Shaw Communications' (SJR) CEO Brad Shaw on F3Q 2014 Results - Earnings Call Transcript

Jun.26.14 | About: Shaw Communications (SJR)

Shaw Communications Inc. (NYSE:SJR)

F3Q 2014 Earnings Conference Call

June 26, 2014 04:30 PM ET

Executives

Brad Shaw - CEO

Jay Mehr - EVP and COO

Paul Robertson - EVP and President, Shaw Media

Steve Wilson - EVP and CFO

Analysts

Jeff Fan - Scotiabank

Vince Valentini - TD Securities

Glen Campbell - Bank of America

Phillip Huang - Barclays Capital

Drew McReynolds - RBC Capital Markets

Maher Yaghi - Desjardins

Greg MacDonald - Macquarie

Operator

Welcome to the Shaw Communications Fiscal 2014 Third Quarter Conference Call. Today’s call will be hosted by Mr. Brad Shaw, Chief Executive Officer 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. Please also note that an investor slide presentation in relation to the conference call is posted in the Investor Relations section of the Shaw website under presentations and meetings and press releases. (Operator Instructions) If the press has any questions, please contact Mr. Shaw’s office 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 now turn the call over to you.

Brad Shaw

Thank you, operator, thanks to everyone for joining us today to discuss our third quarter fiscal 2014 results. With me today are members of our senior management team, including Peter Bissonnette, President; Steve Wilson, Executive Vice President, Corporate Development and CFO; Jay Mehr, Executive Vice President and Chief Operating Officer; and Paul Robertson, Executive Vice President and President of Shaw Media.

Earlier today we released our Q3 financial and operating results. We are pleased with our performance and remain focused on delivering exceptional customer and viewer experiences, leading technology, operational efficiencies and value for all our stake holders. We continue to balance financial results with maintenance of overall RDUs. In the quarter, cable RDUs increased by over 5000, led by another strong quarter of broadband additions. Video losses moderated in Q3, however this is partially due to a strong quarter of business net additions of approximately 6000.

On a reported basis, consolidated revenue for the quarter and year to date was $1.3 billion and $3.9 billion respectively. Consolidated Q3 operating income before restructuring cost of $601 million improved by 3% over the comparable quarter and cable operating income growth was strong, up 5% sequentially driven by customer growth, price adjustments and lower costs. We remain on track to meet our previously disclosed guidance of 2% to 4% of revenue and operating income growth. Adjusting our reported results to reflect the net impact of M&A, operating income for the quarter and year to date period is up 4% and 2% respectively. Year to date, we have generated $555 million in free cash flow and we now expect to exceed the top end of our F14 free cash flow guidance of $625 million to $650 million.

We continue to scale our WiFi network and we now have over 40,000 access points, approximately 25% of our Internet base is using our WiFi service and over 1 million devices have now been registered on our network. A primary benefit of the WiFi service is the fact we are increasing the value proposition of our products. Recent surveys are confirming that the likelihood to recommend or move to Shaw continues to increase due to our WiFi service and there’s been a notable reduction in churn for customers that utilize our WiFi network. On a year to date basis, broadband churn is approximately 35% lower than those internet customers not using WiFi.

We want to be our customers’ primary network with the best in class in-home WiFi experience that is complimented by our Shaw Go WiFi network outside of the home. In support of this strategy, we continue to partner with municipalities to enhance the scale of our WiFi network and we have secured over 50 agreements to date.

On May 13th in a joint press conference with the city of Calgary we launched the first four locations and we will continue with our marketing efforts to create more awareness regarding the benefits of our WiFi service and drive customer usage.

On June 4th we held our annual upfront media presentation, we remained focused on delivering premium and compelling content across all platforms in our upcoming programming schedule was well received by advertising in industry executives.

In LA we purchased 12 new programs this year compared to 18 a year ago. We have a number of top returning shows on global, which provide stability that advertisers are seeking. In the fall, replacing Mystery and Twist, we will launch two new specially channels, Crime and Investigation and For Your Information, which further solidifies Shaw’s media specialty portfolio within the lifestyle genre.

In addition to the linear rates, we continue to buy the stacking and SVOD rights to support our TV Everywhere initiative. Our 11 Shaw Go apps are providing -- are proving to be popular as 10 million hours of content has been watched by Canadians through the TV Everywhere apps.

