Quebecor Inc. (OTCPK:QBCRF) Q3 2022 Results Conference Call November 3, 2022 11:00 AM ET
Company Participants
Pierre Peladeau – President and Chief Executive Officer
Hugues Simard – Chief Financial Officer
Conference Call Participants
Drew McReynolds – RBC
Vince Valentini – TD Securities
Stephanie Price – CIBC
Matthew Griffiths – Bank of America
Jerome Dubreuil – Desjardins
Maher Yaghi – Scotiabank
David McFadgen – Cormark Securities
Tim Casey – BMO
Operator
Good day, everyone, and thank you for standing by. Welcome to the Quebecor Inc.’s Financial Results for the Q3 2022 Conference Call.
I would like to introduce Hugues Simard, Chief Financial Officer of Quebecor Inc. Please go ahead.
Hugues Simard
Ladies and gentlemen, welcome to this Quebecor Conference Call. I am Hugues Simard, and joining me to discuss our financial and operating results for the third quarter is Pierre Karl Peladeau, our President and Chief Executive Officer.
Anyone unable to attend the conference call will be able to listen to a recording by telephone or webcast, and access details are available on our website at www.quebecor.com. The recording will be available until February 3, 2023.
As usual, I wish to inform you that certain statements that we make on the call may be considered forward-looking, and we would refer you to the risk factors outlined in today’s press release and reports filed by the corporation with regulatory authorities.
I will now turn the floor to Pierre Karl.
Pierre Peladeau
Merci, Hugues, and good morning, everyone.
Before going into the details of our operational and financial performance, I would like to reiterate our commitment and motivation to expand our telecom services across Canada through the acquisition of Freedom Mobile. Although the mediation last week did not bring us any closer to an agreement with the Competition Bureau, we believe that the upcoming Competition Tribunal hearings will demonstrate clearly that the acquisition of Freedom by Quebecor will bring to the rest of Canada the healthy competition and lower prices that have been the norm in Quebec for many years due to our relentless and successful efforts to offer Quebecers the best client experience, digital environment at the lowest prices.
On the regulatory front, we’re pleased with last week’s CRTC decisions related to the implementation of the facility-based MVNO access service and associated tariff notices, which suffered — solidified — sorry — which further solidifies right to initiate an MVNO service, allowing us to expand our wireless service outside of Quebec and eventually complete and improve Freedom Network coverage.
We have already initiated the process to seek access to the incumbent network as soon as possible, and we expect the incumbent to negotiate wholesale MVNO rates in good faith, to come to an agreement quickly. Should the incumbent decide to unduly drag out the process, as it is unfortunately too often the case, we will count on the CRTC to arbitrate without delays so that MVNOs can finally become a Canadian reality.
With respect to the CBC/Radio-Canada. I would like to comment on the September 16 order from the governor and council to refer the matter back to the CRTC for reconsideration and hearing. While the governor and council once underlined that the CRTC should consider how to ensure that the natural broadcasters continue to make a significant contribution to the creation, presentation and dissemination of local news, original French language programs and programs produced by independent producers, the decision do not address the essential question concerning the control of Radio Canada on advertising revenues and the need to tighten its mandate. The government must allow private companies to survive by abolishing advertising on all CBC/Radio-Canada platforms, just as was decided for CBC Radio and the equivalent in French in 2016.
Finally, Quebecor welcome the tabling of C-18 Bill by the Minister of Canadian Heritage. The bill is the outcome of numerous representations made by Quebecor and many other Canadian media organizations and associations. It would regulate negotiations between the web giants and news outlets to ensure fair and equitable compensation for the use of the content created by the latter.
Quebecor has long argued that, to preserve the industry sustainability and vitality, original content from the various platform has to be included in this Bill, the creation of a payment system is necessary in view of the web giants’ market dominance. These platforms use the content produced by Canadian news organizations that generate a significant portion of the interactions of their network and should be required to pay a fair price for it.
I will now review our operational results, starting with our telecom segment. After being named Quebec’s Most Admired Telecommunication Company 16 years in a row by CAA’s Reputation Study, Quebecor once again broadly stands out for the excellence of its client experience with 2 new distinctions. First, Videotron has just been named the telecommunication company offering the best customer service in Quebec by a newly seen flash survey that ranks us far ahead above — and other competitors.
Furthermore, the result of the CRTC — I repeat, CRTC 2022 Mystery Shopper Project were recently announced and Videotron ranked first among Canadian providers in many categories. First, overall customer satisfaction; second, best satisfaction rate regarding clarity and simplicity of information provided; third, the company proposing the most appropriate services; fourth, the company offering its customer enough time to make an informed decision and fifth the company offering the best advice.
