Shaw Communications Inc.
Q1 2017 Earnings Call Transcript

Published: 13 Jan 2017

[Operator:]

Welcome to Shaw Communications' First Quarter Fiscal 2017 Conference Call. Today's call will be hosted by Mr. Brad Shaw, CEO of Shaw Communications. At this time, all participants are in listen-only mode and 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 information on assumptions and risks. Mr. Shaw, I’d now like to turn the call over to you.

[Brad Shaw:]

Thank you, operator. Good afternoon, everyone, and thank you for joining us today. With me today are members of our Senior Management Team including Jay, Vito, Alek, and Nancy. We entered fiscal 2017 with momentum as we now have the diversified assets to deliver long-term growth and enhance connectivity for our customers. We are pleased with the progress and execution of our strategic plan. During the first quarter, we continue to see strength in BIS and BNS and improving customer wireline results, which are supported by the investments we made in our infrastructure, the introduction of two-year value plans and a full quarter of our WideOpen Internet 150 offering. Further to this, we continue to enhance our wireline network and are on target to complete our DOCSIS 3.1 upgrade by the end of fiscal 2017. All these initiatives lead to a strong quarter of internet RGU additions of 17,000 new broadband customers. As many of you know, yesterday, we unveiled Shaw BlueSky TV. Our new best-in-class premium television product is now available for customers in Calgary and other Shaw markets in the coming months. Shaw BlueSky TV sets the highest standard for Canadian television viewing. We are proud to pioneer the Comcast technology in the Canadian market and are privileged to drop on the years of R&D that Comcast has invested to create this leading edge entertainment platform. BlueSky TV brings forward more product and feature benefits than any other television service available in Canada. Its voice-control remote makes it easier than ever to find and discover content dramatically changing the way our customer experience TV. In the quarter, we remain focused on the execution of our long-term strategic wireless initiatives, which included three key milestones. First, in November, we rebranded WIND to Freedom Mobile. Second, we began the roll-out of our LTE-Advanced network upgrade in the key markets of Central Toronto and Vancouver and are currently tracking ahead of schedule as we look to complete the network enhancements by fall 2017. Third, we introduced the Freedom Wi-Fi trial, which allows Freedom Mobile customers to connect to over 65,000 Shaw Go Wi-Fi hotspots across Alberta and BC. In support of our multiyear wireless strategic plan, we recognize that there will be periods of volatility as we focus on our long-term objectives, including our branding and LTE network enhancements. We also recognize that there will be periods of heightened competitive activity that will impact quarterly trends. I will now turn it over to Vito to go through financial results for the quarter. Vito?

[Vito Culmone:]

