Rogers Communications Inc.
Q4 2020 Earnings Call Transcript

Published: 28 Jan 2021

[Operator:]

Thank you for standing by. This is the conference operator. Welcome to the Rogers Communications Inc. Fourth Quarter and Full Year 2020 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. Following the presentation, we will conduct a question-and-answer session. I would now like to turn the conference over to Paul Carpino, Vice President of Investor Relations with Rogers Communications. Please go ahead.

[Paul Carpino:]

Hi. Thanks, Arielle. Good morning, everyone and thank you for joining us. Today, I am here with our President and Chief Executive Officer, Joe Natale and our Chief Financial Officer, Tony Staffieri.

[Joe Natale:]

Thank you, Paul and good morning everyone. It’s been almost a full year that our country and our world have been living through a health crisis unlike anything we have seen in many generations. The impacts to society and to the economy as a whole have brought many new challenges, new perspectives, but also opportunities to all of us. It’s encouraging to see vaccines starting to rollout across the country and although early days we can see light at the end of the tunnel. But we know the effects of the pandemic will be with us for some time, be recognized more fully than ever, the role that our networks play in underpinning every aspect of our society and our economy. And I am incredibly proud of the role that our teams continue to play in supporting Canadians and the Canadian businesses, large and small, through every phase of this pandemic. Today, I will take you through some highlights of the quarter, followed by a discussion of our continued success in adopting to meet the needs of our customers, while streamlining costs. Finally, I will provide some thoughts on what we can expect heading into 2021 before turning it over to Tony, to provide more detailed commentary. Despite the spike in the second wave across the country and a new series of restrictions that have been rolled out and expanded in December, in certain provinces, we saw continued improvement in many areas of our business. Our team executed strongly in Q4, delivering a number of sequential improvements, including margin expansion across the businesses driven by continued operational efficiency gains, solid customer additions, excellent performance from our cable business, solid adjusted EBITDA improvements and strong free cash flow. In wireless, we saw strong loading in postpaid with net additions of 114,000. Though the pandemic continues to impact roaming revenue, with most travel still paused and no immigration growth as borders are essentially closed, our disciplined approach to digitization and cost management led to an adjusted EBITDA service margin, up 370 basis points from the same time last year. Over the last quarter, we performed effectively across both traditional and digital sales channels. The preparation and collaboration across our teams, ahead of our critical selling periods resulted in our most successful Black Friday ever. Over Boxing Week, however, the extended COVID-19 lockdowns in Ontario and Quebec in December did have some impact on service revenue, ARPU and additional loading.

[Tony Staffieri:]

Thank you, Joe and good morning everyone. Our fourth quarter results reflected healthy sequential gains and margins across all our businesses, excellent free cash flow growth and strong revenue growth in cable. The expanded late quarter lockdowns during the key Boxing Day selling period did affect wireless revenue late in Q4, but margins were very strong. Let me breakdown results in each of the businesses a bit more and then provide some commentary on our outlook for the first quarter. In wireless, margins were strong despite the pressures on service revenue and adjusted EBITDA associated with the extended and expanded lockdown and ongoing impact of limited roaming revenue. Service revenue declined to 8% year on year driven by rolling revenue declines of $75 million or 67% from one year ago. Additionally, as we continue the transition to Rogers, infinite unlimited data plans, overage revenue was down $40 million or 454% year on year. Importantly, overage revenue is now only about 1.5% of service revenue. And we continue to anticipate overage melt to continue to impact our year on year growth rates until the end of the second quarter. Notably, this timeline is in line with our original expectation on the launch of unlimited plans back in 2019, where we estimated the impact on our financial growth rates to take 6 to 8 quarters to overcome the extended and expanded shutdown in late December. Further impact is service revenue versus Q3 as well as on a year-over-year basis.

[Operator:]

Thank you. Our first question comes from Vince Valentini of TD Securities. Please go ahead.

