only get to launch the i Phone once. We've waited -- this business has waited for an i Phone for a long time. We chose to launch it with impact, and we think that was a great call. What we do with device pricing, that's much more in response to the competitive environment and what happens on a go-forward basis. And part of it is the 0 down component, part of it's the amount of subsidy. All of that is being worked into our analysis. That having been said, we like the results that we're getting on the current pricing and we think it's sustainable, but you might see us make some adjustments on hardware pricing.
Our next question comes from Jeff Fan of Scotiabank.
And I just want to express my condolences to the Shaw family as well. Just a few follow-ups from the questions before and the answers before. Jay, I think you mentioned that -- around the Wireless competition in those 3 or 4 days, you mentioned that you saw a bit of a record disconnect. Is that what you pointed to? And I guess you mentioned the 3G base. So I guess the next question would be, how big is your 3G base? And how quickly are you whittling that down? And then just along the lines of competition in Wireless, I think you've made the point that you only launch an iPhone once and it's your coming out party. Did what the big 3 do in the market kind of dull some of the -- I guess, the upside that you would have expected to see from the i Phone, given how active they were in responding in that -- those 3 or 4 days' period?
Yes, great. Thanks, Jeff. The -- I did -- I don't know that I intended to use those exact words, but I did use the words record disconnects and they were correct. Look, the market got activated. And if you were in a [ MO ] over those 4, 5 days or talking to people, the Wireless market got active, and I guess you could argue we were a source of that activation. And I would make the argument that if the big 3 won't activate the market, in the long run, we'll win because we'll benefit from people shopping around and so forth. We took big disconnects over those 4 or 5 days, as you could imagine. We have a -- you've seen our historical base at $37 ARPU and they were exposed to those kinds of offers from other competitors. So we were going through strong daily net gains going into those days, and clearly, in that short period of time, there was -- our gross sales held up nicely. And we continued to get lots of movement from the big 3, but they got some movement from us over that period of time. That having been said, not to overstate that, you can't -- unfortunately, you can't replace the 5 key selling days before Christmas with 5 days in February, which was probably by design. But I think it was a healthy moment in time where the marketplace had a chance. And probably, in the medium term, if 10 for 60 -- 10 gigs for $60, including voice, has become a thing, we're the place you can get it in the marketplace. And so I think, in the medium term, that helps us. When I made my comments about the 3G base, we've correctly identified that, as we refarm and move into LTE, that large chunks of the 3G base will convert to LTE on a network basis. And we will get to the point where we'll have maybe 250,000 or 300,000 3G customers on the 3G network. I was mainly being a little lazy in my words. When you talk about the legacy base that's at the $37 ARPU, we're going to be able to move a portion of that base up into our plus $50 ARPU pricing. But remember, a bunch of that base is in a different space. It's in the space now occupied by Public Mobile, chatr and Lucky, and what we're occupying now is a more mid-market space that's almost above that. So we're not necessarily going to be able to wave a magic wand, convert that base to LTE and have that it all miraculously come to $50 ARPU. So I think we're going to continue to do our best in serving the segment that we have, where we're growing a very different-looking customer profile as we go forward.
Great. And maybe just a quick one on the core cable side. The video loss in the quarter, when you compare it to last year, you didn't have BlueSky in the market, but this quarter you had it. And the loss seems to be a little bit bigger. So I understand you've slowed down some of the promotional activities, which probably caused that. But I guess the question would be, like how should we think about, I guess, video adds or maybe cable RGUs overall for the remainder of the year of fiscal '18?