As you know, we have invested heavily over the past 20 years, the established customer service and satisfaction, as a strong competitive advantage for Videotron. It is clear from these independent findings that this solid reputational base on which we have built Videotron’s growth and success over the years, still holds true today, and bodes very well for our future as Canada’s most trustworthy telecom provider.
In July 2022, Videotron acquired VMedia, an independent telecommunication provider that is well established across the Canadian market and which offers innovative bundle solutions at competitive pricing. VMedia, one of the key partners that will help us speed up the implementation of our plan to create more competition in Canada by offering advantaged bundles that give Canadian consumers more choices and lower prices.
As previously announced, we accelerated the deployment of our projects of [Operation ISP] as we now have underway 94% of the total kilometers to be deployed. Despite a tight labor market and a challenging supply chain environment, we are increasing the rate at which we are connecting new homes, and will continue to do so over the next month to ultimately deliver high-speed internet access to 37,000 households and 7 municipalities across the province. Our 5G deployment also remains very much on track as we keep adding new operational sites and widening our coverage outside our main urban areas.
Turning to our third quarter results. We have recorded another steady and solid operating performance with a total growth of 99,000 RGUs, which include the acquisition of 50,000 RGUs from VMedia. This is 18,000 more than in the third quarter last year, excluding VMedia, and represent an increase of 144,000 RGUs year-over-year.
In wireless telephony, we recorded 36,000 net adds during the quarter, which brings the last 12 months growth to 126,000 new lines and our total lines to almost 1.7 million as of September 30, an excellent performance in the context of significantly lower immigration and population growth in Quebec as compared to the rest of the country. Once again, we captured the largest combined share of gross adds in Quebec, with 32.5% for our 2 brands, Videotron and Fizz, according to a Léger survey, thus continuing to build market share in Quebec.
Our wireless EBITDA increased by 21% in the quarter compared to Q3 2021, a clear indication that we continue to strike the optimal balance between aggressive and profitable growth. Consolidated wireless ARPU for the quarter improved by $0.76 or 1.9% over the same quarter last year due to higher plan mix, especially for Fizz, lower discount and somewhat higher roaming and data usage revenues, offsetting the diminishing diluted effect of Fizz.
In wireline, we are continuing our efforts, which we mentioned last quarter, to maximize ARPU by better positioning our brands and optimizing the pricing of our illico and Helix platform. These initiatives have led to lower Helix activation in the quarter with a rapidly improving wireline service gross margin.
Our TV distribution RGUs increased by 9,000 in the quarter due to the acquisition of VMedia. But excluding the 17,000 VMedia TV subscribers, we managed to reduce the cable cord cutting for a third consecutive quarter by nearly 40% this quarter. We also managed to reduce cord cutting in our margin wireline telephony service by almost 30% compared to Q3 last year.
In Internet, we recorded a growth of 57,000 customers, which include the acquisition of 36,000 VMedia customers. Internet subscribers year-over-year growth was 70,000 despite the continuing intense competition, especially at the lower end of the market. Internet ARPU increased by $0.47 or 0.9% over the last year and sequentially increased by $0.55 from Q2, overcoming the dilutive effect of Fizz and lower plant mix.
OTT video subscribers increased by 13,000 this quarter, fueled by a 39% subscriber growth for Vrai, our new platform dedicated to exclusive unscripted lifestyle documentary and entertainment content, clearly demonstrating the strong appetite for new and original content in Quebec.
Turning to our financial results. Our telecom segment generated $382 million in cash flow from operations in the third quarter, an increase of 13% over the same quarter last year, with EBITDA growing 2.7% and EBITDA margin reaching 52% compared to 50.7% last year. Revenue increased by 0.3% in the quarter as compared to last year, mostly due to wireless and Internet services revenue and wireless equipment sales, offset by lower Helix equipment sales resulting from a slower Helix growth as we optimize our 2 brands’ pricing to improve margins.
On the OpEx side. Our cost reduction initiatives are paying off with a 7% decrease in the quarter and translating into our increasing industry-leading EBITDA margin. Telecom CapEx, spending was down $32 million for the quarter as compared to Q3 last year as we continue to focus on our strategic priorities and as we operate more efficiently by continuing to lower our cost structure while increasing our investment level on key initiatives, such as LTE Advanced, 5G and network extension.
Turning to Media. Our third quarter results continue to be impacted by a difficult advertising context in a regulatory environment that puts us at a disadvantage in our fight against the web giants and the national broadcaster, CBC/Radio-Canada with funding by the state with more than $1 billion a year. Groupe TVA experienced a decrease of $20 million in revenues and $17 million in EBITDA for the quarter as compared to last year.
In order to compete and maintain our leadership position, we continue to invest significantly in our content offering, both on traditional and digital platforms. And these investments are paying off, as evidenced by the 1.9% market share increase to 40.1 shares to the TVA market — I’m sorry, TVA network and specialty services.
I will now let Hugues review our consolidated financial results.