[Vince Valentini:]

Yes, thanks very much. Tony, let me push you a bit on the ARPU in Q4 and the commentary you have given. So first off, can you give us a bit more color on what this $30 million of lower consumer activity impact is? You keep mentioning activation fees, but I mean, if I assume $40 as an activation fee on average, I mean, sometimes you waive those fees, but at $40 that would be 750,000 gross adds that would be needed to be down year-over-year to add up to $30 million. So there has got to be something other than just activation fees in there? And one thing I don’t hear you talk about in terms of the ARPU trends in Q4 being a bit worse than Q3 is, I think we all acknowledged there were some pretty aggressive promotional behavior going on back in the August September period, is the lockdowns ended and everybody started jamming up promotions to try to catch up on sub adds. Is there not a bit of an impact there from that as well that as you have a full quarter of some of those subs that were loaded at lower price points that had a bit of a drag on Q4 ARPU relative to Q3? And if that’s the case, can you can you or Joe give us some thoughts on the more recent activity we have seen, which seems to be a bit more encouraging in terms of some of those aggressive promotions being pulled from the market by all the incumbents and even some price increases announced selectively by some of the wireless carriers, so a few different dynamics on ARPU if you don’t mind? Thanks.

[Tony Staffieri:]

Great. Thanks for the questions. A couple of things in terms of the $30 million comprises a couple of things I mentioned the activation fees or price plan, change fees, reconnection fees, but the other item that is rather significant are what we call the one-time promotional credits such as gift cards and so it’s that volume that we sort of saw down year-on-year. Second part of your question relates to whether or not we saw pressure on underlying ARPU as a result of the promotional activity. And the short answer is yes, but at the margin. Those types of promotional activities played out in the flanker brands. And so while we saw good ARPU growth with moves from our customers and new customers to unlimited what we saw was bit of an erosion on ARPU as a result of those promotions. Net-net, it had a very slight I would say minor impact to our underlying ARPU and service revenue trends in the quarter. Those were to continue – continue to have a growing impact, but what we saw in the marketplace is a pullback of those promotions after year end. And so we continue to be confident with the underlying ARPU growth profile for this year, but of course, it will depend on market competitive intensity and how it plays out later in this quarter or into next quarter.

[Joe Natale:]

If I can add a couple of comments, we saw some 2 point really significant pricing aggression through Q4 and Tony is right in terms of how he packed it. But that level of aggression always creates froth in the marketplace. Team did well in terms of adding customers, but also the churn – you saw the churn down 7 basis points, but as part of that, there is retention activity as required when customers see some of those prices in the window, then we get phone calls asking, hey, you know, can I get that price? So there is a price plan impact that’s happens across the industry whenever we see that kind of that kind of aggression or promotion going on. I would say to you that the aggressive wireless price bundling with cable that we saw that happened and started in Western Canada, in our minds is not something, it’s a bit of a zero sum game. It’s not something that we have seen before in different parts of the business here in Ontario and in other countries. It’s not sustainable in the sense that it doesn’t really do anything to change share dynamics in a structural way whatsoever. And the experience in the past is that all it does is it creates some of the ARPU pressure and economic impacts for everybody. So we are really pleased to see the return to discipline in Q1 around the pricing environment. And it’s just normal that in Q4 that there is aggression in pricing. It’s just been the case in Q4 forever. I think part of what played as well is we will see what how big the market was in Q4. Our sense the market was somewhere between flat and down a few points. And so you get the sort of increased intensity when there is no immigration, there is no growth in the wireless market. And again as that returns so that gets to a place, where both penetration growth and immigration growth create more new net customers to the market. Our experience has been that some of the pricing aggression remediates or dampens as a result of that.

[Paul Carpino:]

Thanks, Vince. Next question, Arielle.

[Operator:]

Our next question comes from Jeff Fan of Scotiabank. Please go ahead.

[Jeff Fan:]

Thank you. Good morning. Hope you guys are well. Just one question regarding the wireless competitive outlook and another question on 5G, on just the competitive outlook, what we saw last year in 2020, as Vince alluded to, when the market opened up, there was a rush to promotional activities. As you kind of look at to this year, I mean, we are hopefully coming out of a lockdown sometime in Q1, maybe in Q2. How do you think about the competitive dynamics as you kind of go into that more of the year? Are we – can we see a repeat of what we saw last year is when the pool is still small and operators are chasing or do you think the market is going to be a little bit more perhaps rationale waiting for some of the volumes to come back as you alluded to, Joe? And then on the 5G question, Rogers obviously is leading with respect to being first and the biggest on 5G. I am just wondering, when do you think customers will start to really recognize 5G as a major differentiator versus 4G and what are some of the indicators that you are looking at as positive signals for that to start to happen? Thank you.

