Shaw Communications Inc.
Q1 2019 Earnings Call Transcript

Published: 14 Jan 2019

[Operator:]

Thank you for standing by. Welcome to the Shaw Communications' First Quarter Fiscal 2019 Conference Call and Webcast. Today's call will be hosted by Mr. Brad Shaw, CEO of Shaw Communications. At this time, all participants are in a listen-only mode and the conference is being recorded. Following the presentation, there will be a question-and-answer session.[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. Shaw, I will now turn the conference over to you.

[Bradley Shaw:]

Thank you, operator. Good morning and Happy New Year to everyone. With me today are members of our senior management team, including Jay, Trevor and Paul. This morning we released our first quarter operating and financial results for fiscal 2019 and we are pleased with the performance of all our divisions. The results reflect the team's collective effort and commitment to stabilizing our Wireline business and capitalizing on the growth opportunities within our wireless operations. As we discussed last quarter, our entire organization is focused on improving execution and delivering our F’19 operating plans, while making appropriate strategic investments that will yield significant benefits for all of our stakeholders going forward. Our wireless division continues to thrive as we added over 86,000 postpaid customers in the quarter and delivered significant revenue and EBITDA growth. The success we are achieving in postpaid customer growth is a direct result of our strategy to enhance the network experience and reposition Freedom Mobile as a strong and differentiated competitor in the Canadian wireless landscape. Our efforts and focus over the quarter were aligned with our strategy as we continue to move up market and add higher-value customers. Since our entry into wireless, we have invested capital and resources to improve both the reality and perception that Freedom's network was inferior. Today, we disclosed postpaid churn results that importantly show what our customers think of their Freedom exercise -- Freedom experience. Postpaid churn of 1.28% improved significantly by 36 basis points over the last year. We have deployed spectrum, introduced innovative data centric plans, expanded our handset line up with the latest and most popular devices, and significantly added to our retail distribution. These investments are all supportive of an improved customer experience leading to better churn and average billing per user growth, which was up 12% in the quarter. In readiness for Black Friday and the critical holiday selling season, we launched our innovative Big Binge Bonus program in late October, which provided new Freedom customers up to an additional 100 gigs of data to use at their discretion. This strategy helped Freedom continue to attract high value postpaid customers. Overall, our sales activity remained strong throughout the holidays. However, I would characterize that the overall wireless environment as being less active than a year ago. From a network perspective, our priority continues to be the role of the 700 MHz spectrum, which includes our initial launch in all of our major markets in Q1. As at the end of November, the 700 rollout was approximately 25% complete, and we will continue to deploy the spectrum across our footprint over F’2019. We have also made VoLTE available to approximately 35 different devices, representing over 800,000 phones on our Freedom network. Considering the recent events and security concerns around Huawei, we want to confirm that our wireless network does not contain any Huawei equipment. We are partnering with Nokia as our wireless technologies supplier, and we'll continue to build and expand our network to be compatible with future technologies such as 5G. We are pleased to report that we launched the remaining national retail stores in all 140 Walmart locations. Combined with our corporate and dealer network, we now have over 600 locations selling Freedom services. We will continue to expand our corporate and dealer store footprint throughout fiscal 2019 as we launch in new western markets including Victoria and Red Deer, which are expected to be operational next month. In our Wireline business, we have made some important steps in the right direction as we added Internet subscribers this quarter, doubled the speeds of our top Internet tiers and stabilized revenues through our renewed approach to base management, which includes a balanced and digital focus on acquisition and retention. We delivered a 46% wireline margin in the quarter, up significantly from Q1 last year. As we focus on optimizing our consumer business including deploying resources that are aligned with our profitability focus, removing cost where possible and leveraging our network and strategic partnership advantages. Our recent speed increases implemented in December, which included taking Internet 150 and 300 customers to Internet 300 and 600 respectively, impacted approximately half of our Internet base. These customers received an improved Internet experience, showcasing the strength of our network, which supports long-term pricing power of our broadband service. While we are still early days regarding our journey towards a modern Shaw, I am encouraged by the progress we have made as we improve upon the fundamentals of our business and focus on delivering an exciting broadband roadmap in fiscal 2019 that includes anchoring the home with the XB6 modems, introducing a superior managed Wi-Fi experience with xFi and Home Extenders, followed by the availability of IPTV, including Cloud DVR for our customers later in the year. Now I'll turn it over to Trevor to go through the Q1 results in a bit more detail.