Thanks, Brad, and good afternoon to all of you joining us on the call. The reported consolidated results for the quarter include revenue of CAD1.31 billion, up 14.9% and EBITDA of CAD539 million, up 6.1% on a year-over-year basis. Adjusting to exclude wireless results, revenue in the quarter for the combined consumer, BNS and BIS divisions was up 2.8% while EBITDA was roughly flat compared to a year ago. Looking at the divisional details, consumer revenue of CAD947 million in the quarter was up 0.4% while EBITDA of CAD405 million declined 3.3% compared to the prior year. Improvements in revenue were driven by annual rate adjustments, growth in internet RGUs and a year-over-year decrease in promotional costs. BNS results for the quarter include revenue and EBITDA of CAD144 million and CAD72 million respectively, up 5.9% and 12.5% respectively over the prior year. Wireless results in the quarter include revenue of CAD138 million and EBITDA of CAD30 million. Compared to the fourth quarter fiscal 2016, revenue was down 6.4% and EBITDA is up 2%. Results reflect our focus on the launch of Freedom Mobile, the roll-out of our LTE-Advanced network and heightened competitive activities in the period. BIS reported revenue and EBITDA for the quarter of CAD90 million and CAD32 million, up 23% and 28% respectively over the prior year. This increase was primarily due to the December 2015 acquisition of INetU and continued customer growth. Excluding the effect of foreign exchange, revenue increased by 21.3% to $67 million and excluding the effect of INetU, revenue increased by 5.6% to $59 million for the quarter. It’s important to note while organic growth is softer this quarter, we still expect approximately double-digit organic growth for full year revenue and EBITDA in our BIS division. Consolidated capital expenditures in the quarter were CAD290 million. The increase in the current quarter compared to a year ago is due primarily to the addition of wireless investments of approximately CAD64 million in the quarter. Free cash flow of CAD158 million for the quarter decreased from CAD173 million a year ago primarily as a result of a reduction in free cash flow from discontinued operations in the amount of CAD74 million following in the sale of the media division in 2016 and the addition of wireless. We delivered net income in the quarter of CAD89 million or CAD0.18 per share, which is a decrease over the prior year due primarily to the non-recurring provision in the amount of CAD107 million related to the wind down of our investment in Shomi. In addition, a decrease in income from discontinued operations, net of tax, in the amount of CAD80 million due to the sale of the former media division in the third quarter of the prior year, which is partially offset by the equity income of CAD27 million in the quarter from our investment in Corus. Before turning the call back to Brad, I wanted to briefly discuss the change in accounting policy related to the calculation of deferred taxes on intangible assets with an indefinite useful life that impacted our statement of financial position. This change had no business or operational impact and no impact to income or cash flow in the quarter. Please refer to Note 2 of the condensed Consolidated Financial Statements for disclosure relating to the change in accounting policy and the impacts of the restatement. With that Brad, I will hand it back to you.

[Brad Shaw:]

Thanks, Vito. We look forward to a strong fiscal 2017 and maintain a continued focus on delivering long-term growth to shareholders and a best-in-class connectivity experience for our customers. We’ve never had a better set of assets nor stronger team to lead us. We stand on a platform that is ready to hold the weight of the next generation of Shaw as we build for the future. I would like to extend a sincere thank you to all the Shaw employees for their efforts and commitment in helping us achieve our Q1 results. Before we take any question, I want to say we know many people here in Western Canada and elsewhere have endured hard times recently and we are humble that many continue to welcome Shaw services into their homes as staying connected becomes even more important. Thank you for joining us this afternoon. And we will now turn it back to the operator to open the Q&A session.

[Operator:]

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Vince Valentini with TD Securities. Please go ahead.

[Vince Valentini:]

Yes, thanks very much. Let me ask about the X1 pace of deployments. I mean the product looks fantastic. We’ve seen what it’s done for Comcast. Should we think about their pace of deployments getting up to sort of 40% of their subs after a couple of years as what you would be targeting or do you think you can go even faster given the learnings of what they’ve done? And also maybe if you can give us any update on how fast other markets other than Calgary will be getting the product as well, that would be great? Thanks.

[Jay Mehr:]

Hey, Vincent, it’s Jay. Thank you for the question and we agree the platform looks terrific. We’ve learned a lot from the Comcast playbook really over, I mean, I guess, five years of deployment, in some form in three years of going pretty hard at it and we love their playbook and we will be following that playbook. As we all appreciate, we are joining a moving train so we get to join the roadmap where it is today, not where it was 2.5 years ago. So we’ve got a much stronger product today than they had 2.5 years ago to be able to bring into the marketplace. So when you think about whether you counted 3 or 4 or 5 years to get to where they are today, it’s certainly our view that it won’t take us that long because we’ve got a stronger product and a path to get there. That having been said, we’ve launched in Calgary, we are going to launch in Vancouver within a matter of weeks, not months, and then we will be – everywhere else that – we move to other markets at spring. So it’s a relatively – it’s a relatively quick launch making it available to consumers. If you think through this remember that this is a premium experience bundled with a WideOpen Internet 150 that most Western Canadian customers can’t get from our competitors. And so we are really entering the market within that space. There was a little more to your question than that, but I don’t know if that’s a good start.

[Vince Valentini:]

No, that’s good for now, thanks.

