Shaw Communications Inc.
Q1 2013 Earnings Call Transcript
Published:
- Operator:
- Welcome to the Shaw Communications Fiscal 2013 First Quarter Conference Call. 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. Following the presentation, there will be a question-and-answer session. (Operator Instructions) If the press has any questions, please contact Mr. Shaw after the call. 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’ll turn the call over to you.
- Brad Shaw:
- Thank you, Operator. And thanks to everyone for joining us today to discuss our first quarter results for fiscal 2013. With me today are members of our senior management team including Peter Bissonnette, President; Steve Wilson, Chief Financial Officer; Jay Mehr, Senior Vice President of Operations; Jean Brazeau, Senior Vice President of Regulatory; Michael D'Avella, Senior Vice President of Planning; Paul Robertson, President, Shaw Media; and Jim Cummins, Group Vice President, Shaw Satellite Operations. Earlier today, we held our Annual General Meeting and released our Q1 results. I'll make some brief remarks before we open up the call for questions. Our performance this quarter reflects the efforts we have made toward enhancing our customer service capacity, expanding our technology and infrastructure advantage, and maintaining price and financial discipline. We have seen a gradual and stead return in the market to a more discipline and sustainable approach to pricing and promotional offers, building on the momentum from our second half of last year we delivered strong first quarter financial results. Cable EBITDA in the quarter was up 5% compared to a year ago and our Q1 margin of almost 49% reflects the continued balance of customer profitability and growth in subscription revenue. Our consolidated business generated free cash flow of almost $245 million this quarter and we are pleased to announce that our Board today approved the 5% dividend increase that is effective at the beginning of May. This continues our track record of returning capital to shareholders and reenforces management and our Board’s confidence in the long-term free cash flow profile of our assets. Since the beginning of fiscal 2013, we have -- we have had, sorry, we have been focus on improving our business for our customers and viewers. We have responded to our customer’s demand for greater content, connectivity and convenience, while maintaining a leadership position in a highly competitive market. During the quarter we launched the [bold] new brand in marketing platform in the series of initiatives that transform the customer experience, brining TV into the Internet era with innovations like Shaw on-demand search app, the Shaw Go Movie Central and NFL Sunday ticket apps and our new [HD Go]. We continue to expand our Wi-Fi network footprint complementing the rapidly growing demand for broadband. Today the trial of a Shaw Go Wi-Fi continues across Western Canada with thousands of access points available to customers as part of the internet service. Recently we reached agreements with municipalities in Winnipeg and Victoria to extend coverage to key public venues in those cities. Our digital network upgrade project continues to build network capacity enabling us to deliver new channels, more HD television and faster network speeds. We remain on track to complete the upgrade of our analog gears to digital in 2013. Our media business continues to be strong and our mid-season line-up of global TD looks to build on the momentum generated by our successful fall season. This success is reflected in media financial results as revenue and EBITDA were up 7% and 9% respectively in Q1. Our satellite business saw the record install and we’re making preparations to become the HD leader in Canada with over 200 HD channels becoming available following the launch of Anik G1 later this year. But we aren’t resting on these plans and achievements. We are building our business for the future, working hard to strengthen our advantages and capitalize on opportunities. We remain confident about the free cash flow profile of our consolidated assets and we will keep our operating focused chart. As I told our shareholders at our AGM, we believe our continued success will depend on execution of four priorities. First, we will deliver exceptional customer and viewer experiences. Second, we will continue to leverage our leading technology as a competitive advantages across all our businesses. Third, we will find ways to maintain and grow customer profitability, and finally, we will continue to identify new operational efficiencies. Our confidence in our ability to generate long term shareholder value is rooted in our strong management team and employees who genuinely care about delivering exceptional experiences for our customers and viewers. I want to thank everyone on the Shaw team for their effort and commitment, our people, customers and viewers are the keys to our long term success. I want to conclude my prepared message this afternoon by addressing the recent announcement regarding the supreme court of Canada’s decision denying accretion of a value for signal regime. As a key ground for (ph) this process, we strongly advocated for the outcome that was reached and we believe the court’s ruling is good for consumers and will be beneficial for the overall system. It is a complex decision and we are still reviewing it to consider how it may impact the industry in matters of economic regulation. Thanks to everyone for joining us today and we’d now like to open the phones to answer any questions.