Yes. Thanks, Jeff. A couple of things to think about there. One is we certainly are in an adjustment quarter. And our plan is to also have a decrease in video subs in Q2, although a smaller decrease than we had in Q1. And then our plan suggests that we'll be able to move, as we move through that segment of customers, to neutral or slight positive starting in Q3 and continuing to Q4, is the way we look at the business today. If you think about the impact of BlueSky in the business, BlueSky is working. You've probably heard us talk before about the 3 video segments that are evolving in the marketplace. There're the TV lovers, that is a TV customer who watches TV on a television set, often in a shared family room or some kind of shared room, where more than one person in the household is watching the thing -- TV together a couple of times a week. Those are our classic BlueSky customers. We do very well in this segment. We did very well in this segment in Q1. We continue to do well. The other 2 segments are the price-sensitive and the streamer segments. The price-sensitive is that group that is prepared to pay $15 or $20 a month for video. We have played in that space promotionally but we never make any money there. And as far as -- because we're trying to -- we've been trying to market our legacy product to that group and you just -- you can't make money on a $20 video product with a legacy cost structure and a set-top box and a $100 truck roll and 3 calls into the call center, that space just doesn't make sense. So you've seen us pause on that group. And you've seen that in our Q1 video subs, and you'll see that a little bit in Q2. On the streamer segment, it's a little similar to the -- so that's the third segment. It's a little similar to the price-sensitive group, but it's really about consuming on devices. We don't have a pure-play product there. You can watch the Comcast roadmap and predict what we're going to do in those areas. So we think BlueSky is working. Our customers that have BlueSky love it, and they're our highest-value customers. And I think you'll just see us stabilize the base as we go through the rest of Q2 and then go to RGU [ side ] Going forward. In general terms, phone has been pretty sticky for us. Internet is doing well, and we're going to continue to see gains. Satellite was a hair softer in Q1 than expected. It -- there's the normal seasonal factor in Q1. I don't know that there's anything all that structural happening in Satellite, but we are a few thousand behind where we ideally would want to be. As you look forward, Satellite business is going to be tough. We're going to manage it for profitability. ARPU is holding up nicely on satellite video, and I don't think we're going to chase the RGU number to try and replace high-end value customers with really low-end, low customer lifetime value. I think we're really going to be focused on retention there.
Our next question comes from Phillip Huang of Barclays Investment Bank.
First, I also want to express my condolences on the passing of Jim. In terms of my question, I want to ask first on the BYOD ARPUs. I was wondering if you could give any color on the types of ARPUs that first, you're seeing or that you expect to get, just given the expanded adjustable market, yes, on the BYOD market from the refarming. I'd imagine that we will see a nice lift in the segment in addition to those customers buying a new i Phone from you. Just trying to assess the magnitude of the corresponding lift to ARPU from the BYOD segment that you expect.
Great. Thanks, Phillip. So to be clear, our whole business has been a BYOD business for a long time. We have sold a small percentage of phones on activations, well beneath the average. The challenge has been our BYOD business has put everybody onto a 3G network because the phones were not compatible with even our LTE spectrum. So we've always been in the BYOD business, and you see that in our $37 ARPU. Over the course of November, we did see a nice uptick in ARPUs and more than what we were seeing on the base of that $6 or $7 in the BYOD space. As we balance subsidy with monthly recurring revenue, we're working on is there a $10 break, which there often has been for BYD -- BYOD, and we'll work our way through that. To be clear, in Q2, we haven't put any energy into BYOD. We only have LTE activated in the Western markets. So I think you'll see us find our voice on that when we're ready to go everywhere. And then also it's hard to say 2 things at once, and we've been saying iPhone as loudly as anyone will listen. So our BYOD customers tend to come on about $10 less than our i Phone adds today in terms of their monthly, and it's a space we have not really leaned into LTE yet.
Right. Got it. No, that's very helpful. I was just wondering from the 3G. Say, if I'm an i Phone 7 user and now I can go onto your network, whereas that would have been 3G before the refarming, then how much more I would be willing to pay to go on your network. And the $10 remark is helpful. If I...
We've got big opportunities for the second half. We're not going to get bored with iPhone because we've been waiting a long time. We're going to drive that. In the second half of the year, the value proposition you just described is going to be right at the heart of our market.
Got it. No, that's very helpful. If I could squeeze in a second one. I mean, you've obviously talked a lot about the strong demand on the i Phone for you guys and having a much bigger lift for your business than you had expected. I'm just wondering, to the extent that it's also having -- requiring you to spend a little bit more to support that growth, is there any corresponding offset to potentially mitigate the impact to the full year free cash flow?