[Operator:]

The next question comes from Jeff Fan from Scotiabank. Please go ahead.

[Jeff Fan:]

Thanks and good afternoon. Just wanted to ask you a question about the – also on the BlueSky. Jay, I think, you’ve alluded to this before that you’ve been seeding with a lot your existing customer base with the compatible equipment inside the home. So I’m just wondering as you hit the market how – where are the priorities, are these going after new customers or you looking after migrating some of these existing customers with compatible boxes to the platform? And I’m just wondering where your priorities are and then we start there.

[Jay Mehr:]

Thanks, Jeff. It’s a great question. As we’ve talked about we joined the Comcast equipment roadmap a couple of years ago as we started down this path and we’re able to realize immediate benefits in terms of cost savings that were dramatic in terms of cost that we’re paying for our gateway. So every box we bought in the last 18 months is a compatible [X1] [ph], in fact it’s exactly the same box that we are deploying today with the installs that we are doing in Calgary. So we are coming up on a couple of 100,000 of those boxes that are already into deployments today. And so clearly that’s an easy place to start. Because those customers are recent – have interacted with them recently, many of them are already on 150 and those that aren’t who loved have come on board to WideOpen 150. So it’s a great cost effective way to get immediate traction. We also want to put our best premium product forward to new customers. So as customers are choosing between optic and maybe the 50 meg service that’s available to most consumers in our region they have an opportunity to weigh that against WideOpen and BlueSky together.

[Jeff Fan:]

And maybe switching gears a little bit, sitting back looking at capital allocation, maybe a question for Vito. Can you talk a little bit about how the capital spend this year within your guidance is going to shake out across the various divisions? Just to give us some clarity of visibility into how it breaks down. And I guess one question in there is about the capital spend in ViaWest. Good cash flow from that segment this quarter. Is there just timing related to that or should we expect that CapEx to come up? An overall sort of breakdown and maybe just specifically touch on ViaWest a little bit.

[Vito Culmone:]

Yeah, maybe I will address the second one first. You are absolutely right. Simple free cash flow from ViaWest was positive in the quarter. We are pleased with that. That was primarily timing related. As we look at F’17 in aggregate, we expect that business to be plus or minus a couple of million dollars on that, so call it flat. There will always be a few FX related issues there, but that’s the guidance that we’ve provided on that and that’s what Nancy and the team are marching to and committed to. Overall, I think, Jeff, your question about where are we allocating capital, when we look at our aggregate spend of CAD1.3 billion, we’ve got about 60% of it geared towards growth initiatives and that would obviously be primarily obviously wireless including all of our business infrastructure services and all of our success base with BlueSky TV and also, obviously, runs on BNS activity. So we are really pleased on how we pivoted the capital focus primarily on growth. We still obviously have some maintenance to sustaining our network continues to be in really great shape and we are never going to lose sight of that and continue to make the appropriate investment. But I’d say about two-thirds of it geared towards what we would say is a growth initiative.

[Jeff Fan:]

And maybe finally for you Vito. Just sitting back looking at the balance sheet and leverage, where would you sit right now, how comfortable are you and we’re just back to investment grade, have you had any conversation with agencies recently and where you stand on that?

[Vito Culmone:]

Yeah, we sit at about 2.5 on the leverage front, which is we are very, very comfortable with it, totally committed to investment grade. As we look at the next few years, we really like the balance of free cash flow and capital profile and capital investment required. So we don’t see ourselves reaching out too much over that. Conversations with rating agencies are very, very constructive. I think in the last six months, particularly as our assets have settled into place, particularly after all the transactions we’ve made and been able to communicate the clarity around that, I’d say everybody is feeling pretty good about things.

[Jeff Fan:]

Okay, great. Thanks a lot guys.

[Operator:]

The next question comes from Phillip Huang with Barclays. Please go ahead.