- Operator:
- (Operator Instructions) And our first coming is coming in from Phillip Huang [UBS Investment Bank]
- Phillip Huang:
- Your cable EBITDA was very strong this quarter despite some cost inflation. So just a couple of clarification question. How it was related to the reduction in (inaudible) in the quarter, my rough calculation gets me sort of in the $5 million, am I in the ballpark?
- Steve Wilson:
- No, it’s lower than that, Phillip, it’s less than $2 million.
- Phillip Huang:
- And then secondly, you had lower margin and sale expense this quarter, should we just think of this as seasonal before marketing except the end of next quarter? Your overall cable OpEx this quarter would have only 1.5% sequentially despite the Fur 305 (ph) with cost inflation. I guess I am trying to determine whether costs can be sustained at the current level going forward.
- Steve Wilson:
- Well, marketing costs are down from last year and that’s more a function of last year’s activity. We have rolled out our new brand platform and our new advertising platform but a lot of that was rolled out in the last month of the quarter. And so you will see additional expense on that in future quarters. Also we are somewhat behind in terms of people hiring right now and we do have additional people in certain areas where we need to be above and the last thing is that there are additional network fees that are coming in future quarters but so you will see some additional pressure in future quarters from that.
- Phillip Huang:
- Okay. And can we see the whole effect of it by the next quarter or do you think it’s more gradual over the course of the year, the fiscal year?
- Jay Mehr:
- Yeah. Phillip, it’s Jay, I think, next quarter you can see the full run rate of marketing in terms of staffing levels. It’s not a large number. It’s most in strategic areas. We’ve fully hired our customer service areas. We will see a ramp into that over time. The network fee there is once you get it into network agreement that has its annual rate increase January 1st. So you will see that general improvement with pricing pressures of the network.
- Phillip Huang:
- Got it. Thanks so much.
- Operator:
- And our next question comes from Vince Valentini [TD Newcrest]. Please go ahead.
- Vince Valentini:
- Thanks very much. Hi Brad. Two specific questions and then one some more related general one. The specific one first, the tax benefit from a pension contribution you guys made, I think you are expecting about $75 million reduction in cash taxes in 2013. From that, can you just tell us how much of that was already achieved in the first quarter? The second specific one is on the digital network upgrade. I noted in your commentary, you said that’s pending and CapEx has come down significantly year-over-year. Is that project just about complete sort of distributing minimal amount in Q2 and beyond?
- Brad Shaw:
- Peter will start with DNU.
- Peter Bissonnette:
- Excellent. So, hey, Vince, this is Peter. So in the first quarter, we manage DNU so that there wasn’t comparatively low [and some of that, again] response to that and the contract as far as the normal ordinary busy season. So you will see that the DNU actually pick up going forward. There is couple of other capital areas as well that include something such as the Anik G satellite payment was deferred and it will be coming. There are some additional facilities cost that will be a part of second half of this fiscal ‘13. There still are some branding costs associated with capital branding cost. These are things like signage costs et cetera. And there are some favorable Motorola pricing that you’d be able to negotiate with them. And so costs were probably moderated now than they were over. And we’ve seen some reverse logistics and we have seen some reverse logistic benefits that’s essentially reselling some of the equipments coming being cycled through our warehouse and is now being sold to customers at a discount but it’s really making sure that we are handling those kind of warehouse levels and utilizing our grip as much as possible. And we are working towards a bringing own equipment approach to a just included model which really as they, and sort of and first, there is going to be some contract associated with that approach. It’s good having you back on capital and those are sort of major performance that you will see occurring over the next couple of quarters. Just in terms of the tax, let me explain first that as we noted the free cash flow section of the press release, we’ve funded the shares for $300 million. That is a financing event as far as we’re concerned. We are taking an unfunded liability and funding 75% of it. And so it’s -- essentially it’s use of free cash flow on the fraction of free cash flow and that’s supported also by the fact that the discretionary payment. This is not a required payment. So similarly, we would expect to see the $75 million tax reduction this year. But you will see it going to the income statement. It will not be included in free cash flow of that recovery. In the first quarter, the impact of that is about $20 million. But we had a bit of a lower tax rate as well as the few other things going on. We did have some loss utilization in subsidiaries as well. But that would give you a sort of a sense of where we’re at the first quarter.