[Trevor English:]

Thank you, Brad and good morning, everyone. Fiscal 2019 is off to a great start with positive financial contributions from all business divisions. And before getting into the numbers, I do want to confirm that all reported and comparative figures reflect the accounting policy changes related to IFRS 15, which of course primarily impacts our wireless division. On a consolidated basis, revenue grew 8.8% to 1.36 billion and EBITDA increased 13.5% to 545 million compared to the prior year. From a divisional perspective and on wireless, supported by strong subscriber growth over the last year, including our first quarter additions, consolidated wireless revenue increased 60% year-over-year to 273 million. This includes service revenue growth of over 30% in Q1, which was driven by ARPU growth of 12% to almost $42. Wireless EBITDA grew over 36% to 45 million this quarter. As a reminder, the change in accounting under IFRS 15 is primarily related to our treatment of wireless subsidies. In the past, we would amortize the subsidy over the life of the contract against equipment revenue only. We now allocate the subsidy proportionately between equipment revenue, which is expensed in the period and service revenue which is amortized over the contract period. The net result in the near-term is a decrease in revenue and EBITDA, although EBITDA to the lesser extent has been now amortized commissions over the contract period compared to pre-IFRS accounting where we expense them on day one. While accounting changes creates noise in the results and from a comparative perspective, it's important to remind investors there is no actual change in overall revenue or cash flow from the customer. You can see from our disclosure that the impact of IFRS on Q1 F’2018 results was immaterial, reducing wireless revenue by 4 million and EBITDA by approximately 1 million. As you would expect the impact is more meaningful through Q2 and Q3 when last year we significantly increased device sales and corresponding subsidies related to customer growth. As disclosed in our annual report, the full year impact in F2018 due to accounting policy change was a reduction of approximately 50 million in wireless revenue and approximately 30 million in wireless EBITDA. In Wireline, Q1 consumer revenue was essentially flat at 936 million compared to the prior year, while business revenue increased 5%. Wireline EBITDA growth of 12% to 500 million includes approximately 25 million in VDP related cost reductions. First quarter Wireline margin of 46% percent represents a 460 basis points improvement compared to a year ago and includes savings related to VDP, lower marketing expenses, and our overall focus on profitability. In the quarter we did incur a retroactive cost of approximately $7 million dollars related to higher rates than expected from the Copyright Board of Canada for retransmission tariffs covering in 2014 to 2018 period. However, we also have a number of smaller favorable one-time adjustments and provision releases that essentially offset this retroactive tariff charge this quarter. In the quarter our reinvestments to enable VDP were slightly behind our internal plan with more spent shifting into Q2 and through F2019. However overall we remain on track to deliver $140 million of VDP combined net operating and capital savings this year. Capital spending of $271 million in the quarter was largely on plan with reductions in wireline expenditures on network infrastructure and customer prem equipment. Wireless investments in the quarter include deployment of the 700 spectrum, which will continue to ramp over the coming quarters. Our Q4 F2018 spend include a delivery of wireless equipment whereby there is a timing difference between delivery and deployment and therefore Q1 F2019 wireless capital was below Street expectations. However in aggregate we continue to expect F2019 wireless investments to be approximately $400 million. With Q1 behind us, we remain on track with respect to our F2019 guidance of consolidated EBITDA growth of 4% to 6%, capital investments of approximately $1.2 billion and free cash flow in excess of $500 million. Before turning the call back to Brad for closing remarks, I wanted to briefly discuss the recent capital markets activity. Our balance sheet continues to be strong with leverage remaining at approximately 2-times and in November we accessed the debt capital markets and were successful in raising $1 billion in senior notes at attractive rates and tenors. Considering market volatility we view this as a prudent proactive approach regarding $1.25 million maturity that is due in October 2019. Brad, back to you.