[Phillip Huang:]

Hi. Thanks. Good afternoon. First, I wanted to just quickly touch on the wireless business for a moment. We've all seen the new catchy marketing campaign for Freedom Mobile through December. I was wondering if you guys have any early sense on how the market is responding to the new marketing campaign. And certainly there's, as with every year, there's quite a bit of seasonal activity at that time and was wondering if after you guys did the LTE launch and the rebranding, whether we should expect in the coming quarters to see a strong recovery.

[Alek Krstajic:]

Hi, Phil, Alek Krstajic here. Look, everything we’ve seen, the Freedom Mobile launch has been a real success, the social media response that we’ve been monitoring has been very, very positive, some of the blogs. So the feedback we are getting is great. Customers calling to the call center have indicated they love it. I ran into one of the – my competitor’s CEO and he even reluctantly admitted he loved the name – for its worth. So we are very, very excited about. I think we found something that is going to resonate with everybody out there. And as – vis-à-vis the second part of your question, we did see an uptick, I think, what you are going to see in terms of – the lift from LTE is very good, we still have limited handsets, so I’m bullish on LTE, but it’s going to be a while for the ramp-up to happen. We tend to monitor, as long as I’ve been in this business with all the different companies, we also look for when does that traffic start to really increase in the stores, five or six years ago we would have seen Christmas traffic start to accelerate around December 8, December 9 or December 10, this year it really didn’t start to happen till the later part of December. But notwithstanding that, we had a solid December and I think you will see a good recovery.

[Phillip Huang:]

That's very helpful. Thanks. And then if I could switch gears and touch on the set top box for X1 again, I believe the software upgrade to those boxes, can they be done remotely or I just wanted to understand the process for the couple of hundred thousand boxes already in the market, what is the best way to actually get those boxes to be ready to actually have the X1, is it for them to come in and swap for another similar box that's already been upgraded for the software? Just wanted to get your thoughts on logistics of getting those boxes with X1, thanks.

[Jay Mehr:]

Yes, it's a good conversation, a detailed question, Phil, thank you. In terms of the rollout today, we haven't started with that base today first of all because we've got plenty of demand. And at this moment today, our practice because we're keeping things simple is that the box comes back into the warehouse and gets redeployed with the software on top of it. Our partners are able to do that in a more free flowing process and it's on our road map shortly. So by the time we get to addressing that base we'll be able to make that transition in the home today. But we are not – on launch day we aren't doing that at this moment. We'll be ready in lots of time to take advantage of that opportunity.

[Phillip Huang:]

Got it. And then looking into the longer term, where do you see the platform taking Shaw with service in the home, obviously, the demo yesterday was really helpful and really encouraging to see such a strong roadmap for the platform going forward. Do you see other areas that could expand your services to make it – to make broadband and television even more sticky in the home?

[Jay Mehr:]

Yeah, thank you for the opportunity. We are so excited about this platform and what it makes possible. Even just coming back from CES [ph] with what you saw, everywhere, at CES was voice recognition. It wasn’t that the voice recognition [indiscernible] getting a little bit better, it was because the level of control that that layer gives people to the complex elements of their homes and their lives and their digital experience and interest of things. And to be clear, when you talk about our vision, our vision is Tony Werner – Comcast vision, we’ve talked all along about if they are planting two ups, we are planting two ups, but the vision is that this home operating system will create the aggregation and simplicity. In the Comcast model, they are adjusting thermostats and lights and we are headed down all those paths too. And it really becomes about simplification and an aggregation in the home and using BlueSky as your entry point. So correctly identified for us, it’s a lot more than video or a lot more than IPTV.

[Phillip Huang:]

Thanks very much.

[Operator:]

The next question comes from Drew McReynolds with RBC Capital Markets. Please go ahead.

[Drew McReynolds:]

Thanks very much. Good afternoon. Just two for me. Alek, can you just talk to the LTE handset roadmap that you think is in front of you just in terms of getting more handsets available in your spectrum band? And second question, you provided previously some X1 kind of OpEx and CapEx guided to about CAD75 million, I think, for fiscal 2017 and I think two-thirds of that was OpEx this year. Just want to kind of firm up those numbers if they are still relevant just given the timing of – and all that you are doing on the deployment.