- Vince Valentini:
- Okay. Great. And the general question, you may have answered them a little bit but I just wondered what your definitions are of modest and comparable given your guidance for the year as modest EBITDA growth and you’ve put up a pretty impressive 6% growth during the first quarter. First quarter is seasonally one-year bigger quarters as well and on the free cash flow side, they have been much more so. Do you think it would be comparable to last year where you’re up over 100% in the first quarter? So do you think the guidance is now less conservative or do you really think there is some big events coming in future quarters that make the year-over-year growth rates quite worse than what we just saw here in Q1?
- Brad Shaw:
- Well, currently we have a SKU in terms of the CapEx spending rate and that’s attributable going through the second half of the year. And so we’ll see that. There are some moderating factors in EBITDA coming into coming quarters. I would say at this point, Vince, our plan would be to look at the guidance again and come back to you in April and mid-year and give our refreshed view to that.
- Operator:
- And our next question comes in from Jeff Fan [Scotiabank Global Banking and Markets].
- Jeff Fan:
- I’ve got a few questions. First just on the television subscriber trends, wondering if you can give us some color on the trends on gross additions and also churn. I am wondering if there is the decline in TD services more because of a reduction in gross adds or whether churn continues to pick up. The other question is related to the pension contribution. Just curious about the timing as to why you’re doing that because that under funded position has been around for a bit. So I am just wondering why -- the question about the timing. And then lastly, on just the capital CapEx profile going forward over the long term. As we look further out post DNU, what should we think about in terms of your CapEx, in terms of your CapEx profile?
- Brad Shaw:
- Jeff, I will just start on NJI (ph) little bit on. We’re very much focused on customer profitability and we have very much discipline in both profitability and retention and acquisition. And so you’re not seeing I think -- I think we’re seeing the benefit of return and also maybe adjustment of the gross sales with, for quality and quality customers and we’re very much focused on that seeing 81 add a little bit to that. But that’s just a reflection of our continued focus in that regard. For sure, I think it’s clear that the plan and the Brad’s direction has all in around quality customers. The last they served the coach is the opposite of our velocity. So we’re certainly going to continue down this path of balancing customer profitability with subscription revenue growth and I think and customers from APAC. In terms of your question on television churn versus gross sales, we can tell you that we subscribe our television churn trend as positive. It’s certainly not increasing and it’s a big area of focus for us. So reflecting in the results is certainly on the gross sales side.
- Peter Bissonnette:
- Jeff, in terms of the pension contribution, so there was a number of important things that happened, essentially at the end of last year. We closed our fab, there are 15 served members, there are 8 active and 7 retired. So there will be new -- no additional people coming into the plan. We also froze eight salaries at 2012 level so that what happens of course is from an actuarial point of view and those numbers that you can see in the comp table assumes that there is an increase in compensation until the retirement days. What we have done is we’ve, for the base portion of the salary it will be frozen at the 2012 calculation of the eligible balance at the retirement days. So to the extent that base salaries it’s a lot, they would not -- those increases would not be included in the pension balance. So that resulted in a $25 million curtailment gain last year, a reduction of the expense. And now as you can see in the comp table, the actual results of these in Brad are showing negative compensation in total. In terms of, as part of that we also looked to funding, and we felt that it was an opportune to fund. First of all, let me say that the pension liability is treated as debt by most of the credit rating agencies. So funding this is just essentially debt for debt. Interest rates are low, so you know that the liability in these plans is very high as a result of that. And so it’s a good time to fund. We potentially could term it out at low interest rates as well at this point. But currently we’re trying to finance it on our credit facility, so we’re financing in the 3%. And the net cost of doing that is a nominal when you look overall at the other retirement compensation arrangements work.