[Bradley Shaw:]

Thank you, Trevor. I'm pleased with our first quarter results and the progress that we have made. Our focus in fiscal 2019 is on execution, while we managed through a significant period of change. During the year, we are making investments required to enable VDP access and transition to a digital first organization. We will launch new IP products that focus on growing our broadband business and we will continue with our network and retail expansion supporting further wireless growth. I am confident in our ability to deliver on all these key strategic initiatives and look forward to providing updates throughout the year. Thank you. And we will now turn it back to the operator for questions.

[Operator:]

Thank you. We will now begin the question-and-answer session. [Operator instructions] Our first question comes from Drew McReynolds of RBC Capital Markets.

[Drew McReynolds:]

Thanks very much and good morning. Just want to hone in here on wireline maybe for you Jay, obviously very good margin expansion in the quarter. I think in the past you alluded to seeing more of kind of that margin improvement in the back half of 2019. So just wondering if you could kind of provide an update on what kind of investment in automation you made in the quarter, as well as perhaps how programming costs are expected to trend for the rest of the fiscal year?

[Jay Mehr:]

Great. Thanks, Drew, this is Jay. I'll start with that and Trevor can fill in on some of the timing of the second half investments. We were very happy with the first quarter in terms of wireline with -- we are the team was all in its new roles and largely aligned as we went through the summer. So we brought our -- this with the first quarter of our transformed organization, and we liked the results that we got. We see opportunities for improvement and continue to want to grow broadband and to grow revenue through our focus on transformation. I think on the investment side, to your comment, our net investment where we achieved our gross savings in terms of investments, we didn't really reinvest that much in Q1 and the timing of our net investments in the second half -- Trevor did you want to…

[Trevor English:]

Yes, Drew, I think it's true. And maybe there was some confusion about absolute EBITDA growth versus growth rates, clearly we’ve very strong growth rates this quarter, but just caution going forward, we’re lapping some pretty strong quarters in the second half of 2018. In terms of reinvestments, there wasn't as much planned this year. We certainly are still being cautious about VDP and just managing through the exits. We -- there was about 200 folks that exited the business this year. There's another 900 to go in F2019 with majority of that back half weighted in the second half, roughly 700 of those 900 will come out or leaving them. Majority of those folks that are leaving later in the year are certainly more on the operational, technical technician staff, so that's more CapEx rate related. But some of the investments related to automation of processes, self install, field force optimization and some of the digital initiatives that we're tackling, we are sort of being very dynamic as the leadership team and looking at these on a weekly, monthly basis. We expect those to come, but it will come later and in 2019 than originally planned.

[Drew McReynolds:]

Okay. That's great. Thanks for that color. And one final one, also on wireline, we saw a bunch of pricing packaging speed changes to what you're offering out there in the market. I know you talked about in your opening remarks, but maybe if you could provide a little bit of the impact that you've seen on RGUs or whatever traction you've got as a result, just any color there would be helpful. Thank you.

[Jay Mehr:]

Yes. Drew, it's Jay, again. I think, you’ve alluded to we made a couple of changes, we made internet speed change right at the end of the quarter, which sort of had no impact on Q1. It was literally in the last two days and will impact Q2. Basically, we really wanted to reinforce our position in fiber to the home and fiber to the node as we lead into our broadband strategy giving us what we believe we can market as absolute parity in the fiber to the home areas and four times faster than fiber to the node. It affected almost half of our Internet customers, a little less than half about 900 -- possibly 900,000 residential Internet customers. And response has been extremely positive on the double down both in terms of the reaction from our base and increased activity into our inbound digital and call center channels. In the following week, we also made our planned moves on video, which is really as we’ve talked to the markets about in the past. We’re really focused on managing video for profitability, eliminating the reprice risk and improving cost predictability for video. So the focus is on $60, $80, $95 plans, and again we were pleased with the early response for December. So that’s kind of an exciting time for our wireline team, very much the first chapter of the book, but it’s great to see the business responding as we planned for it to respond.