Hugues Simard
Merci, Pierre Karl. For the third quarter, Quebecor’s revenues reached $1.14 billion, down 0.4% from last year. Revenues from our Telecom segment were up 0.3% to $942 million, mainly due to the increase from mobile services and equipment and Internet access. Revenues from the Media segment decreased 11% to $170 million in the third quarter, while our Sports & Entertainment segment grew 17% to $57 million in the quarter.
Our adjusted cash flows from operations increased $37 million in the quarter or 10% to $403 million, once again demonstrating our continued operational and financial discipline. Adjusted cash flows from operations from our Telecom segment grew $44 million or 13% to $382 million.
Quebecor’s EBITDA was down 0.4% to $518 million in the quarter, mainly due to the $19 million decrease in EBITDA from our Media segment, which is explained, as Pierre Karl already alluded to, by lower advertising revenues, lower volume and film production and audiovisual services and the increase in our investments in content production and acquisition for Groupe TVA in order to maintain our leading position in the television market share in Quebec.
Our Telecommunications segment posted EBITDA up $13 million or 3% to $490 million. Quebecor reported a net income attributable to shareholders of $178 million or $0.76 per share compared to a net income of $173 million or $0.71 per share reported in the same quarter last year. Adjusted income from continuing operations, excluding unusual items and gains or losses on valuation of financial instruments, came in at $175 million or $0.75 per share compared to an adjusted income of $176 million last year or $0.73 per share.
For the first 9 months of the year, Quebecor’s revenues were down 0.7% to $3.35 billion and EBITDA was down 1.6% to $1.45 billion. EBITDA from our Telecom segment grew 2% in those 9 months to $1.44 billion for the same period, an improvement of $28 million over last year.
As of the end of the quarter, our net debt-to-EBITDA ratio was 3.23x, up from 2.8x reported at the end of the third quarter of last year, mainly explained by the $830 million investment for spectrum acquisition across the country in the third and fourth quarters of last year.
Our balance sheet remains very strong with available liquidity of nearly $1.7 billion at the end of the quarter and growing free cash flows that are more than sufficient to fulfill our commitments and fuel our development plans.
During the quarter, Videotron has secured the committed debt financing required for the acquisition of Freedom. During the 9 months of the year, the first 9 months of the year, we purchased and canceled 7.1 million Class B shares for a total investment of $203.8 million.
Finally, the Board declared a quarterly dividend of $0.30 per Class A and B shares, which represents a payout of 34% of our free cash flows this year, in line with our target, which we’ve enunciated a number of times, to be between 30% and 50% of our free cash flow.
We thank you for your attention, and would now open the line for your questions.
Question-and-Answer Session
Operator
First question comes from Drew McReynolds from RBC.
Drew McReynolds
Yes. A couple for me. Just first, Hugues, maybe on the VMedia. It may be disclosed somewhere. Can you give us kind of the rough revenue contribution and margin just for modeling purposes, if you can?
And then secondly, just on wireless market expansion. Pierre Karl alluded to obviously Quebec not benefiting from a lot of drivers that are underway outside of Quebec across Canada. But what are you seeing in terms of expansion here? Are you still seeing some in Quebec, it’s just not as strong as the rest of Canada? That would be great.
Hugues Simard
Okay. On the — on your first question, roughly speaking, revenues of $7 million and margin of about $400,000 EBITDA margin on the EBITDA for VMedia in the quarter. On to you — okay. On to your second question, I think, Pierre Karl will pitch on that.
Pierre Peladeau
Well, as you know, the auction took place and they were conditioned. The MVNO recent decision by the CRTC released about 2 weeks — or less than 2 weeks ago, give more details on who will be or the sum will be available or will have the right to expand.
So we were not expecting that we’ll see — you need to be a telecom operator already, so that reducing the amount of possible players in the MVNO field. You all know, you know, that we acquired spectrum in B.C., Alberta, Manitoba and in Ontario. So these are the territories right now where we have the capacity to start offering an MVNO service.
We expect, as I mentioned, the economy, but unfortunately, our experience previously was not to this environment that they will respect what the CRTC has been saying, is to negotiate in good faith. We’ll be able to establish a decent rate for which, I guess, that both the CRTC, the government and the ISED, the industry minister expect to see competition taking place in the wireless, much bigger in the future. And we intend, obviously, to be a partner there, but we will not give any preliminary strategy on our marketing, given that obviously, we’re in a very competitive environment.
Drew McReynolds
Yes. And just 2 follow-ups, Pierre Karl, if I may. In terms of the time line before it all goes to first or final offer arbitration with the CRTC, if it does that, do you have any sense of what that time line could look like?
And then second question, just, sorry, back to the wireless market expansion. Thanks for those comments. I was alluding more to actual population immigration, expansion inside the province of Quebec, in terms of the wireless market. So just those 2 follow-ups would be great.