- Jeff Fan:
- And on the CapEx profile long term?
- Brad Shaw:
- I think Peter talked a little about the one-time impact in the CapEx profile. I think what you’re seeing in CapEx is two things. There are the timing things that Peter indicated. There are also assuming realizing significant investments from our, we are now 18 months into our operational efficiency programs and all of our procurement efforts, reverse logistics are very visible in the numbers, I think if you look at the CapEx you could probably look at it is in equal blend of timing and real savings.
- Jeff Fan:
- Sure. And I guess my question was more if you look beyond this fiscal year just kind of the general direction of trend?
- Steve Wilson:
- I think what, that sort of summary statement these were a comp in the free cash flow profile the company is leading in the long-term.
- Brad Shaw:
- Yeah. Yeah. The sensitivity is around on CapEx intensity and we manage around that, if the chemistry is that.
- Steve Wilson:
- Yeah. And those projects will come off as we finish them and that CapEx intensity will come down, and just as we said before that’s seriously we see for free cash flow growth and we are committed to that growth.
- Jeff Fan:
- Great. Thanks very much.
- Operator:
- Thank you. Our next question comes from Tim Casey [BMO Capital Markets]. Please go ahead.
- Tim Casey:
- Thanks. Could you talk a little bit about the impact of S&I in the quarter, you alluded in the first quarter that S&I was offsetting some potential weakness in voice and data. I’m just wondering how that trend is going. Can you comment net positive or in -- are you still net positive on core cable additions or is that negative being offset by S&I?
- Jay Mehr:
- Tim, it’s Jay, and we alluded the answer last time as I guess every time if I recall. The -- we can confirm that our residential business was up both internet and telephone in the quarter. We were pleased with our results in S&I and also pleased with our results in the mid-market. But we did have the small increase in internet comp on the residential side as some (inaudible) are encouraging.
- Tim Casey:
- And would you -- are you increasing your investment in S&I or should we think about that is more of a stable business, how would you characterize S&I for us?
- Jay Mehr:
- We would characterize the business segment which certainly include S&I with wholesale include increasing presence in the medium size business side, we characterize that whole business is $250 million business with mid-teen growth rate.
- Tim Casey:
- Okay. Are you spending aggressively in that business or would it have a similar CapEx profile in terms of intensity to your overall business?
- Steve Wilson:
- Other (inaudible) there are specific spend with regard to OSS and BSS costs, because we have only a separate OSS business have the system to manage that business. But as we have always had a time to take because that those spend prudently and that will be reflected in the higher business opportunity that exist within the S&I business.
- Brad Shaw:
- Okay. Tim to answer your question, it does have a higher CapEx profile that our overall cable CapEx taken together.
- Peter Bissonnette:
- Yeah. And Tim, I only say on top of that is, our approach has always been to go into some of these greedfield, brownfield and go to one customer and do that, we are going to take maybe a little different approach in some areas in regards to building out and coming back, and selling to the base versus doing the opposite. So, you are going to see some different tactics we have -- we take on going forward.
- Tim Casey:
- Okay.
- Operator:
- Thank you. And our next question is coming in from Glen Campbell [Bank of America/Merrill Lynch]. Please go ahead.
- Glen Campbell:
- Yeah. Thanks very much. And first on the drift, I mean, your free cash flow profile is very strong, you are not doing the buy or you thought the buyback reactivated but not in use? Have you thought about or you’re planning to discontinue the drift and then I have couple of follow-ups? Shaw, thanks.
- Steve Wilson:
- No. I think the drift is an effective way to do sort of longer term dollar cost averaging of equity issue. On an annual basis it contributes $28 million. We think it’s positive, we think it’s positive for shareholders. We pay our dividend there on the monthly basis. You know that our shareholder base has certainly increased very substantially in terms of the amount of we have investors that are there, we’re being put into hybrid funds as well, fixed income hybrid funds. And so the drift is working well for us, for this year we’ll pay out $440 million of dividend. And when you look at that’s a drift off that it comes down to $360 million, which is about 75% of our free cash flow at the current forecast rate.