[Drew McReynolds:]

That’s great. Thank you.

[Operator:]

Our next question comes from Vince Valentini of TD Securities.

[Vince Valentini:]

Thanks. Let’s stay with that wireline pricing theme for a sec. Jay, I assume you’ve seen some notices going out by Telus for rate increases in Internet primarily and a little bit video for the end of February, any thoughts about that? Does that strike you as a nice reaction to what you’ve been doing the past couple of months and can you give us any update on what your rate increase upgrade cycle might be this year?

[Jay Mehr:]

Yes, thanks, Vince. I think we continue to have a nice competitive fighting for every -- fighting for the business, and then decent price discipline in the marketplace. In terms of rate increases you’ll recall we did a -- what we used to call the cable segment the consumer broadband segment we call it now did a rate increase last spring. And probably you'll see something along that regard this coming up spring because we don't rate increase within a value plan. It's only a portion of the base that gets rate increase, and I think TELUS is making similar moves. As we did last year, we did our consumer satellite rate increase last year in the winter and we did this December 1st, as well. It went well on average it's a $3.40 increase effective December 1st and will probably contribute about $20 million in F2019 revenue. So that's where we're headed on pricing, I think the way you've seen is all of our pricing is focused on broadband. If we need video to get a broadband customer we're going to add video absolutely in a profitable way. And it's an important part of our business, but we're pleased with where both we are and the market is right now from a pricing perspective.

[Vince Valentini:]

Great. Two other ones and I can throw out. One now for Paul, one for Trevor. Paul first maybe, the churn improvement year-over-year is obviously pretty substantial, at 1.28% you're almost down to a level where some of the incumbents are, but TELUS is below one consistently, T-Mobile in the states is below 1. Do you think 1.28% is sort of as good as it gets or do you expect continued gains from this level in future quarters? And then for Trevor, just you can think about it, while Paul is answering that. Is 13.5% is not just slightly above your guidance, I understand the timing on some of these IT costs. But is it fair to say 13.5% is trending towards the higher end of that 4% to 6% guidance range for the year on EBITDA or do you still think that the midpoint of that range is most realistic.

[Paul McAleese:]

Vince, hi, Paul, thank you. Yes, we're obviously thrilled with the performance of the team, the infrastructure are all of our customer contact points that got that 1.28% figure in place for us over the last 90 days. I would expect to see some volatility to simply for two reasons, we've got a smaller base, so it's a little bit easier to affect that with small movements and we've got a higher percentage of BYOD on our roles than the incumbents do. So I’d expect to see a little bit of movement, but I would characterize that range as something we look to aspire to for the rest of the year. And I'd like a kind of 30 year head start to get to sub-one I don't think you're going to see that anytime soon given the composition of our base. But these are really significant improvements we've seen and it's full credit to the network and engineering teams that have so drastically improved the network experience over the course of last year. You'll continue to see our churn level be in that range I think over the next couple of quarters.

[Trevor English:]

And yes, Vince, I’d say based on the delivery of the Q1 results and where we sit, yes, we are trending towards the high end of the guidance range.

[Vince Valentini:]

Thank you.

[Operator:]

Our next question comes from Jeff Fan of Scotiabank.

[Jeff Fan:]

Thanks, good morning. Few questions, first, let's just clarify with Trevor, with respect to the IFRS there seems to be some confusion on that, so I just want to clarify that. In this quarter there were some margin decline, I guess, on a year-over-year basis, but that seems like from your explanation is just due to the fact that you didn't have a lot of subsidies in your base in Q1 last year. So as we look out the rest of the year should we start to see margin improvement on the wireless side as you start to lap the -- I guess the iPhone handset in the subsidy model that started late last year. And then again the $30 million adjustment in 2018, only $1 million in Q1, how does that roughly split out for the rest of the year from Q2 to Q4? And where do you think the number ends up roughly in 2019?