Well, we -- Phillip, it's Vito here. I mean, clearly, the subscribers that are coming in, there's a reinvestment there, without the lift in ARPU, into subsidy and into cost of acquisition. All of that is embedded in our EBITDA guidance. In respect to, obviously, working capital requirements and whatnot, we guided last -- in October, around what we expected to see. To some degree, the effect that we're exceeding our own expectations, we'll have adjustments to that, but all very, very manageable, obviously, with our balance sheet liquidity and cash on hand. So nothing significant to report at this point.
Our next question comes from Greg MacDonald of Macquarie Capital Markets.
And like the rest, I'll express my condolences to the group. So a quick question I want to have is on the wireline, the basic subscribers in particular, and maybe just a little more color on the profile of the declines and potential impacts on ARPU or pricing power there. We do know that there was some competitive activity in the quarter, Telus pulled back its promotional activity, I think, it was in kind of early December. So there was an impact from a competitive standpoint there. But the press release also makes reference to a change in customer mix. I wonder, are you talking cord cutting or Jay, the reference to streamers that you're talking about? To what extent is cord cutting, which is having a bigger impact in the U.S., to what extent is that having an impact in Canada, either in basic customer declines or also in loss of pricing power?
Great. Thanks, Greg. It's not the perfect quarter for us to talk about the video landscape because we have the adjustment things around promotional customers that we don't make a lot of money on. And so I don't want you to look at our video RGU number and say, the world is changing for video. But that having been said, even after our video number stabilize again, the world is changing for video. The video landscape is changing for the entire industry. I don't necessarily accept that Canada's all that different than the U.S. I think, in North America, things are changing and things are changing with the amount of streaming content, things are changing quite frankly with just the amount of content that's available in the cloud or free through what people call piracy and whatever words they use to describe it, including on sports. The video world is changing and there's things happening on video. And people will try and lean in and adjust to make their own numbers look better and stuff like that. There is stuff going on here. To be clear, of all companies, I think our 2-year head start on BlueSky, combined with our Wireless assets put us on the sunny side of wherever those industry changes are. Now I don't think there's anything scary in for us. I think we had such video competition early that others haven't had, that our video ARPUs have already adjusted and our video market shares have already adjusted. So I think we're on the sunny side of the changes in the video market. But the world and consumers are changing, and we can't control that.
So to be clear, Jay, when you're describing in the release on change in video customer mix, I thought that, that was more related to what's happening in your promotional activity as opposed to cord cutting. Am I correct in making that assumption?
You are correct on that statement. So to be clear, what that statement clearly refers to is we have a mix of TV lovers and price-sensitive customers that we're playing in. We basically removed all of the offers that made video available for $15 and $20 a month. And as such, we didn't add any price-sensitive customers. You can imagine that segment has a high degree of churn as it comes off promotional periods. Now what we saw, we had a good quarter in our traditional TV lover's space. So that comment on the press release was about the structural change in our promotions.
Okay, great, that's helpful. And a quick follow-on, if I could, on Wireless. For the second half of the quarter, with Big Gig being in the market, could you talk even contextually about the profile of existing customers increasing their data plans going on to the Big Gig plan versus the impact of gross adds? That would be helpful. So existing versus new.
Thank you, Greg. If you look at migration within the base, there's always migration in the base and because so much of our base has been BYOD and so forth, there's lots of room for customers to move up and down. In the history of WIND and in our time owning the asset, all of that would net up over the course of a month to be about 1% of the base, maybe 2% in an active month. And historically, that would be quite neutral or may be down $0.50 in terms of monthly recurring. From October 22 to the end of November, that activity increased a bit in terms of overall migration. And when you net all the pluses and all the minuses, in terms of people adjusting their monthly billing, they came up about $7. And interesting enough as November unfolded, that moved a little bit even more forward, moved from high $5s into the low $7s in terms of the activity. So it's clear that we've hit the marketplace so that there's a portion of our base that really likes this Big Gig abundant data approach and is going to buy into it. To be clear, although if you're -- you need to be patient.
Yes, the 1%, right?
If you have 1% or 2% of your base adjusting on a monthly basis and all of our new adds coming in at over $50, I mean, we're going to have a lovely ARPU story in 1 year or 2.
Running in the right direction, absolutely.
But it takes a period of time for that to flush into the base.