We continue to expand our TV Everywhere strategy with the goal providing our customers, greater choice and flexibility over what they watch, how they watch and when they watch their favorite content. Further to our organizational announcement on April 14th, we have taken the first steps towards the company wide transformation that we will call focus to deliver. This new structure will streamline Shaw into three clear units; consumer, business and media and will become the new reporting structure for financial and operating results beginning in Q1 of fiscal 2015.

The key outcomes of our focus deliver program include the improvement in customer satisfaction and effective customer centric organization, a cost structure that enables future growth and high employee engagement.

As part of this new structure, approximately 400 management and non-customer facing roles were affected and elimination of these roles will be completed by the end of July. In connection with this restructuring, we recorded a onetime charge of $53 million and expect annual savings, net of new hires will be approximately 50 million.

As Focus to Deliver is a multi-year transformational program, we have identified a number of key initiatives that will align with our strategic priorities. The first critical step was the organizational realignment and performance management which is nearly complete. The remaining initiatives center on our strategic pillars of exceptional customer service, leading technology, customer profitability and operational efficiency.

We are evolving from a traditional cable and media company to a network and content experience leader, delivering connectivity and programming across multiple platforms and services. We remain focused on driving performance and value for all of our stakeholders through continuous enhancement and improvements in our operation.

Thanks to everyone for joining us today. And we would now like to open the phones to answer any question, operator.

Question-and-Answer Session

Operator

Sure. Thank you (Operator Instructions) Your first question today will come from Jeff Fan with Scotiabank. Please go ahead.

Jeff Fan - Scotiabank

A couple of questions. First is on the broadband subscriber base, I guess what we’re noticing in the last couple of quarters is the standalone broadband subscriber base is growing pretty quickly and it looks like it’s really the main source of your broadband subscriber growth. Wondering if you can give us some color on what’s driving this, whether there’s any ties to the push on the WiFi service and whether these customers are coming on because of that. And maybe just a bit on the profile of what kind of customers these are?

And then the second question is just on the media side. We saw some impact I guess during the Olympics quarter on some advertising dollar being shifted. We’re wondering if you can help us quantify what the impact might be during the last quarter from what’s going on with the World Cup, whether you’re seeing some revenue shift there for the current fiscal quarter? Thanks.

Jay Mehr

Great. Jeff its Jay. I’ll take the first part of the question. I think it’s fair to say that we’re pleased overall with the continuation of the shift in the marketplace that’s happening here and we’re watching Canada. And for sure our internet gain of over 12,000 is a terrific group point of our differentiated internet strategy. Remember that this was Q3 and we do very well with university students. So Q3 is normally a top quarter for us on the internet side. So this is our best Q3 result since 2010. I think for sure, it’s driven by a number of market segments including business as a significant part of the standalone internet ad. I think as you’ve seen through our strategy shift, we have for sure to say created the bundle to deliver a customer experience that customers can enjoy. And if a customer wants to buy an internet product and only internet product without video over voice, we’re excited to deliver that experience to them and I think you’ve seen that. And I think it’s important to remember that our internet penetration of past households is only 47%. So as Brad talked about through the network and content experience company, this base is an important part of growth for us.

Paul Robertson

It’s Paul here. No, we’re not seeing any different advertising due to the World Cup Soccer.

Jeff Fan - Scotiabank

Okay and just quick follow-up for Jay.

Brad Shaw

Jeff, I’ll just add one thing to that and that is that I think people have forgotten that we had Historia and Series+ in the results last year, and so there was $8 million in the quarter last year related to Historia and Series+ and $5 million of EBITDA. So when you take that into context, we’ve actually grown our EBITDA in media quarter-over-quarter.

Jeff Fan - Scotiabank

Okay. And just a quick follow-up on the standalone internet. So just to clarify, is this driven by mostly business or is it more of the consumer group or millennial customer consumer base?

Brad Shaw

I would say it’s about an equal split Jeff, for sure. We have gains in internet. Internet is a core product for us in business. We haven’t really seen directional shift in the business internet space. We’ve seen pretty consistent gains. I think the shift in direction has come mostly on the consumer side on internet.