[Trevor English:]

Sure, a lot there Jeff and I understand there is some confusion with the policy changes on IFRS 15 that makes it difficult to do comparatives. So on the margin question, you're absolutely right there wasn't as much sub-loading in Q1 of last year, so that's why there was a stronger margin than this year. I would say where we're looking at sort of trending through the balance of the year is somewhere in that 16% to 20% with the with the sub-volume that we're expecting. However that trend changed significantly based on higher sub-volume and more subsidy upfront on the equipment side of things. As far as the split on the 15 to 30, you're absolutely right again Q1, there wasn't as much activity really that I would say roughly half of the $50 million impact on revenue and half of the $30 million impact on EBITDA occurred in Q2 when we really started to ramp up the volume and device sales in the subsidy related to the activity a year ago. So hopefully that helps from a modeling perspective and you can do your adjustments on IFRS 15 for 2018 on a quarterly basis based on Q1 disclosure that we gave today. And then the Q2 is roughly half and then Q3 and Q4 is both the remainder split evenly over both of those quarters.

[Jeff Fan:]

Okay, great. Question for Paul, on the wireless side, if we look at your postpaid adds for this quarter the last 12 months you’re adding almost close to 320,000 subscribers. You’re growing ARPU double-digit now. How do you feel about that level of pacing and growth and the balance that you’re seeing on both of those metrics? And just wondering how things may kind of shift as we look out the rest of the year?

[Paul McAleese:]

Yes, obviously a very strong 12 months. Difficult to predict, Jeff, just going forward as, Brad, indicated we had some more measured and somewhat quieter holiday selling season relative to last year. So a bit too early to predict. Of course there has been some speculation in the media that there has been sort of a flattening out of smartphone replacement cycles and things. So that may impact sort of our forward looking 2019 numbers. We are continuing to see strong growth particularly in that mid to upper segment for us. So we're continuing to pursue sort of a higher quality subscriber than we were even at this time last year. That may moderate some of the growth figures that you talked about, but as you saw in the last 90 days we've been able to kind of continue to power through that. I'd say at this point, we're comfortable with our growth. We've got some new markets coming on that should help. We've also got some things pushing in the other direction a little more disciplined and a little more thoughtful inoculation from the incumbents to some of the more at risk subscribers that they have. So that’s making for a little bit less available market. On the other side of that, we'll be opening up more than a million new pots [ph] this year as well. So I think the next 90 days will be a strong indicator of how the year will play out. But we continue to think we're going to have a good solid growth pattern for 2019.

[Jeff Fan:]

Okay, great. And just one final question on the wireline cable side for, Jay. There was a mentioned in the MD&A about subscribers migrating downward the video packages. So that sounds like core shaving. I'm wondering are these subscribers seeing their content costs go down as well, i.e. are you able to maintain, I guess, the gross margin dollars from these customers even as they migrate down? Or whether there's some flexibility you still need on the content side to try to drive that or maintain that profitability?

[Jay Mehr:]

Yes, thanks for the question, Jeff. I think as you've seen what we've done on video pricing, it's designed to really provide great value for our customers almost on a cost plus basis to our cost structure. One of the challenges as we've watched over the last few years with our Blue Sky entry into the marketplace is we really emphasize choice beyond the flexibility that we had in our programming agreements [technical difficulty] that we saw over the past two years a significant degradation in our video margins and also in our video revenue. Q1 was a very positive turnaround quarter for us in cable video, where we still had some much more modest declines in revenue and margin. We started to move forward and the beginning of December looks extremely positive with video as we bring pricing back in line with our cost structure and providing value to our IPTV customers.

[Jeff Fan:]

Okay. Thanks, Jay.

[Operator:]

Our next question comes from our Aravinda Galappatthige from Canaccord Genuity.

[Aravinda Galappatthige:]

Hi. Thanks for taking my question. A couple of questions on the wireless side. Number one, I was wondering if you can sort of revisit the geographic mix, I know you've in the past been alluding to sort of still being heavy on the Ontario side, perhaps two-thirds. I wanted to see if that changed materially. And secondly, I think in the past call you alluded to some initial efforts around cross selling in the West, I wanted to see if there is -- that program has commenced or if there's any early feedback? I'll leave it there.