Yes, and I'm drawing the conclusion that clearly, the bigger impact is the i Phone and the ability to sell that type of product into Big Gig plan, right? But when you say increased a bit, am I to conclude 1% going to 2% or something like that?
Directionally, you are on the right track.
Our next question comes from Aravinda Galappatthige of Canaccord Genuity.
Thanks for taking my questions, and I also want to pass on my condolences to the family. With respect to -- my first question is on Wireless. I know you can't get too detailed here, but I was wondering if you're willing to offer some kind of color on the -- for the mix of the net adds you're winning in Wireless these days, both regionally and in terms of, I mean -- my general understanding is obviously, that more of the wins are still in the city in Toronto. Has that mix sort of changed in recent times? Are you seeing more of a balance to the West as well? Or has it been sort of a maybe steady mix over the last several quarters?
We're -- you correctly identified that our Wireless business is a -- is quite heavily weighted to the GTA. Has been. We saw some pick up in Alberta, in BC for sure. And there were some really interesting movement in the Vancouver market. Vancouver is actually, I guess, not unlike Toronto, to a point; it's quite a price-sensitive market just because of the relationship of the cost to housing to people's income. And so we saw some nice movement in the Vancouver market. But to be clear, our December business continue to be incurred in Toronto, maybe slightly less so than in previous months. But the GTA matters to our Wireless business.
I'll just add on a net basis as well, predominantly postpaids, is where it all landed. I mean, healthy gross adds both on postpaids and prepaids but nice churn improvement on postpaid. So when you look at the net adds, significant majority of it is effectively postpaids, again, another strong ARPU feature indicator.
Great, thanks for that. And just a quick follow-up on the Wireless side. You experienced as you kind of refarm the AWS-1, I know you completed that in the West. What's sort of been your experience in terms of sort of network performance and capacity there? And what are your expectations as you kind of move that process to Ontario, where there's probably going to be much greater need for capacity? Do you feel that, that refarm spectrum can kind of support what you would potentially get in terms of demand in Ontario?
Great. Yes. I mean, to be clear, the refarming exercise happened so quickly in the West and has also happened in most parts of Ontario with the exception of the GTA. It's kind of hard to sell other communities until you get the GTA up to speed, so it really hasn't been our focus. It happened so quickly because there wasn't congestion, right? And so you could simply -- we didn't have enough customers to cause congestion in the West. And so you could simply move the spectrum over into a smaller number of sites you had to fill in with 2,500 in order to take -- to relieve congestion. The fact that Toronto is taking longer is partially just because civil construction is harder in Toronto and it just takes longer, I mean, we're not as connected there. But it's more materially because we've got a lot of customers in Toronto and a lot of activity. And so we just can't pull back that 10 MHz of AWS-1 without replacing it with 2,500 MHz. The team has done a terrific job and a shout-out to our entire technology team, and particularly the team under Brian in Wireless. The planning process of -- of course, 2,500 MHz is extremely dense and allows us to manage tremendous amounts of capacity. The plan works, and we're able to actually improve the customer experience as we do the refarm. And then the LTE network continues to be wide open even in Toronto. So from a congestion point of view, it all works. It just takes us a little bit longer. The good news is we've had the i Phone to be our focus for this 4 or 5-month period. So we haven't lost anything, and we'll be able to come hard with VOD as we complete.
Our next question comes from Tim Casey of BMO Capital Markets.
I just wanted to revisit a comment you made Jay, where you thought -- I think the expression you used you thought you were on the sunny side of the industry developments, yet you described your video business as really focused on TV lovers. You can't make money in the price-sensitive segment and you don't have a product yet for the streamers. Yet by your own admission, that legacy component or market is the one that is transitioning away. And it seems that whenever you stop the price lever, there's almost an immediate impact in subs. I'm just wondering if you could square those comments for us. And I guess, as a follow-on, you've indicated on the Wireless side, your pricing is your pricing. That doesn't seem to be the case on Wireline. It seems to be more dynamic. I'm just wondering if you can reconcile those thoughts.