[Joe Natale:]

I think your question will this summer be like last summer? And I would say, last summer was our first real understanding of what it felt like to come out of the pandemic. I mean, Jeff, there is no playbook for it, right. We just said okay, game on, people are out and about, restrictions have been softened lifted in many parts of the country. We saw data growth spike tremendously almost overnight we saw 30% to 50% data growth. So there is sort of a muscle reaction that says okay, game on, let’s go. And therefore it creates a sense of froth, growth and let’s go makeup for whatever it didn’t happen in the previous few months. I think we would all look back at that period and now we have a much more sanguine understanding of real economic outcome, the lifetime value and economic outcome of that froth in that intense period. So I think our second time through it as an industry. I think it will be a mix. I am sure there will be some level of aggression, but I think there will be a much more kind of rationale sanguine look at it and say where are the value economics in this, where are the value drivers in this. So that’s my view. It’s – and my hope is that there is not a third crack at it. And that everything points to the point that will come out. I think the biggest thing that you should take comfort in Rogers is that the capabilities we have now are vastly different than the capabilities we had a year ago. I mean, our ability to transact online was I would say not terrific a year ago. Right now, I think it’s very good, very strong and the ability, I touched in my comments, the ability to order online, pickup in store, have it delivered to your doorstep, these are all things that the team worked hard to make happen through last year. And part of the reason you see some of the margin improvement is that we have been able to kind of impact some channel mix that has a far more attractive COA as a result. And therefore we have got an ability to not just play the game differently, but to do so with better economics given the channel and COA characteristics that are leaning in our favor because of those capabilities the team worked so hard on. So that’s the view on that. In terms of 5G, 5G is – like 4G and other investments we are in the investment cycle of 5G. And the capabilities are here and now in terms of the Ericsson investment that we made and the ability to light it up. The needs to be done at some point, so, we did it, we will keep expanding it, etcetera. And as I have said to you, I think in the past, 5G will come in tranches unlike 4G and 3G, which were the sort of big turn on the lights and now we have a brand new capability. 5G will come in tranches. The first tranche is already happening as 5G iPhones and 5G Samsung phones hit the market. We will see more of those in our base. And given some of the capabilities of 5G architecture, we have a better ability to deliver a gig of data at a better unit cost. And when Canada sits at 3 gigs a month on average and the U.S. is closer to 10, Korea is closer to 30 gigs a month we are on that path and the ability to do so in a way that’s far more cost effective is important to the economics of this industry. So, that’s sort of the first prize. The first prize is really kind of economics of bandwidth. The second prize around 5G I think will be a series of applications that come to light along the way. One of them will certainly be fixed wireless access. I mean, you have seen the beginnings of what I would call 4G fixed wireless access in the industry. 5G will make those economics and that capability and population density enablement even better around that front. How far away is that? That’s in the next, call it 1 to 2 years away. And then the one that gets all the media attention is around one of the IoT low latency type applications. I would tell you that they are being worked on right now. And there is evidence of some of those already in the market. Like the automation we have done in the city of Kelowna, for example, that’s been publicized or some of the work that we are doing with mining companies around using 5G capabilities to create more automated capabilities on the mine site, etcetera. These are B2B applications and they will happen as each of the B2B verticals matures and some verticals will mature more quickly than others. So I mean, if you are looking for a full P&L on the 5G, I think you get a real material P&L is in that 3 to 5-year time zone away. But we got to invest now because these things take time and effort. The 70% of the work in network investment is civil engineering work. 70% is people digging trenches, acquiring sites, building towers, bringing fiber and you can’t turn those things on at a dime, you have got to do them years ahead of time and that’s what you are seeing coming from us as an organization. And along the way, what you are hearing us say as well is we have got a great network. We have got the best network. And we continue to get accolades for it all around. It was on this call 2 years ago that people are asking how is the Rogers network doing, lot of questions around capability and performance. I would tell you that that we have best in class networks and we lead the industry and it’s more of a reinforcement that, that’s a crown that we are never letting go of. And 5G is also a sense of pride for this organization and being first in driving the largest opportunity and having a sense of pride and innovation in the hearts and minds of engineers is important to the culture of a telecom company. So, I think that’s – those are the honest to goodness mindset reasons around it. We are blessed in Canada with very good 4G networks, LTE networks. When you look at the countries that have lackluster 4G networks, 5G is taking on a lot more prominence. So, the contrast between 4G and 5G will come over time as I have said. The one thing we had to do to get ready for 5G is we had to launch unlimited. We had to like we couldn’t have overage based regime around the customers that want to use the most data that was in a paradigm that came out of 3G and 4G and expect to ever take advantage of 5G. If you look at some of the early gaming apps, burn up 10 gigabytes in a few minutes. Right. So my point is this is all the orchestration towards the 5G future. And I would say that later on this year we will probably once again have a bit of a 5G all the way for Rogers’ discussion. Once we come out of the quiet period, we will have the spectrum auction, I think that will be a great thing to do and that will set it up for the investment community.