[Paul McAleese:]

Hi, Aravinda, its Paul. The split between East and West continues to be 70-30 where it's remained for quite some time. I do expect to see some changes in that as soon as in the coming months on a modest basis as we open up the -- some of the Western markets, including Victoria, which will light up in the coming weeks. And we'll see about 1 million of the 1.3 million pops that we added this year will buy us to the West. So that will start to have a bit of an impact on that split. But I wouldn't imagine that that's going to move in a meaningful way for a little while yet. On cross selling, we began really our first effort on that which is to sell Freedom products within our Shaw stores here in Calgary at Chinook Mall. Very, very pleased with the first 60 days or so of that and we'll look to continue to expand the availability of Freedom product within Shaw's retail footprint over the coming months.

[Aravinda Galappatthige:]

Great, thank you very much.

[Operator:]

Our next question comes from Maher Yaghi of Desjardins.

[Maher Yaghi:]

Thank you for taking my question. And guys, I wanted to -- as you continue to drive Internet into your overall mix higher and as you alluded to trying to work out the profitability on the video side. Can you talk about your expectations for revenues on the consumer side for the rest of the year? We saw results holding steady on the top line consumer in the first quarter. Can you maybe just tell us how it's shaping up for the rest of the year? And on the business side, what are the improvements or the potential upside we should see in net growth? We saw a nice uptick in the quarter. Can you talk about what's to come maybe for the rest of the year?

[Trevor English:]

Sure, Maher, its Trevor. Maybe I'll start and then Jay will add some things here. But on the Wireline segment, our focus really remains on stabilizing the business, improving execution and growing broadband. And certainly this quarter, we delivered on that. From a top-line perspective I would say, we continue to expect consumer to be roughly flat and business will contribute mid to high-single-digit growth. And frankly how we've done that on the top-line for the last several quarters. So I'd say that will continue to be the focus and what you can expect from us over the remainder of F2019.

[Maher Yaghi:]

Okay. And in terms of wireless, you talked about the split 70-30 from Ontario. Do you see a difference in customer mix in terms of ARPU levels in Ontario versus Western Canada?

[Trevor English:]

Very modest. There is a slight increase in ARPU in the Alberta market relative to the rest of the Canadian market, but on balance, it's all within pretty much striking distance of each other.

[Maher Yaghi:]

Okay. And in terms of the retail strategy you -- how long you think it's going to take before we see an uptick in the Retail segment in Western Canada from the investments you've made so far?

[Trevor English:]

Well, they're relatively early. So the new markets that we’re opening are really starting in the coming weeks and you'll see that continue through the course of F2019 and F2020. Our retail investments there, I think we've indicated in the past that we’ll be opening around 30 to 35 corporate stores, about two-thirds of those are in the West. And again, those are all in front of us at this point. So you'll start to see some modest shifts in the retail percentage of contribution over the coming couple of months.

[Maher Yaghi:]

And the focus there, I guess is mostly on the postpaid, because it seems like you are ready to lose some prepaid customers in the quarter to focus on postpaid. What do you think, we should be expecting on the prepaid side in the next couple of quarters? It seems like the competition is trying to attack your low end, which is a bit weird for me to understand, but what's your expectations on prepaid?

[Jay Mehr:]

Yes. You have to ask them about their intentions. As far as, we -- our strategy, we're -- I've spoken previously on this call about how pleased we are with the evolution of our corporate stores and our distribution partners on the pursuit of higher value postpaid subscribers. So I think it's consistent with our strategy. We've asked our distribution to remain focused on that higher value segment. We'll continue to welcome customers of all preferences for payment mechanism over the next number of quarters. As you know, Maher, we launched in July some entry level price points for data only subscribers. We're seeing some of those come in on a higher basis of prepay. But overall we want to continue to focus on the highest value subscriber that we can secure, which is a customer that comes in on a two year device financing arrangement on a big gig rate plan and signs onto a high value device. So that's really been our sweet spot. And I like the way we're moving up into the higher quality subscriber profile, but we will always make sure that we've got an entry point for prepay lower revenue subscribers as well.