Yes. Great. Tim. The -- if you think about our approach to video, we continue to do well in that TV lovers space, and we love this BlueSky product as does our customers because it integrates the Internet, digital experience and your TV experience, and it's the best-in-class experience. And the growth -- to be clear, even within our BlueSky base, maintaining ARPU is kind of the new op. We're not seeing big ARPU gains as we deploy BlueSky into that base, but we are seeing increased stickiness, reduction of churn, and the combination of BlueSky and Internet 150 is a terrific package, and when we ultimately add Wireless for that customer, that's a beautiful customer -- lifetime value customer. So that's a super important part of our business. When we said clearly that we couldn't compete in the price-sensitive or streamers space on our legacy cost structure, that was about us being very clear that the old cable company is not going to be able to compete with Netflix and Google and Amazon in the video space. To be clear, Shaw is going to compete in that space but we're not going to compete in that space as a traditional cable company. We've got a tremendous roadmap in the home from Comcast, so BlueSky is our first deliverable, but the whole Comcast roadmap is what we've signed on for. And we are totally committed. And this will be a bigger thing on the Wireline side of the business just because of scale. We are totally committed to creating a modern digital experience, which can both drive customer satisfaction and material bottom line savings. And as we deliver that modern service delivery model, with the modern product, there's money to be made in that space. And I think to be fair, it's probably less money than in the legacy space.
And that's flowing through our results.
Yes, that's flowing through our results. But we're working hard on not just the next set of product offering, but probably more important, that digital self-serve, no set-top box cost structure that will be critical for us to be in that space. So today, see us focus on TV lovers because we've got the best products on the globe for that. And we're working hard not only to deliver the next set of products, but digital, low-cost, self-serve, data-driven business model that really becomes the new Shaw in that space.
When do you think we'll get there, Jay?
I think you get the customer-facing solutions, certainly -- in calendar 2018, certainly. And you get major inroads in terms of self-install in calendar 2018. If you start talking about the completely digital network phone, Shaw, I think really, you make progress in that area, but that's more of a 24- to 36-month to completion in the transformation. We're spending an awful lot of time up -- on the Wireline side of our business, multiyear transformation, new operating model. We'll have more to say in this in the Q2 call, and you may even see in the next coming weeks on the operating model side that we're starting to make some significant moves on that side.
And Tim, in the meantime, you've got Internet really strong, you've got our B2B really strong, you've got obviously, Wireless and everything we've talked about. So we feel pretty good about those 4 components and how they're working through.
Our next question comes from Drew McReynolds of RBC Capital Markets.
Condolences to everyone as well. Two questions. First, Vito, maybe just provide us an update on your thinking with respect to the Corus stake, if anything's kind of changed there? And then secondly, on the Internet side, clearly, you guys are holding your ground and probably doing a little bit better. Can you just comment on the competitive dynamics within fiber-to-the-home footprints? Have they changed relative to perhaps some of your commentary over the last year or 2? Or is it just fairly status quo within those footprints from a competitive intensity standpoint?
Jay, why don't you take the Internet and then maybe sweep up the Corus one as well.
Sure. Okay. Well, let's start with the Internet one. With the strength of our Wireline network has us well positioned. We're making moves into DOCSIS 3.1, and we have built into the model another level of speed and service in the marketplace that would allow us to compete with fiber-to-the-home activity from our competitors. So we think we're in good shape there. We think there is significant customer value in our broadband product and quite frankly, in the broadband product that we offer by the fiber-to-the-home providers. And with that value comes pricing power, and so as we continue to deliver faster speeds and unlimited data, I think we think about it in that regard. I think it's fair to say through that fiber-to-the-home areas and our competitor compared to non-fiber-to-the-home, that in general terms, we are now indexing 3 or 4 points higher in the non-fiber-to-the-home competitive areas as opposed to 3 or 4 points lower in the fiber-to-the-home competitive areas. We have quite equal market share in most of the markets that we are in, very different than the U.S. and I think, even different than parts of Canada. So there's still upside for us in that space. We don't think we're missing anything, and we continue to make investments in our Wireline network and feel pretty good with where we are on there. And if I can comment briefly on Corus, I don't really have a lot to add to the public discussion around Corus. I think we'll leave that mostly to others. It was never our intention to hold this investment in perpetuity. And from our perspective or from my perspective, look, we have a terrific balance sheet. We've got a solid EBITDA growth story, and we have no urgent cash requirements, would be our comments on that.