[Jeff Fan:]

Thanks, Joe.

[Paul Carpino:]

Thanks, Jeff. Next question, Arielle?

[Operator:]

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

[Simon Flannery:]

Great. Thank you. Good morning. Tony, I wanted to follow-up on the operating leverage it’s great to see the margin improvement despite the top line pressures here. And you have talked a lot about digital transformation and things like that, how should we think about as the economy reopens as travel recovers, how much of this improvement is permanent and how much will be kind of given back in terms of increased roaming costs and other things that you are not spending on currently? And on that roaming piece specifically, how much of it is attached to business travel returning, which might take a little bit longer than tourism? Thank you.

[Tony Staffieri:]

Thanks for your question, Simon. I think with respect to leverage on costs, I understood the question, what we should see as roaming returns and some of the other items is a very high flow-through rate to our margins. And so we currently have even in a very low growth environment plans to continue to expand margins. And so what we should see as roaming returns net of roaming costs is a good healthy flow-through rate in excess of 50% and probably as high as 60% to put a rough estimate on it.

[Simon Flannery:]

Right. And what about other costs that you were able to save on this year that may come back in terms of as activity advertising, T&E things like that, that we should be aware of?

[Tony Staffieri:]

There are variable costs, of course, that are going to as the market expands or the size of the market and our volumes increase, there are variable related costs as Joe referred to COA or COR type of costs. Those are variable in nature. But I think it’s important to highlight that the quantum of them have come down particularly as we move to more efficient channels like digital. And so again within the broader – within the broader margin expansion comment that I made, we have captured those within that. If I had to sort of go through each of the specific items, I have talked about channel mix, I think it’s important to highlight the margin improvement we have seen from moving to installing plants. And as volumes go up, we don’t think that’s going to erode, obviously, that’s going to depend on the economy. And then there are improvements that we are seeing throughout our businesses in back office, again, as we move to more and more AI and automation in those areas. On our cable business, some of the areas that we are seeing cost improvements, Joe mentioned self installation, number of service truck rolls, has come way down. And that really gets at the operating efficiency of having completed some of the service costs the first time. We have had good progress on our content costs. And you see that in our P&L in terms of managing what was previously a continuing escalating cost for us and we have been much more creative and better executing in terms of those costs. Of course, in cable, we have the digital capabilities is well improving and the back office pieces that I mentioned earlier. Hopefully, Simon, that gives you…

[Simon Flannery:]

And then on the business travel?

[Tony Staffieri:]

And sorry on the business travel, our expectation is when we look at the mix of it, generally for us it ends up being about 50

[Simon Flannery:]

Right. Thanks so much.

[Paul Carpino:]

Thanks, Simon. Next question, Arielle?

[Operator:]

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

[Drew McReynolds:]

Yes, thanks very much. Good morning. Joe, just add to Jeff’s comment or question on 5G in your comments just update us in terms of your subscribers that are currently using your 5G network? Are there any kind of data points you can update us on specifically on that? And then secondly, on the CapEx, I appreciate you don’t want to quantify anything at this point, are you able to bigger picture have you done in the past, just comment on how you think CI generally trends both in cable and wireless? Are we still tracking to what has generally been kind of guided to over the last two or three quarters? And then lastly, for you, Tony, you have talked about looking at ways to get better recognition, the public markets have some of those non-telecom assets. So, just wondering whether initiatives are continuing to kind of move forward on that file? Thank you.