[Maher Yaghi:]

Okay. And just last two quick questions here. On the prepaid loss of the 20,000, how would you say the split was versus conversion to postpaid and loss to competition? And on ABPU growth rate, now that you lap some of the entry points on the iPhone, how we should look at or expect to see ABPU growth in the future quarters?

[Trevor English:]

Yes, the split of the losses we incurred this year -- this quarter on prepay a little more than half were attributable to customer migrations to higher value postpaid plans. A lot of that was attributable to the incentive that we provided customers to move up into commit to a higher monthly recurring revenue with us through things like the Big Binge Bonus. So we made it appealing to customers to move up and spend more with us this quarter and we were grateful that they had the confidence to do so. We saw about roughly 10,000 of those 20,000 losses would have been attributable to two competitive losses. On ABPU growth, I don't think we're guiding at this point on that. We're obviously continuing to see our focus beyond sort of $50 and $60 subscribers. So those you on model on that that you'll continue to see us focus on the big gig pricing. And as I said, I think a couple of calls ago, I'm not going to get bored of that anytime soon it's working for us customers are finding it appealing. We're continuing to hear from customers that they love the option of being able to get out of a scenario where they have excess overage charges. And we're going to continue to poke at that we believe that that's an aspect of the competitive environment that we just find unconscionable and we're going to continue to leverage that. So customers are voting with their feet and with their wallets they're staying in record numbers. You can -- now you can probably build your model to support that.

[Maher Yaghi:]

Okay, great. Thank you very much, guys.

[Bradley Shaw:]

Thanks, Maher.

[Operator:]

[Operator Instructions] Our next question comes from David McFadgen of Cormark Securities.

[David McFadgen:]

Hi. I have two questions on wireless. First of all do you know when you would be done say 80% or maybe 100% of the deployment of the 700 MHz spectrum? And then secondly, just following along the ABPU growth, can you give us an idea what the ABPU is on your postpaid gross adds. Because obviously that would have implications for growth in the future.

[Jay Mehr:]

Yes, I'll take those in reverse order and then Trevor you want to take the second one. So on ABPU growth, the inbound cohort continues to be in the low to mid-50s over the course of the last quarter. So were seeing new subscribers come on those big gig rate plans at well above the reported ABPU. So like the trend that that's putting in place for us.

[Trevor English:]

Yes, on the 700 rollout, David, I mean obviously that's the focus for F'19. We get a big chunk of it done this year. But just to be clear it will spill into F2020 as well in terms of the investments.

[David McFadgen:]

Do you think you would have 80% of the deployment done by the end of say…

[Trevor English:]

That's a little bit high in terms of by the end of this year, David.

[David McFadgen:]

Okay. And then maybe if I can just follow-up with another one, so when you're co-locating wireless and wireline in say Shaw retail location, how -- like how does that benefit wireline at all or wireless? Can you give us any more details there?

[Jay Mehr:]

Yes.

[David McFadgen:]

They're not they're not on the same bill, right. They're just co-locating.

[Jay Mehr:]

Yes. They're not in the same bill and you're selling Freedom and Shaw services. They're not on the same bill thing. I'm not sure is a totally modern thought. I think that may be a little bit about how the marketplace used to operate. It's a simple conversation, it's an opportunity to have a conversation with customers in Western Canada on what their monthly spend is on both broadband and wireless and take the asset of the organization to save the customer money. We're doing it in small baby steps, we're doing it at moments of truth as you onboard customers and as you say customers reduce churn, but it's very helpful for the conversation, David.

[Paul McAleese:]

And David, its Paul. Things like being able to profile hundreds of thousands of WiFi hotspots available to our wireless customers attributable thanks to the investments we've made on the wireline side of the business it's a nice cross-sell there and customers are reacting well to that.

[David McFadgen:]

Okay, all right. Thank you.

[Operator:]

Mr. Shaw, there are no more questions at this time right.

[Bradley Shaw:]

Great, thank you operator and thank you everyone and we'll talk to you soon. Have a good day.

[Operator:]

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