Pierre Peladeau
Okay. Well, first, I would say that it’s not excluded that we can get an agreement with a provider. So we’re not being forced to go and face full arbitration. If we were to go that route, unfortunately, it will continue to take some months. How long the period will be?
Will it be 1 or 2 quarters, 3 to 6 months? And obviously, you can imagine that the shortest would be what we will certainly prefer. We’re not completely in control of the process, and we unfortunately, again, experienced in the past all type of things that are slowing the process from the incumbent side.
Will this strategy continue to be the situation? I don’t know. We expect not. We could think that the incumbent will listen a little bit more about what is the CRTC mindset and also the government. As you’ve seen incumbents challenging decision in courts, and unfortunately — fortunately for us, fail to be able to be successful in front of the court.
For the Quebec market and the wireless. There is — well, should we call it a debate? This is certainly a question mark about what Quebec is ready to take as the number of immigrants. So there’s a “sociopolitical” debate that’s taking place. As you’ve seen the Canadian government decided or said that they will get — they will admit 500,000 immigrants on a yearly basis for the upcoming 3 years, or roughly. Or the Quebec government said they would consider 50,000.
So as you can see, it’s a big difference. Is 50,000 good enough for us? We’re not, again, there controlling about what everything is taking place. We’ll certainly continue to market our products, and we think that we’re well positioned, again, from our 2 brands, Videotron and Fizz. But certainly, we meanwhile, we should say that it’s a mature market.
And this is — therefore, we strongly believe that we need to go elsewhere, in other regions in Canada where competition is much lower and for which we believe that we’ll be able to get a significant market share of the wireless market.
Operator
Next question comes from Vince Valentini from TD Securities.
Vince Valentini
First question is on Internet revenue and ARPU. So Pierre Karl, you mentioned that ARPU increased $0.55 from Q2 to Q3. Can we get a bit more detail on the moving pieces there? I assume some of that is mix changes with Fizz, some of it may be people moving to higher tiers. I’m specifically interested in the — if you’re seeing some traction on just net pricing gains, which could mean price increases you’ve made, but not giving away as much of that as you may have been previously through promotional discounts. Is — are you seeing a bit better traction on that front?
Hugues Simard
Yes. Vince, it’s Hugues. I mean, it’s a bit of everything. Honestly, it’s price increases, yes, that we are benefiting from now on — for the whole of the quarter. Mix is — has been positive as well.
As people want more performance and keep wanting more speed, more and better performance. And discount, yes, less discounts. I think we’ve been — certainly in this quarter, we’re seeing that we’ve been a lot more agile and a lot more efficient at reducing discounts.
So it’s basically a little bit of everything you’ve said, which leads us to — that’s pretty good, $0.55 is a — sequentially is a pretty good performance. It remains a very competitive market, for sure, especially on the lower end of the market. But we’re seeing, certainly, as part of this, the redeeming factor, I would say, of this market is that the top end of the market keeps performing very well, and we keep being able to drive some ARPU up on that front. So I think that was a good quarter on Internet for us.
Vince Valentini
Great. Second, moving to the wireless expansion and the proposed deal. When you strip away some of the, what I’d call, strange legal tactics on all sides, it seems like the core issue is ownership of cable or fiber assets being linked to a wireless network. Is it possible for you guys to share any thoughts on that?
As once who seem quite happy with some sort of leased access or some other way of accessing somebody else’s infrastructure for backhaul, are you willing to provide any commentary on how comfortable you are with that type of framework relative to some people’s views that wireless doesn’t work unless you own a cable network?
Pierre Peladeau
Yes. Well, I’ll try to give you a little bit more. In the meantime, you can easily understand that we should refrain ourselves regarding the situation in front of the court.
Well, first of all, what we should say, and you know that, Vince, and I guess that everybody should know it, Freedom operated at the beginning mostly in Ontario. And as of today, my understanding is Shaw doesn’t own any wireline infrastructure there. So Ontario is still a large portion of Shaw.
Is wireline, as what the Bureau said, necessary to compete? Well, we’ll find out, I guess that in front of the court, they’ll try to demonstrate that, and we will listen to what they’re trying to achieve. In the moment, unfortunately, we’re not able to find out what will be their arguments.
But what we should know also, as you can imagine, is we negotiated, with Rogers, the appropriate considerations to take care of what the Competition Bureau was raising and making sure that we will access to infrastructure as efficiently and competitively possible. So those agreements are already negotiated, and we look forward to get the green light to close the transaction.
Vince Valentini
Fair enough. One last one, if I can. The DOCSIS road map is, call it, I’ll say it’s been topical recently, with different players suggesting one route versus another and some people thinking all-fiber is the only way to go. Can we just get your latest thoughts on what Videotron’s plans are? And whether it’s going to be mid splits, high splits, FDX, ESD or move to all-fiber gradually?