- Glen Campbell:
- And then two follow-ups, one is on the DNU upgrade, and you’re making fast progress towards digitizing the analog tiers but I guess at year end you had 17% if I’ve got it right, 17% at the 250 meg plus capability level. How fast do you expect to increase Shaw, when do you think you might be through that program?
- Brad Shaw:
- (Inaudible) we talked of the DNU-1 with a lot of the discretionary tiers by the end of the fiscal year.
- Glen Campbell:
- And then the upgrade to 250 meg?
- Brad Shaw:
- That’s included in the project.
- Unidentified Speaker:
- That’s part of that.
- Glen Campbell:
- And that would be in across the whole footprint?
- Brad Shaw:
- Yes.
- Glen Campbell:
- And then the last one on the subscriber trend, there is I guess for us an expected downturn on the satellite side. I was wondering if you could maybe give us a bit of color in the area and then talk about maybe trends in the current quarter and anything you might be doing marketing wise to change the traffic?
- Jim Cummins:
- Thanks Glen. Actually a great question. We certainly continue to see adults (ph) growth, the subscriber growth and our focus continues to be focusing on profitability. In Q1 subscriber losses were due really to new acquisitions. So churn range is same and it’s really positive but certainly across the country there is really aggressive authors that we just not necessarily keep them at. We view those looking forward targeted growth opportunities as we continue to still take a balanced approach as we launch the new VOD services, we see us adding services to the base and eventually over time will add financial value to the satellite division as well.
- Glen Campbell:
- So then in quarter trends in satellite and cable?
- Brad Shaw:
- Speaking to both satellite and cable, it’s clear we have a plan, it’s clear that we’re sticking to the plan to focus on exceptional customer experience on leading technology on customer profitability and operational efficiency, and we’ve got 14,500 people continuing to execute that plan. So you will see some similarities as we go forward.
- Glen Campbell:
- So in terms of the Q1 trajectory or Q2 versus Q1?
- Brad Shaw:
- I would say in regard to the Q1 trajectory and just supplemental, this is last half of last year, we’re going to continue to see that. As Jay says we have that rigorous focus in continuation basis here. So --
- Glen Campbell:
- Like you’re doing a thermometer on customer experience and your year over year measurement of that thermometer.
- Brad Shaw:
- We’re very pleased with what we’ve seen this last year. The customer experience is exemplary versus where we have been -- with the creative efforts and ensuring we have the resources in our call centers, we really provide the kind of response that we are making with the customers. We’re really pleased with where we’re going with, as compared to kind of underlying kind of support with customers, really becomes their own customer service representative. They can put services together, they can authenticate services. These are things that now need consolation, some of the things we are doing with the back office, as we evolve those back offices. We’re pleased with the products and the way our products are working for our customers.
- Unidentified Speaker:
- Let me just speak for a second as to the perception of the weakness in subscriber results. I think we need to remind people again, the subscriber you hear is to protect core RGU that’s the growth for RGUs, we grew them by 95,000 last year. This quarter we were basically flat for RGUs and cable, slightly down in satellite, we talked about. But that’s very much part of the strategy here. We are not looking to hit the ball over the parts in terms of subscriber growth. We are looking to that balance between profitability and certainly we are achieving profitability and maintaining to date of our subscriber of revenue generating unit. A flat quarter when you look at it, and that is not necessarily out of line that how we’re keeping because we’re not looking to be aggressive in terms of growing RGU. And I think one of the things that’s important to keep in mind and particularly in the environment today from a competitive point of view, revenue increases are going to come much more from the ability to have pricing power on products in particularly internet than they will have from subscriber growth going forward. Telus is a tremendous competitor, we give them a lot of credit. In fact, you probably (inaudible) given us a lot of rigor in our business that we maybe not had as much of that and we have, a lot of thread goes over there but we do -- I think we’re doing incredible job also, and it’s going to go from -- I believe it’s going to go from a pricing decision to a service decision to customer experience decision and we are all chasing that and we’re all doing the best we can to get there, I think our numbers reflect that. But what I will say is that we’ve always said there is room for two strong competitors in Western Canada. And we are encouraged by the number of development over the last year in regards to disciplined behavior in Western Canada. So that gives you a sense. And so we’re committed to the strategy and that’s what you’ll see going forward.