[Joe Natale:]

Thanks Drew. On the 5G subscriber site, we have not disclosed any specifics. But what I would tell you just through sort of maybe more self evident is that the 5G subscriber base is indexed towards the iPhone. And we have the largest iPhone base. The 5G subscriber base is tied to unlimited. And therefore they are, by definition, our highest value, most data consumptive customers. So, this really is about the very top decile of the market. And part of our energy around getting out there quickly is inside the – if you are doing segment analysis of our base, we’ve had a very strong top end of the market base that we have had historically, because of structural advantage around the iPhone and going back even to when the BlackBerry was a thing since at this point in time. But so that base has a need for certain capabilities and unlimited is there, the sharing nature of unlimited has played well with that base and they were the first to sign up for a 5G phone, so very important to the retention lifetime value of our most valuable customers. On the CapEx front, the core of our CapEx is going to be spent on a handful of things one is continue on the 5G front. Our view is we have got good momentum in terms of our capability. The team was done a great job and well-tuned in terms of the multiyear roadmap around it. We have done a good job of negotiating great agreements with our vendors, both vendors of technology and the vendors of the civil engineering efforts around that. And therefore we are on a roll. And the best thing you can do when it comes to network build is keep it going and have contiguity and not have start stop. Start stop is the death of network build efficiency. So we are going to keep rolling on that front. And when it comes to the cable business, we are going to keep rolling on that front both with Brownfield and Greenfield, no segmentation. We have been doing no uplifts across our cable business. We are roughly about half of the way through that. You see the homes pass per node has gone down dramatically over the last few years as a whole and we have got some GPON activities and efforts underway in Atlantic Canada, where this area of opportunity to do so on a more attractive basis. So we are going to keep pushing them upfront for the same reasons I have just described. And third is we have seen tremendous benefit from our digital efforts. And we have got an even bigger appetite for some things down the road on digital. And it’s not just digital in terms of service or in terms of sales, as we have described today, but a whole bunch of digital opportunities in terms of better managing network capability and reliability. And I will give you an example. We have got some AI tools that everyday looked through the network. And because of the new ignite gateway capability we have an opportunity to understand what does the performance like inside the McReynolds house. And are there issues with either Wi-Fi or devices etcetera that are causing half of your stress to you and your family, Drew and then we have the ability to proactively either heal those without even you knowing about it or we will just proactively send someone to do some maintenance or support. You will swap out a particular box or device proactively. So we have built these tools that are combination of analytical tools, supplemented by machine learning engine that gives us an even better ability to withstand what’s about to go into an unacceptable state for a customer and what we can do for us. So those three things, it’s foot on the gas and let’s to the extent that we can, let’s go. The biggest question mark is with COVID is building permits and city planning departments and all things that gotten our way last year, so far, so good, but those are the kind of the question marks. Our goal, our view is the CapEx intensity that we have articulated still intact. Think about 22% or so for cable and think about 12% to 15% for wireless. So nothing has changed in terms of those zones of CI, just really focused on the areas that matter most as you would expect us to be. And our ability to get more done for the same dollar has gone up tremendously. As we have strengthened the capability of our network organization, they have done an incredible job of actually negotiating new contracts and getting better unit costs. So, we can get a lot more done at the same CI than we could even a few years ago. So, that’s sort of the CI picture. And I will pass it to Tony on the third question.

[Tony Staffieri:]

On the last part of your question, Drew, in terms of, I think what you are getting at is, we had stated in the past looking at surfacing value from some of our significant assets that sit on our balance sheet today. We haven’t lost sight of that. We continue to look at alternatives and want to be careful and very opportunistic about it. And during this COVID environment, it doesn’t lend itself as an optimal time, particularly as we switch our execution focus on operating new operating methods and processes during COVID. And so that’s where the focus has been nothing to report new on the other assets front.

[Drew McReynolds:]

Okay, thanks very much.

[Paul Carpino:]

Thanks Drew. Next question, Arielle?

[Operator:]

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

[Tim Casey:]

Thanks. Two for me. Just one clarification, Tony, could you just revisit an earlier question about the $30 million one-time, you alluded to gift cards and things like that, could you just walk us through what’s happening practically on that related to lost activations and things like that? And second just on your iPhone leadership, just wondering if you have enough loading of 5G to offer any early insights on what you are seeing on behavior and if you think that one of the – is the potential for an iPhone loading or super cycle, it’s often referred to, is that one of the things that is making it difficult for you to provide guidance this year, is that too much of an unknown factor, just wondering how that is influencing their thinking? Thanks.