Do you have any updated thoughts on what your technology road map is?
Hugues Simard
Vince, you’re becoming an expert on following on technical stuff, aren’t you? Maybe you can come on for us.
Pierre Peladeau
Well, quickly, what we can say, first of all, as you know, DOCSIS is what I was referring to, is completely FTTH, so it’s on technology, and we will continue to deploy as much as FTTH, or fiber to home, where we have the capacity of doing so.
On the HFC, on the coax side, we’re working very closely with CableLabs, that also are introducing technology that will increase the speed of what the service in DOCSIS is being able to service customers since the implementation of cable Internet in 2000.
So as you can imagine, cable industry is pretty big. We got the Americans with Comcast, Charter and much more. So we’re working very closely with them on top of Cogeco, Rogers and Shaw to make sure that the cable and technology will remain competitive in the future and being able to service our customers with the best product at the lowest prices as possible.
Operator
Next question comes from Stephanie Price from CIBC.
Stephanie Price
On the wireless expansion, assuming a favorable outcome for the Rogers and Videotron here, how much time do you need to start executing on the national wireless strategy? From the tribunal submission, it’s clearly you have a sound plan. But I’m looking for more color around your readiness for a day-to-day operating perspective in terms of systems, regional teams, et cetera.
Pierre Peladeau
Well, quickly, Stephanie, yes, we will say that we — despite the fact that the transaction is not approved, we have a pretty good idea about how the networks work, what kind of technology Shaw/Freedom is using. We obviously have a good relationship with wireless equipment suppliers.
As you probably know, we do business with the 3 largest equipment providers. We are a multiple operator company for now 2 years since we decided that we will take Samsung being our 5G operator, equipment operator. So we do business with Ericsson, we do business with Nokia and we do business with Samsung.
We know that Freedom is a Nokia customers or Nokia equipment related. So we have the capacity to work very closely with them, and we’ll be able to start the business very quickly. Obviously, this business is already ongoing, so we will continue the ongoing business. And we will then start the transition process that will bring us the cost savings in terms of systems, in terms of purchasing power and in terms of roaming prices and so on that will bring up the savings that we factored in, in our internal models.
Stephanie Price
And then could I also ask about the impact of the acquisition of Distributel by a competitor? And how we should think about the wholesale market and wholesale revenue going forward? A few of your cableco peers have started disclosing retail Internet subscribers. Just curious how big a portion of the TPIA subscribers is in your base.
Pierre Peladeau
Yes. Well, it’s — right now, it’s certainly not completely easy to figuring out. As you — as we just find out, we were negotiating with VMedia for the acquisition in the meantime. But we didn’t know, during that was taking place, Bell was negotiating with EBOX, a TPIA that we know pretty well in Quebec. And same thing for Distributel.
We know that a significant portion of EBOX customers were related to our own network. We are — we have a TPIA business, which is I’m not going to say huge, but certainly we think important compare to other providers for a simple reason. I think that TPIA operators were considering Videotron a company much easier to do business with, a company that was providing a better service, a better product at a better price.
Will this be the situation moving forward? Will EBOX customers migrate on Bell network? Well, we’ll find out. If we were to do so, and we’re not seeing any things like this right now. Well, they run the risk to lose their customers, and that’s it. So will they continue in this route? We’ll find down. But it’s too early, Stephanie, right now, to have the capacity to understand all the dynamics of this new phenomenon where you’re seeing incumbents buying TPIAs.
Operator
Next question comes from Matthew Griffiths from Bank of America.
Matthew Griffiths
All right. I think I just wanted to follow up first on what Vince was asking about. And Pierre Karl, calling you were mentioning that you’re comfortable that you’re going to be competitive in the future. But I was wondering about if you’re concerned about any erosion in competitiveness in the present, particularly when it comes to upload speeds or even just the marketing cache perhaps of offering much faster download speeds in some cases. And what you — if you can give any time line on how quickly, if you saw that as a concern, you could respond in the market.
Pierre Peladeau
You’re talking about wireline or wireless?
Hugues Simard
Wireline.
Matthew Griffiths
Yes, wireline. Particularly around the debate around DOCSIS, which is being worked on currently but isn’t being implemented currently. So if you could just comment on if you’re seeing any erosion in competitiveness versus what competitors might be offering, and if that’s having an impact. And how quickly you could respond if you are seeing an impact.
Pierre Peladeau
Yes. That’s obviously an interesting question which we ask ourselves. And we made the survey to figuring out what are the most important element for a customer to subscribe to a provider compared to another one?
And the main element, you will not be surprised to find out, that it’s prices. Prices is the main driver. In terms of service that we are offering, we certainly on the high speed side, 400 megabytes, that was certainly a pretty good product for which, even in this new era of pandemic environment, you will have a strong capacity to service with a good product.