Nothing much more to add there, really.
Our next question comes from Maher Yaghi of Desjardins Securities.
My condolences to the family as well. I wanted to ask you, Jay, about your comment on the promotional activity that happened in December. You discussed it to a good extent. But I wanted to understand, why do your customers who pay in the $35, $40 range, as you said, mostly are 3G customers, taking promotions at $60 for 10 gigs, while you had in the market a product for $50 and 10 gigs. Why -- what's -- what is driving -- or what drove these customers to go to the competitor for something that you already offered and could -- they could have taken advantage of already? So I'm trying to understand what you need to do to keep those customers happy more than what you're doing already?
Great. I would say 2 things on that. One is I know -- I understand the philosophy that the direction of the base of customers that we bought when we bought WIND is determinant of our success in the Wireless business. I would make the argument that when we bought WIND, it wasn't about the customer base, it was about the spectrum and the network and the opportunities and the chance to point the business in a direction that we're now pointing. And so I understand that people would like to see us aggressively monetize the historical base and bring them up the chain. We're going to do some of that. But clearly, when we talk about our aspirations in the Wireless business, it's to play in a different space. And today, we're in quite a different market position because that's what was available to us. The reason the victory or having such success with Lucky and chatr and perhaps Public Mobile is very difficult for us to compete with them in that space, when you look at their distribution, when you look at their network, when you look at their in and out of roaming areas, that's just a fight that we don't have many levers in. And the consumer who is angry at the big 3 for their data overage charges, there's lots of room for us there. And it's harder for them to respond in that space than it is for them to come up with something achieved on Public Mobile or chatr. So I think that's how we're thinking about the business. If you're asking us about why we have higher churn than the other carriers, and why we're exposed to that side of the base, I think that's quite frankly where our business was and is. We do have higher churn. We have a prepaid base that's available for customers to -- for our competitors to reach into. We don't have our base secured in the same way as others have their base secured. There is no question in the voice world, there's still in and out of service area with included roaming and other things. That is a complexity in our value equation that isn't a complexity with the big 3. And so when I talk about a pricing umbrella, the reason we're not going to be a member of -- a junior member of the big 4 is if we offer exactly the same prices like the other 3 guys do with exactly the same offers, we won't win. There is in and out of market roaming and there are some things on the network, and there's a -- we've got a less secure base and higher churn than they have. We are playing a different game, which is what we're up to.
And just a follow-up. I always thought it's cheaper to, let's say, upgrade a customer that you already have than going out and grabbing a customer from the competition and having to subsidize or do any -- I mean, is there an opportunity to -- now that you saw that there is a good amount of customers on -- your own customers on 3G that are readily willing to pay $60 for 10 gigs, why -- I mean, is there an opportunity here to upgrade them before they go somewhere else? And what do you need to do to do that?
Yes. For sure there's an opportunity. For sure there's an opportunity and I think we have the opportunity to focus as we go forward. And we are a relatively simple wireless operation and we're doing one thing at the time and we had the opportunity to expand our addressable market with iPhone, and we chose to do that. And we've got no regrets on that level of focus. I understand we could have focused on other things in December but I think we focused -- I think we focused on the right thing. To be clear, we saw disconnects for 4 or 5 days. I really don't have that much to say. I guess we're on the phone first. I don't have much to say about the wireless desktop that we are primarily a spectator in. The big 3 were the primary participants in this. Our disconnects over those 4 or 5 days must have been a small, small, small fraction of the swap that those 3 guys did to each other and we were kind of a spectator in the shopping malls over those 4 or 5 days. So while we indicated that we went from net gains on those days -- on the previous days to kind of flat days for a few days, which was a tremendous amount of activity for us. I mean, that 4- or 5-day story isn't really for us to tell, and the big 3 will have a lot more to say about that than we will.
And Maher, I'll just add to Jay's comment that in fact, although not the focus in December clearly with the iPhone launch, upgrades were significantly higher than they have traditionally been in the month and we recognize the cost of acquisition deferential there, for sure.
Our next question comes from David McFadgen of Cormark Securities.