- Glen Campbell:
- Okay. That’s helpful. Thank you.
- Operator:
- Thank you. And our next question comes in from Drew McReynolds [RBC Capital Markets]. Please go ahead.
- Drew McReynolds:
- Yeah. Thanks very much. Thanks for taking my question. Maybe already, you call on the media side, obviously a pretty good quarter. Can you just talk to any impact from the NHL strike in the quarter and just how Q2 is tracking?
- Paul Robertson:
- Thanks Drew. It’s Paul here. With respect to the performance of the ad market in the first quarter, it was pretty solid compared to a year ago, probably in site growth it looks like. With respect to the NHL in particular, it skewed some dollars probably from conventional specialty. Perhaps we were the beneficiary of some of it, not a significant amount, so in the kind of $3 million to $5 million range perhaps in over the period. So -- and the major strength that we saw was based on the improvement in our programming mix where we were to increase our share of the top 10 programming on global. And that’s again improvement compared to year ago with moving from three out of 10, six out of ten -- six out of 10 in the period. So we thought that the lift that we got was primarily due to program mix. Although we know we did get a little bit fallout from hockey night. With respect to the trend in the second quarter, I think we’re seeing it’s kind of early because their business continues to come in. But I think we’re seeing similar kind of performance. Often if you set a good pace from a programming standpoint in Q1, you continue it on. And given that show -- we’ve still got poor shows picked up this year that are possibly going to be renewed next year, so we are still in the money in terms of the shows we bought. So we are enjoying a good trend line there and expect the second quarter will continue to show the same kind of positive trends in the market.
- Drew McReynolds:
- Okay. Thanks for that and a couple of follow-up for you, Steve. Just on the pension contribution, is there any related P&L benefits with it?
- Steve Wilson:
- Yeah. A small related P&L benefit because we don’t have an interest component in the actuarial expense. So you will see probably about $9 million to $10 million improvement in EBITDA as a result of that no longer being factored through that actuarial expense.
- Drew McReynolds:
- Okay. Thanks for that. And the cash tax rate for modeling purposes, I think you heard it was at 30% last quarter. Is there no change to that if you exclude, obviously the one-time cash benefit, tax benefit on the contribution.
- Brad Shaw:
- I think 30% is still a good rate to use for this year. And we’ll come back and look at that and the half year as well?
- Drew McReynolds:
- Okay. And then the finally, just on Shaw go, just -- could you provide us with an update, just on how that product is going?
- Brad Shaw:
- It’s going very well, we’ve launched Movie Central, HBO Go, which is really the major product. We have NFL Sunday ticket. The season is over but that was also very successful launch. We’re on NBA league pass now, which is proving to be very successful as well. And we got a number of new bill applications in Hopper which will likely launch in next little while focused on kids, focused on a variety of other programming services. So it’s a -- we've created the store. We’re now stocking the shelves that has proven to be very successful from the customer point of view.
- Drew McReynolds:
- Okay. Thanks very much.
- Operator:
- Thank you. And our next question comes in from Rob Goff [Byron Capital Markets]. Please go ahead.
- Rob Goff:
- Thank you very much. My first question would be on the business side. You indicated that the capital intensity of business was modestly higher. Could you comment on the margin impact? Is it accretive to dilutive margins? And secondly, in looking back on the change in the wireless space, how much you have changed your view towards wireless, Wi-Fi or other wireless applications?
- Paul Robertson:
- So just again on the capital intensity, the capital intensity for business would be in the high 20% range. As most of our all capital intensity, in terms of margin, the business margins are accretive overall to margins and then there was a third part there.