And I mean by that, that you’re going to service your customers, while 2 or 3 people or 4 people are doing Teams or playing on other things. So the quality of our product is just fine. It delivers the service of what customers are looking for. And certainly, in terms of prices, they will continue to favor that. So again, we’re well positioned.
If we were to move, and we were offering 1 Gb in certain areas. As you can imagine, offering 1 Gb is more expensive than offering lower speed because you need new equipment, you need more cards, you need some upload from some program providers. And our response is similar to what we’re seeing when our competitor is offering that kind of service.
So to give you a final answer, on the radar screen that we have right now, there is no significant changes in terms of elements that will move one customer out of pricing consideration to speed or to new technology.
And we can refer to what we’re seeing in the wireless business, we’re not seeing it only in Canada or in Quebec. We are seeing this taking place everywhere in the world. A lot of people have been asking how to monetize 5G. That’s a pretty interesting question. We never heard an answer of that. 5G will remain a new technology, be driven by prices.
If you offer 5G, 20% higher than what you are able to offer in other services, obviously, they’re going to be less successful if you were to see prices going down. So I guess that the dynamic of the wireline and the wireless in terms of new technology introductions are similar. And then therefore, we’re seeing ourselves at the right place at the right moment with the right prices.
Matthew Griffiths
All right. Good. That’s very helpful. And if I could just sneak one second question in, just on the CapEx front. You’re seeing a nice decline in CapEx, and I’m just curious at how sustainable the decrease is, or if we’ve reached a bit of a plateau in the decline going forward.
And maybe if you could just outline, kind of what’s driving that? Because you mentioned in your prepared remarks that your investments are continuing. So if that’s the case, what are the drivers of the decrease would be helpful.
Pierre Peladeau
I would like to emphasize on one thing, which is, for us, very important. And we’ll give you a little bit more detail. For us, it’s not a — we will continue. And — this has been a culture at Videotron, since its inception. As you know, Mr.
Chagnon passed away recently. Mr. Chagnon built this company on providing customers with the best product, innovative and always in front of what the market was considering. We keep this philosophy. So it means for us that we will not go on a cut on capital expenditure that will reduce our introduction of new technology. So 5G will always remain a significant portion of our investment.
And then for the rest, we need to understand that we will prioritize, because as you know, capital expenditure, you have all sorts of expenses. You’re going to have information technology, you’re going to have other things, which sometimes, we will not consider a priority for bringing new customers, new products. So it remains for us a philosophy that we will never get out of, and we will continue to emphasize on it.
Maybe Hugues, you have a few other things to add.
Hugues Simard
Yes. Just on — I’ll just to add to what Pierre Karl just said. And just to be clear, the sort of, I’ll call it, the step function that we’ve lived through due to everything Pierre Karl just said, the nonessential, I mean, the number of projects, of capitalized projects, that as we are now more disciplined and more rigorous, that we just don’t do.
And as we lean out our teams, it just naturally brings down a lot of nonessential and nongrowth or nontechnology-related projects that we’ve just said, yes, that’s a nice to have. But you know what? This is not going to benefit us at any point. It doesn’t have a business case that’s really compelling. So we’re just going to throw it on the side.
But the step function due to this reduction is not going to be able to — we won’t be able to replicate it ever and ever again. I’m sure you just can’t. Once you’ve cleaned out the bad or the nonessential weeds, you can’t keep doing that every year.
And we — and also last point. We were helped on the equipment front as well on the capitalization side of the equipment due to Helix. So that’s another thing that won’t come back. But that doesn’t mean that we can’t continue to be more efficient, and we certainly intend to be as disciplined and rigorous going forward. But I think if that’s your question, the rate of decrease in CapEx is not going to be — it’s not going to continue at that same rate.
Operator
Next question comes from Jerome Dubreuil from Desjardins.
Jerome Dubreuil
First question is on the VMedia acquisition. Now it’s been a few months that you’ve operated this asset now. Were you surprised by some of the aspects of the market outside of Quebec as part of the wholesale business? Maybe some maybe behavior of consumers that would be different from the Quebec market?
Pierre Peladeau
I guess that first of all, we are not completely — but we can say that we were a bit surprised about what Bell is doing regarding their desire to acquire TPIAs. For us, we acquired VMedia certainly to be able to get access to other region of Canada where that is already an EBOX market.
So VMedia gave us the capacity of an interconnection give us the capacity to position ourselves in the future positively if we were to launch wireless to MVNO. Well, when we will or acquire Freedom. So it’s a value-added service that we are having. So it’s — the logic we have in this is quite different than probably the one that Bell had.
So what will be the effect moving forward? Right now, it’s probably too early to know. But certainly, our TPIA is looking to grow, and we already launched a campaign in Manitoba. Obviously, VMedia is certainly not like MTS in Manitoba, but we need to start somewhere. And we will continue, for brand recognition, exercise at a very competitive price.