Please also convey my condolences to the Shaw family. Just a couple of questions. So on the video subscribers, you talked earlier about Q2 is probably going to be negative as well and Q3 neutral to positive, Q4 positive, do you think that you could actually finish up fiscal 2018 on a neutral basis? Or is the result in Q1 just too much of a negative? And then secondly on the Wireless ARPU. If you look at Quebecor's experience, within 2 quarters of them offering iPhone, their ARPU was growing at a double-digit rate. Do you think we could start to see some meaningful uplift on your Wireless ARPU within 2 quarters? Or is it just too early to say?
Yes. Great. I'll take the first one, David, and I'll let Vito take the second. Look, we don't guide on RGUs, particularly, because it's such a competitive environment and things move up and down. I don't want you to think we're sitting with a control panel and we're adjusting the various levers and we know exactly to the single unit where we're going to land. We are being very purposeful in our step-by-step approaches on both Wireless and Wireline. And to be clear, our Wireline plan that we're offering the business to today does not get us back to neutral in video but does get us back to potentially growing and being more neutral on a quarterly basis in Q3 and Q4. And there's a good news story as you do the math back from guidance, you can see the benefit of what we're doing here and what it means for the EBITDA story in the back half and you can -- I'm sure, you can do the math yourself on that. We're not prepared to give up that financial benefit that we're getting in the second half of the year that add another 5,000 video subs or something like that. But we are excited about getting through this part of the business so that we can get back to some stability. And in terms of Wireless...
David, your comment about Quebecor is interesting. I mean, you've got some network perhaps differentials there between us and them on that side of things. But I'd circle Q4 of this coming -- of fiscal '18 as one to watch. Definitely, as we've talked about through the course of the call, the weighting of the incoming valued customers should start to see some meaningful impact in our back half, particularly Q4, heading into F '19 as well.
And if I can just add one additional question on Wireless. Do you think within, say, the next 12 months, you would actually bundle the Wireless product with your existing telecom services out West?
Yes. I mean, clearly, as we work our step-by-step approach on both the Wireline and Wireless sides of our business, bundle is going to be a hugely important part of the modern digital Shaw experience. 12 months, it's possible you might be on the light end, but it's certainly possible.
Okay. And would that at all be contingent upon any, say, CRTC ruling on wireless roaming or something like that?
Yes. I mean, there are so many variables in our business. And we are in a disruption-heavy competitive environment. So yes, there's a level of agility that is required. And I think that's actually a competitive advantage of ours not only as consumers and behaviors and needs change but also as regulations change. I think, we -- there's a decent line if sight with the costing model on roaming is a model in the calculation and there's a decent line of sight of where we'll probably land there, which is probably good on voice, not great on data. We'll see where it lands. I don't think that will be instructive. 600 is super important for us. We're building a business around kind of that stuff, landing where we're thinking it's going to land. I don't think that will be determinative. I think the bigger part of this is really -- we're taking a step-by-step approach to Wireline and a step-by-step approach to Wireless. And then over time, those steps bring those things closer together in support of a more modern service delivery model and a model -- a new Shaw really in terms of how we're approaching things. And I think if you look at the last 18 months closely, you can see in terms of our go-to-markets, we've already started that with BlueSky and WideOpen Internet 150 and the Smart suite of services and Big Gig and the hero devices with iPhone and have seen lots of those go-to-markets together. In many ways, it's the operating model, but digital, the self-serve, the data segmentation that will come in behind that and enable the coming together of the 2 sides. So I think we're in control of our destiny and not necessarily waiting for external things to happen.
This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Mehr for any closing remarks.
Thank you, again, for the call. It's a -- it's going to be a difficult day here today with the AGM and the services for Jim, tomorrow. Again, on behalf of Brad, I want to thank you for all of your kind thoughts. And we know that Jim would want us to be completely focused on the business. We're going to take 1 minute or 2 and not be totally focused over the next day or 2, but we are going to continue to build this business as we go through these difficult times. We have a plan. We're being purposeful but what we're doing on both the Wireless and Wireline side, meaningful moves on operating model coming forward in the next couple of weeks, more info in Q2, and we couldn't be more excited about the opportunity for our business both in terms of market share gains on the Wireless side, Internet, revenue opportunities, opportunities in Business and our long-term EBITDA story. Thank you very much for your time today.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.