[Alek Krstajic:]

Sure. Drew, we’ve got a roadmap that basically starts obviously with the LG V20 and the ZTE handset that we’ve got in market now. They were a little bit delayed, but that – the patch that Qualcomm came through. And so, they are all good to go. By spring, you will see a couple of more handsets rollout and then we really see by summer time and by sort of early fall really filling in with all the major manufactures and all their models having been 66 handsets. And again, this is being driven largely by U.S. carriers who are also looking for Band 66 read handset to be able to do AWS-3 LTE. So I would expect that by the end of our fiscal year, by – through end of August, you are going to see most of the major brands with Band 66 handset in our lineup.

[Vito Culmone:]

And Drew, it’s Vito here. In respect to your second question, I think the CAD75 million is, we are very much still in that ballpark for the latter half 2017 so no update to that. Obviously it will move around a little bit, but no significant departure from what we’ve previously said there.

[Drew McReynolds:]

Okay. Thank you very much.

[Operator:]

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

[Tim Casey:]

Thank you. A couple for me. Alek, can you just clarify, do you expect to have new iPhones in the lineup this calendar year? And Vito, can you talk a little bit, I guess, directionally how we should think about margins with respect to X1 and the fees you will be paying to Comcast? Like, should we think of it as J-curve type model that expands with wider deployment or is it more, do you think, it’s going to be less variable, will be more flat line in terms of margins? Thanks.

[Alek Krstajic:]

It’s Alek. With respect to the iPhone, it’s really a question that only Apple can answer, but I would say to you that Apple has had – history repeats itself, Apple had a strategy where they have traditionally tried to do even mid-model upgrades where they include the latest and greatest chipsets to appeal to as many bands as possible. If you look at the iPhone 5S, it worked on AWS-1, but actually the iPhone 5 halfway through they made a chipset change. So, we don’t know for sure what’s going to happen with Apple, but if history repeats itself, we should by the end of this year see an Apple iPhone that does have AWS-3 capability. Now we don’t have a relationship with Apple right now. So there is really two steps here, one is for us to establish a relationship and the second is for Apple to actually have a phone.

[Vito Culmone:]

Tim, it’s Vito here. In respect to your second question. Great question. Obviously, we are not going to get too detailed into the terms of our contract with Comcast. But I think you described it appropriately that over – as we get more boxes into the system. Obviously, most of our customers are pre unit cost related to supply [indiscernible] will be coming down on a per unit basis through the period. That’s the operational cost impact associated with that. As Jay mentioned and Jay you can tag on to this, when we think about how we are packaging it, premium, what does it overall do from a margin perspective and the churn benefit and all the rest of it, obviously, we are very, very comfortable that at the end of day notwithstanding the costs related to this great platform that we are going to be further ahead than we otherwise would have been.

[Tim Casey:]

Thank you.

[Operator:]

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

[Aravinda Galappatthige:]

Good afternoon. Thanks for taking my question. Just wanted to touch on WideOpen 150, kind of talked about the take up there since you launched the product earlier last year. Can you just touch on the competitive response you are seeing to that product? We often seen some set of competitive offers online, but I wanted to get a sense from – at the ground level what you are seeing. And also connected to that, what kind of reprice risk sort of do you see particular on the consumer side as you get to sort of the back half of year?