[Tony Staffieri:]

Tim, I will start with the first one. In terms of the $30 million, as I said, it really relates to the one-time fees that typically in Q4 with a much higher volume drives a certain amount and we just saw lower volume this quarter, I talked about activation, implicit in there, I should have highlighted, it include ups as well. And so one of the things you do see are the activations, but you don’t necessarily see are the hardware upgrades and we had lower volume this quarter, much lower volume that we would have had last year in the fourth quarter. A number of other fees, I talked about price plan changes and then upfront promotional fees. And often we pivot to those rather than recurring discounts. And so we have had some of those in the quarter, some of the other fees and we can provide you a full list, but they would be late payment fees, suspension and reconnection fees and there are a few others that fall into that category that are down year-on-year. And so that really is the quantum of the $30 million. In some respects, the decline of some of those fees relate to our bad debt performance just being better, better than we expected and somewhat better on a year-on-year perspective as well. And then the second part of your question, Tim, I am not sure we got it, but maybe you could rephrase it to help us frame the response.

[Tim Casey:]

I was just wondering what your expectations are for iPhone loading and if that’s a swing factor in how you are thinking about guidance?

[Tony Staffieri:]

I wouldn’t put it in the category of material swing factor. We have a healthy mix, as Joe referred, certainly iPhone would be at the top of the list in terms of handsets for us and the makeup of our base, but it isn’t a factor from a guidance perspective for us.

[Tim Casey:]

Thank you.

[Paul Carpino:]

Thanks, Tim. Next question, Arielle?

[Operator:]

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

[Aravinda Galappatthige:]

Good morning. Thanks for taking my question. Two on cost reduction from me and a quick regulatory question. On the cost reduction front, we saw 13% decline in wireless of the OpEx yet again as we saw in Q3, obviously part of it relates to roaming. But I was curious to hear, Tony, if you can talk a little bit about what component of that can be ongoing as we kind of look at some of the progress that you have made on the digital front? And secondly, I think Joe perhaps a year ago you kind of gave us some updates on sort of total while of COA in particular, the P&L impact of the wireless subsidies being somewhere in the $900 million neighborhood and COA probably being $450 million. I know that you can’t disclose specific numbers, but directionally how much progress has been made on that front and maybe sort of the outlook from there on? And lastly, given some of the changes to leadership, is there any comments you want to make about to the government relations ahead of potential decision on the wholesale front? Thanks.

[Tony Staffieri:]

Aravinda, I will start with your question in terms of some of the cost categories. I have touched on them earlier on the call of just to reiterate put them probably for the wireless side into three categories. And I wouldn’t underestimate the impact that installment plans and the related margin improvement has had if you are to look at our 370 basis point margin expansion in wireless, about a third of that comes from hardware margins. And so that shift has been a good one for us and a good one for the industry in Canada. The second piece relates to channel mix and costs on channel mix have just become much more efficient, especially as we move to direct channels and digital channels. And that’s coming through as we set our COA and our COR and even as volumes improve, it’s a per unit cost that has actually come down quite substantially. And so that’s been helpful. And then the third is what we want to gather is back office costs, including our call centers. And so there are number of factors in there, but if you took even just the call centers, with the migration of our base more and more to unlimited, we are seeing the reduction in call volumes, for example, that we had expected. And so that continues to drive it down. In terms of the sustainability, other than the first one, channel mix and back office costs, we continue to see opportunity and they are sustainable. And similarly on hardware margins, although those are more impacted by market conditions and we will continue to follow sort of how that plays out in the market, but we do believe it is an opportunity for continued improvements. Now, on the cable side, we are seeing much of the same in terms of categories. I would replace hardware margin with content costs, which in our cable business represents 50% of our cost structure. And what we have seen is with the Ignite platform, more of an ability to change the packaging and channel lineup so that we are dropping channels that cost us money, but aren’t of interest to customers. It sounds very basic. But the team has been very particular in going through that and reducing costs even in the event that it’s a 1%, 2% or 5% cost reduction on an $800 million cost base. It ends up being a significant savings. And then finally, self-install and reduction of service truck rolls, some of that is capitalized, but some of it is OpEx. And so you are seeing that play out in both our capital improvements as well as our OpEx. We continue to see opportunities to continue to improve that. And so again, I would put those in the category of very much being sustainable.