And we think that we’ll succeed, coupled, again, with what the future will bring us in terms of additional services, whatever, if it’s through Freedom Mobile or through MVNO, that we will offer. I don’t know if I answer completely your question, Jerome, but this is what –
Jerome Dubreuil
Yes. No, that’s fine. And then the second one I would have is in terms of the TV platform migration. We’re seeing Helix platform installation decelerating a bit here. There was kind of this expectation that maybe you could be transitioning to only one platform in the future, and that could improve margins.
Is that still a target that you have over the foreseeable future?
Hugues Simard
Yes, I think what we’re doing, just to be clear, is that we have 2 platforms, right? I mean we have — we introduced Helix a couple of years ago as an added value, I’ll call it, a premium type of service platform, but still have illico, which for a lot of TV users, is doing the job. So I think what we’ve been doing over the past few months to ensure that we maximize ARPU and margin is really to price and position these 2 platforms in a complementary fashion.
If people want — are willing to pay and are seeing because some people are looking to — for the added services, the added value of Helix at the right price, then we position it there. But we are no longer migrating against economic sense away from a platform, illico in this case, that is, for many people, doing its job just fine. So I think that’s more what we’re doing as opposed to going to a unified platform, as I think you were alluding to.
Pierre Peladeau
Yes. And I think for the introduction of IP television, for which, it was coupled with other services within our environment. We think we can think of the Internet. We can think voice recognition.
So we found out that being a little bit too aggressive in marketing our Helix was probably not the complete best way to achieve our desire to improve our margins in TV distribution. So we slowed down our migration or our transition, marketing transition, and finding out that what Hugues said, and we have a solid base of customers that are pleased with what illico service are offering them.
This is not getting out of the phenomenon, which we’re seeing as cord shaving, which we — is taking place on both platforms. But certainly less expensive when you need to deploy a new equipment, to move from a illico to a Helix customer.
We thought that maybe we will be able to sell the equipment. And again, it’s a very competitive market. Bell is there, pushing obviously, their products. We are facing this environment. And then therefore, I think that we were open enough to change a little bit, the way that we were marketing our net strategy.
At the end of the day, I would say that we are happy with the results because we’ve been able to increase our margins in TV distribution, which is what we’re looking for, despite strong phenomenon like cord shaving that is taking place and cord-cutting, which is not affecting obviously the margin, but certainly not a bad business for us or a bit of good news for us. And it shows up in the way that we’re able to slow the decrease of our customer base that we get in the TV distribution.
Operator
Next question comes from Maher Yaghi from Scotiabank.
Maher Yaghi
I wanted to maybe talk a little bit about the pricing environment in Quebec for cable. We — you have competed against Bell for a long time successfully. We’ve seen recently a surge by Bell in terms of how they market their product, becoming more promotional and as well offering a product with nice technical specifications in terms of speed, et cetera, et cetera.
So can you maybe share with us what — because we don’t see it right now in your results, it’s something that’s likely to be more present in future results. Maybe just in terms of the promotional pressure that you’re seeing from Bell, is it forcing you to react and offer promotions that could dilute some of the ARPUs that we might see in the cable business going in the next couple of quarters? And if not, then at what point will you sacrifice share to protect your pricing?
The second question I had is just a clarification when it comes to TPIA. Is it a good ballpark to think that TPIA is about 15% of your subscriber base?
And finally, my last question is on CapEx. Hugues, you mentioned that you qualitatively has discussed what’s driving your CapEx decisions day-to-day. Can you maybe provide any indications how we should look at CapEx for 2023? If you don’t want to give a precise number, maybe directionally, up or down or flat versus 2022?
Pierre Peladeau
So I’ll try to answer the first question. Yes, it’s a very competitive environment. It’s more competitive than anywhere else. If you were to look at prices, and it’s funny, I mean, well not funny, you’ll see that Bell will offer $60 for 1.5 Gb in Gatineau. And you cross the river and Ottawa, the same product is $75.
So it shows that, I mean, there’s something happening. Are they more — well, we’ve been seeing always Bell and other incumbents, more aggressive other incumbents, obviously, in the wireless business and in the wireline business, very competitive in Quebec.
This is why, and I guess that evidence is there to prove it, that we need to work on costs, and we’ve been working on cost as always, then we will continue to do so. [Spoilers] is not something that we agree or accept, and we will continue to work very closely on that. And this is the way that we think that we’ll be able to succeed, by continuing to have the highest margin of the industry despite a very challenging competitive environment.
How far or how down Bell will continue to go, well, we don’t know. But there is certainly a point where they will have to think about or think twice about what will be the future of their business.
But certainly, again, what we can say is our product and our services. And we emphasized on the fact that despite the fact that I said earlier, the first and most important element for picking a provider against the other is the prices element, customer service is also a significant one.