[Jay Mehr:]

We are taking together we are delighted with the progress of WideOpen Internet 150 doing exactly what we wanted it to do in the marketplace. You correctly identified there was a relatively small number of customer that would have had to enter into a two-year service agreement in order to lower their rate. And a good percentage of them have already done so and are already reflected in our Q1 numbers and all of that has happened quite elegantly and in a way that we’re expected. ARPU for internet is still up very nicely on a year-over-year basis and we are through the vast majority of that. Our customers in Western Canada, I think, are a little bit more aware of their monthly bills than may be in other parts of the country in terms of level of competitive activity that we’ve had for so many years here. So that reprice is largely happened and you won’t – you see it already in our numbers and again internet ARPU maintains a nice healthy increase on a year-over-year basis. So, nothing to be terribly concerned there. In terms of the competitive dynamic, I mean, it’s fair to say nothing comes easily in this worlds and it’s fair to say that we had lots of activity in the market and by the way, we also participated in the marketplace. And so as you can expect with these kinds of change in trajectories, as you’ve seen in our numbers, it wasn’t done without some dustups both ways. The most aggressive of those offers are no longer available from either one of us. And we will see how the marketplace unfolds. It’s a very different experience for us to be in those kinds of dustups with a positively differentiated product for the majority of Western Canadians on broadband and now today with a positively differentiated product on video. So we will engage as much as we have to, but it’s looking good today.

[Aravinda Galappatthige:]

Okay, thanks for that. And my last question on this network services. Obviously, very good EBITDA number. I mean, if – we are looking at sort of mid-single-digit revenue growth as the baseline, I mean, is that type of operating leverage or even something close to it, is that sustainable? I mean, is there something in the model that we should kind of know as we try to sort of forecast for the upcoming quarters?

[Jay Mehr:]

You are asking if – I will let Vito start and I show up with the…

[Vito Culmone:]

Sure, yeah. Aravinda, you are absolutely right. I mean our Q1 was plus 5.8% overall. But what we are most excited about quite frankly is when you exclude the satellite numbers from that, our core as we call it is 9.6%, so – and the percentages obviously are impacted by relatively obviously the absolute amounts here and we are very, very comfortable that the team and the products said and what’s happening around monthly recurring revenue and peak installations as we are moving forward, double-digit growth across that business for F2017 is definitely possible.

[Jay Mehr:]

[Indiscernible] to watching a trend here. While we’ve been talking about our Smart services and –SmartWiFi and SmartVoice are both being double-digit growth on a month-over-month basis and so we are on the right trajectory. As we’ve talked about it, it takes a period of time because you’ve got legacy businesses in that revenue for that revenue to be big enough to be able to actually turn the ship. And so we see on the upside as we move into this business in F2018 as really the Smart services takeover the – not only the revenue growth, but a larger proportion of revenue.

[Vito Culmone:]

And continuing to invest in that. So might not – EBITDA side, you might see some choppiness there, we are not going to – but we are going to appropriately invest in our product as we forward quarter-to-quarter. But on the revenue side, I agree with everything Jay said there, double-digits.

[Aravinda Galappatthige:]

Okay. Thank you. It makes sense. I will pass the line.

[Operator:]

The next question comes from Greg MacDonald with Macquarie. Please go ahead.

[Greg MacDonald:]

Thanks. Good afternoon, guys. Looking back at the wireless quarter, it’s pretty obvious that there was some scaling back in prom activity as you went into the Freedom Launch. But Brad also commented that there was some competitive as well. If you just describe it in terms of increase of churn versus decrease of gross adds and how the subscriber count played out for the quarter, what was the bigger impact? Was it customers churning off to get fees free iPhones that were in the market or was it more a decline in the promotional activity and therefore gross adds that played out?

[Alek Krstajic:]

It’s Alek. I’m not sure I can quantify it like that. If I had to pick, I would say the fact that we purposely slowed down, we started early in the quarter slowing down our advertising spend really for two reasons. One, you don’t want to have – you don’t want to be spending money promoting a brand you are about make disappear, namely WIND and replace it with Freedom Mobile. Second things that as you promote and get more customers in that come in sort of 30 days or 60 days before you launch LTE, a number of the ones that buy the higher end phones are actually going to be annoyed because they would have rather waited and bought an LTE handset in December. So I think what happened was there was a very purposeful decision to slow sales down and then I think what happened, there was some pricing in the market that really was quite aggressive and rational specifically, the CAD40 4 gigabyte rate plan. And I would say that rate plan, it provoked a little response from all the incumbents and so it helped to accentuate the slower sales on our side. The great news is we think we’ve seen now all those – what I would call, rational rate plans have been pulled out of the market and so we should see some rational numbers start to increase again.