[Joe Natale:]

Aravinda, I hope that helps, because just the price of the pipeline, the majority of those cost changes are structural, sustainable and that’s where you focused our attention as opposed to more temporal costs. And we are pleased with you heard the one-third of 370 basis points in wireless is around equipment margins. So that goes to your second question really, which is are we seeing that subsidy ameliorate? Are we seeing better COA? If you couple that with some of the channel mix that we have seen heavy reliance on digital and express pickup, delivered to the home with Pro On-the-Go, etcetera, every one of those is far better COA than some other channels. So, indexing there and I think customers are really enjoying it. Our satisfaction scores are super high in each of those customer journeys. I think that they will persist far beyond COVID in terms of how we do business. So they are also structural in nature. In terms of I said, one of the opportunities that COVID provided to us was the ability to create a far more productive collaborative relationship with government both at the ministerial level and the departmental level. We have seen that cooperation all through the last year overall. I do think that will persist. I think the common goal of how do we help support the needs of rural Canadians? How do we drive forward together between industry and government to bridge the digital divide for the 10% or 15% of Canadians that don’t have access to the best internet for really largely economic reasons and the return on investment in those areas is greater than very challenging since the beginning of the telecommunications industry. So being on the same side of the table around the role of connectivity issues I think will bode well in terms of the nature of the collaboration, the cooperation that’s there. I have grateful to Minister Bains for the support that he provided while he was in office. We had nothing but great discussions about the future of the industry. And I am very pleased with the conversation I have with Minister Champagne. I think he has got an incredible background and understands the technology sector and understands the business environment. We have had some great discussions around just what’s important on a go forward basis. And I think at the heart of all regulatory environments is strong collaboration between the industry and government on what matters most for the future. And that’s where it starts and those are all good things.

[Aravinda Galappatthige:]

Thank you very much.

[Joe Natale:]

Thanks, Aravinda.

[Paul Carpino:]

Thanks, Aravinda. Arielle, we have time for two more questions.

[Operator:]

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

[Jerome Dubreuil:]

Yes. Thanks for taking my question. Trying to look a bit ahead to potential recovery, first in cable, we have seen a nice improvement in ARPA. How would you segment the impact from pricing trees versus maybe other factors like your customers moving up in terms of download speeds? And then in media last year, you said that it could be difficult to achieve positive EBITDA without game day revenue, now, that’s been better than expected, but if ever the Blue Jays can’t go back to playing in Rogers there, do you also expect a challenge in terms of generating positive EBITDA? Thanks.

[Tony Staffieri:]

Thanks for the question, Jerome. On the first one, very specific to cable and the sustainability of ARPA increases, I think a couple of things, the price increase had, I would say about a one-third impact of the ARPA, a contributor to one-third to the ARPA increase that you saw. The other two factors that we saw play out nicely in not only this quarter, but in prior quarters was a reduction in promotional activity, something we have talked about in terms of trying to bring discipline to end of promotion periods and do a better job of getting customers on to a new rate plan that is sustainable rather than just renewing promotions again. And so we have been focused on when we look at total promotions as a percentage of revenue and bringing that down and we are starting to see good success in the marketplace on that. The second piece of it relates to upgrades, not only in migrating to our Ignite TV, but also to higher speed tiers as you would expect. And so, both of those are contributing nicely to the growth in ARPA and so, it’s the latter too that we are really focused on is being very much sustainable and continuing to drive APRA growth for throughout the year. Your second question related to media, I am not sure I got it, but let me try to help in terms of – for the Jays, ideally, we are looking at and as I talked about before breakeven type of scenario for our media business, the Jays is really the big swing factor. And so if they play in Toronto, there are more advertising revenues as you would expect that we can garner from that. And if there are audiences, then that’s a huge potential for additional revenues, even if it’s a quarter or a third of ticket sales. So, to the extent that they end up playing, not in Toronto and back in Buffalo or somewhere else, then what we are going to see is significant drag on our media business. I don’t want to provide too much direction in terms of what that could be just given the unknown variables, but it’s a very material swing either way and contributed part of the reason we held back on giving guidance. That was one of the big three or four items that is still just the big unknown.

[Jerome Dubreuil:]

Great. Thank you.

[Paul Carpino:]

Thanks, Jerome and thanks everyone for attending the call. If you have any questions, please feel free to give us a shout. Thank you.

[Operator:]

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