And it’s known that customer service is certainly one of the business that we’ve been investing in for the last 20 years, and it still continue to provide a solid customer base that think twice before looking for a “better pricing environment” because it’s funny to have a better price, but when you don’t have a service or your product is not efficient and therefore not able to achieve the full capacity of having it, certainly not the best way for you to take the proper decision.
So we will continue to look forward with the same philosophy: good product, good prices and operational efficiency.
Hugues Simard
And just for your other 2 questions, Maher, on TPIAs. In our case, it’s just a little over 10% of the Internet RGUs that are represented by TPIAs in our business.
And in terms of CapEx guidance, we’re not going to give you guidance today. But I think stability is probably the word that most aptly will describe our — as we’re looking forward to 2023 CapEx. As we said, there’s still — we believe that there’s still some efficiency gains to be had and maybe further investments on some of the big growth-related or technology-related projects. So maybe slightly up, but what we have in mind right now is more stability than increase or decrease in terms of CapEx on a yearly basis.
Operator
Next question comes from David McFadgen from Cormark Securities.
David McFadgen
Just a couple of questions. Obviously, lots of calls — questions on the call today. Can you just comment on VMedia? Does it have Internet reseller agreements in B.C. and Alberta and all the major urban centers in those 2 provinces?
Hugues Simard
Yes, it does. Yes. Is it operating — it operates across Canada. It operates in all provinces of Canada. Is that what you’re asking, David?
David McFadgen
Yes. I just wanted to know, like assuming you can buy Freedom, then you’d be able to step into those agreements pretty quickly and offer a bundled product, right?
Hugues Simard
Correct. Yes.
David McFadgen
And then just on that note, do you think possibly, say, Telus could try and have a reseller agreement with you and offer a bundle in your home territory? Talk about that.
Pierre Peladeau
Everything is possible, David.
David McFadgen
Okay.
Pierre Peladeau
But I guess that it is certainly something that they should study or they should look at. But —
David McFadgen
Yes. I mean, maybe Bell buys Distributel, and oh my gosh, the other one — I don’t know. Just I don’t know what your thoughts are around that.
Hugues Simard
Our thoughts on Bell buying the TPIAs. Is that what you’re asking?
David McFadgen
Yes, to prevent Telus from doing so, just to protect the existing bit —
Hugues Simard
Well, we’re not quite sure. I think as Pierre Karl mentioned a little bit earlier, we’re not — we’re not in the head of Mirko Bibic obviously. But at this point, I think we’ve been successful with Fizz and with our current strategy in building market share and hitting all the various price points that seem to be connecting with our subscribers and with our markets.
So I don’t know, we’re not seeing — I think I mentioned it a bit earlier. We’re not seeing at this point any major impact from Distributel or from EBOX or for many of these TPIAs having been acquired. So anyway, let’s see.
But in our case, as we’ve just mentioned, the case of VMedia is more — has more for us to do with our bundling strategy going outside of Quebec than it has with playing on prices, which we believe we can achieve on our own.
David McFadgen
Yes. Yes. Okay. And then one last one. I mean, have you given sort of a range for CapEx for 2022?
Did you give an update on one on this call?
Hugues Simard
No, we haven’t. No. As I said, if — basically, where we’ll end up this year is probably going to be what we’re going to be shooting for next year.
Operator
And the last question comes from Tim Casey from BMO.
Tim Casey
Pierre Karl, I mean I think one of the inferences in your negotiated deal with Rogers was that you would have a roaming arrangement there largely worked out. Now I appreciate that there’d be a different discussion if you didn’t have Freedom.
But should we not assume that you’re going to be able to get to an agreement on an expedited basis, even given your comments about best efforts and arbitration, given the discussions you’ve already had with Rogers? Is that not a fair assumption?
Pierre Peladeau
Well, Tim, I would say, yes, you’re not wrong. We would certainly favor that type of situation. As we know — as you know, we have a lot on our desk right now, moving forward with the court next week. We need to document our agreement of the consideration was also ultimately — the issue we had on joint network. And so we’re working very hard to make sure that we’re going to be in the best position to convince the court that everything is okay, and we’re full blown open for making sure competition will take place in the wireless as quickly as possible.
So is roaming part of it? I guess that you — we cannot think that it’s not part of a larger agreement because roaming, as you know, is of importance for any type of operators.
Thank you, Tim. So I think it’s — we do not have any other questions, Andreas?
Operator
No further questions in the queue at this time.
Pierre Peladeau
Thank you all and talk to you at the next conference call and the quarter from now. Thank you, and have a nice day.
Operator
Ladies and gentlemen, this concludes the Quebecor Inc.’s financial results for the 2022 Q3 conference call. Thank you for your participation, and have a nice day.
dited
Be the first to comment