[Greg MacDonald:]

So you made reference to that, Alek, is that suggest there therefore that activity has returned back to kind of normal levels or are you still not quite seeing that yet?

[Alek Krstajic:]

No, we started seeing – once we launched Freedom Mobile in December, the Christmas rush in boxing, we started seeing sales accelerate very, very nicely. So we started building momentum again. I’m referring to the fact that just in the day or so, all the flankers seem to have pulled the aggressive promotional pricing that they had and so that generally means that we become a bit more attractive. I think the impact from last quarter was really significant because if you’ve got a CAD40 4 gigabyte rate plan, it’s LTE, it starts to really shine a light on our deficiency having only a 3G rate plan. In 2017, with a robust LTE offering as the year unfolds, I’m less worried about how those rate plans will affect us.

[Greg MacDonald:]

Okay. And final question, was there a big…

[Jay Mehr:]

No, carry on, you are good.

[Greg MacDonald:]

Was there a bigger Ontario versus Western pact or was that not really the case?

[Alek Krstajic:]

No, I think it was across the board.

[Greg MacDonald:]

Great. Thanks a lot guys.

[Operator:]

The next question comes from David McFadgen with Cormark Securities. Please go ahead.

[David McFadgen:]

Yes, great. Thank you. Two questions. In the event that the CapEx, the CAD1.3 billion, doesn’t drop probably modestly next year, in the event that it doesn’t go down, do you anticipate that you would take Corus cash dividends as opposed to the DRIP in order to get your payout ratio down below 100% on the dividend? And then secondly, I see that you are going to be leveraging the Shaw Wi-Fi hotspots with Freedom, I know it’s free until March 31. After that point in time, it’s included in some plans, but some plans it is not. For the plans that it is not, what would be the incremental monthly fee would be, something in the order of $5? Thank you.

[Vito Culmone:]

Hi, David, it’s Vito here. First question, little bit of a hypothetical question, we are a very disciplined company when it comes to the capital side of things, the team is working very, very hard in allocating and being efficient and keeping to their commitments. So I expect no material departure from the CAD1.3 billion we’ve committed this year. And if there is departure, it’s strategic, it’s growth based, it’s in the best interest of our shareholders. Overall, we are managing free cash flow. We are very much like, obviously, our Corus investment, our [indiscernible] DRIP and whatnot and we will defer that decision if you will to the appropriate time as to when we come off the DRIP and what all that looks like. I’d rather separate two issues for the time being. Second one, sorry, I didn’t…

[Alek Krstajic:]

Second one was for me.

[Vito Culmone:]

Okay.

[Jay Mehr:]

There’s no decision that’s been taken yet on pricing around a Wi-Fi add-on.

[David McFadgen:]

Okay. But do you anticipate that there would be bit of a charge [indiscernible]?

[Jay Mehr:]

We are really looking at all of the sort of strategic aspect of that. There’s an argument to be made for inclusion, there is an argument for inclusion with bundles. There is an argument to be made actually charging an incremental fee. You are going to have to wait because I haven’t got an answer on that one.

[David McFadgen:]

Okay, great. Thank you.

[Jay Mehr:]

What we can say is having activated it, we’ve been very pleasantly surprised with the volume that Freedom customers are using on the Wi-Fi network. There is no question that it’s unleashed a level of data activity that was beyond our expectations. It’s a great value there.

[David McFadgen:]

Okay. All right, thank you.

[Operator:]

[Operator Instructions]

[Brad Shaw:]

I think that’s it operator.

[Operator:]

Mr. Shaw, there are no more questions at this time on this call today.

[Brad Shaw:]

Okay. Thank you, operator, and thanks, everyone. We will see you next time.

[Operator:]

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