- Rob Goff:
- Wi-Fi.
- Brad Shaw:
- So we absolutely made the right decision in term of wireless and Wi-Fi as we all know is probably one of the fastest growing segments in terms of local assets in the wireless state. So our strategy makes perfect sense. I mean, we’re building on a wireless network to support our broadband customer that’s exactly what’s happening here. So that was good decision. I don't think we have any regrets in terms of not building a traditional mobile network. And I think the market is well -- the capital intensity is very high and it’s a very tough to get on the decisions as the fourth or fifth player in the market. So we capture lots of wireless utilization if you will by doing things like obviously the Wi-Fi build but even offering things like Shaw Go which is available to any wireless network, it doesn’t necessarily have to be Wi-Fi but what we found and this is sort of an obvious observation is that people prefer to choose the Wi-Fi because it’s cheap or virtually no cost. So we're very happy with the (inaudible). Absolutely.
- Operator:
- Thank you. Our next question is coming in from Maher Yaghi [Desjardins Securities].
- Maher Yaghi:
- Just wanted to just follow up on line by deployment. Can you update us on the CapEx expense in the quarter and maybe what could be remaining later this year? And if there were some revenue generated from Wi-Fi directly or directly on wholesale level, could you maybe update us on that?
- Brad Shaw:
- Well, I’ll just start, on Wi-Fi our focus is access and coverage. We have engaged with probably 55 municipalities or communities we’re engaged with to provide access. We continue to work on that. And for now it’s just -- it’s getting us to a point where we do have that coverage across the metropolitan areas, and focusing that will be our focus in the near term. As far as the CapEx, Jay?
- Jay Mehr:
- We’re on a slightly ramp-up run rate last year, I don’t have the quarterly Wi-Fi number precisely in front of us. Some of it is shared engineering and other incentives that we don’t have specifically right now, we’re on a slightly ramp-up focus from last year. In terms of the monetization and the return on investment on things like Wi-Fi we would like maybe a couple of comments. If we look at our focus on churn in our business and this is why all of this is about it, exceptional customer experience, TV, Shaw Go, Wi-Fi is all the both driver ensuring a reduced churn and increase our pricing power. Certainly what we have seen so far is Movie Central Go. Movie Central churn is materially down as we launched Movie Central Go. And while it’s early days on the Wi-Fi project, our customers who use our Wi-Fi service, our internet customers who use our Wi-Fi service compared to our internet basis doesn’t use our Wi-Fi service, our churn is less than half on internet basis, these are the Wi-Fi service. Now it’s early days and we don’t think you could necessarily take that. We won’t let anybody use in that spreadsheet. But the trends are encouraging, but the churn story on Wi-Fi is derived from retention and pricing power which is really the key to the whole strategy.
- Maher Yaghi:
- On the pension, it’s definitely a (inaudible) I used to do on cutting that the salaries, on the pension. Can you maybe talk both the timing on why you made the pension contribution 300 million? Can you talk a little bit about why you decided now to cap that pension in terms of salaries and -- why now, is it because of the low interest rate, the fact that it’s becoming good expense to support or there is more behind the scene?
- Steve Wilson:
- Obviously we look at compensation on an overall basis each year. We’ve used the pension plan historically because and not Brad’s stock options, because we have a controlling shareholder and granting stock options when 80% of your family wealth is really tied up in the business doesn’t actually had a lot of incentive. So a year ago the plan was designed with the pension component. This last year we decided when we took a look at it again that if the time was appropriate to close the plans, and decrease the base salaries. That was something that management agreed before would be appropriate and so nothing in particular in the timing, it’s just part of our annual look at compensation.
- Maher Yaghi:
- Okay. Great. Thank you very much.
- Operator:
- That was our last question.
- Brad Shaw:
- Great. Thank you, Operator. Thanks everyone.
- Operator:
- Ladies and gentlemen, this does conclude your conference call for today. We thank you for your participation. You may now disconnect your line and have a great day.
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