Operator

Your next question will come from Vince Valentini with TD Securities. Please go ahead.

Vince Valentini - TD Securities

I got a follow up on that. This improved traction with the broadband business in the consumer space, do you have a sense of whether it’s being driven more by your WiFi or more by the improvements in speed these made with network investments?

Jay Mehr

Vince, it’s Jay again. I think there is a number of things that are really helping differentiated internet experience and we look at things like the network surveys and leadership position in terms of the mainstream providers and speed as another great proof point that our accelerated capital funding has worked and the investments that we made in our network are really driving the customer experience. We’ve seen very positive uptick in our likelihood to recommend both in the internet space and on WiFi, which we are just delighted about. And we also know that our customers are valuing and using the WiFi. Brad shared with you some of the churn benefits that we’re seeing there. So I think all of that is combing to help start a shift in the marketplace here.

Vince Valentini - TD Securities

Okay and if I can check with that question and do a sort of ARPU in pricing, are you also seeing an accelerated shift or a continued positive shift in subscribers to higher speed tiers where they pay more?

Jay Mehr

Yes, we are.

Vince Valentini - TD Securities

And can you give us any data points on that? Your EBITDA growth seems still pretty attractive but revenue growth wasn’t overwhelming this quarter in the cable segment. Is there any sort of more color you give us on that what kind of uptick you’re seeing in ARPU from up-tiering?

Jay Mehr

Yes. I don’t know that will -- because of the way our bundles work, it’s difficult to give two precise numbers. Clearly we’ve got some movement upward on our internet ARPU. Clearly we have some movement downward on our video ARPU and so I think you see an offset there. On one level I hear a concern about 3% revenue growth and 6% EBITDA growth. I think we’ve talked before, I think if you look at our business, we’re kind of thinking about 2% to 4% revenue growth business and if we want to get EBITDA growth of more than 2% to 4% then we need to do things like we did in this quarter. So I wouldn’t be alarmed with 3% revenue growth.

Vince Valentini - TD Securities

Okay and lastly, rate increases given consumers seem to like what you’re selling, have you any given thought to normal rate increases, September especially on the broadband side?

Jay Mehr

Yes, to refresh everybody, up in’14, we had rate adjustment in cable in September. We'll play out the model as we rollout at ’15 guidance. I would say we’re not necessarily planning right on September 1st, but I would anticipate that you’d see some changes to broadband pricing in the first half of next year.

Operator

Your next question will come from Glen Campbell with Bank of America. Please go ahead.

Glen Campbell - Bank of America

Yes, thanks very much. Switching back to WiFi, a lot of cable companies have taken this move towards home-spot modems where there all their customers can access service from any of their customers. And I know you’ve taken a look at that. Can you talk about how you see the pros and cons of that move from a Shaw perspective?

Brad Shaw

Hi, Glen, it’s Brad. Well, I think our focus has been for WiFi -- is to build the network and have customers enjoy and sign up. I think as we look at and we see what Comcast has been able to do with some of the other guys down in the U.S. and we’re in close contact with them, we see the benefits in how its working, I think we’re in a certain advantage because we’re little bit more ahead on public WiFi or municipal WiFi call it than the others. But for us its part of the network. So it’s something I think you’ll look at down the road and say it’s all about expanding the network, it’s trying to create value for all our customers and I think it would be just a matter of when, not if.

Glen Campbell - Bank of America

Okay, that’s great. A couple of follow ups if I may. First on cost inflation on the content side. I guess it helps you on media revenues. Obviously there’s some cost there with what you’re buying in Hollywood and then I guess there is the offset on the cable side. Could you give us a sense directionally as to what’s you are thinking will happen over the next year on those parameters? Will cost inflation be a little more rapid in the year ahead than it was -- just the year that you’re in, with you buy in in Hollywood, is this likely to increase the rate of content cost inflation or do you think it will moderate a little bit on that side? Can you give us just a rough sense?

Paul Robertson

Sure, it’s Paul here. We found it to be a pretty moderate market from that standpoint. And we went down and bought less show this year than we did a year ago at this time. And it always helps to be in the market for less programming. It makes you less desperate to pick up the shows at a high rate. So we’re very pleased with the way the market responded to our offers.

Glen Campbell - Bank of America

Okay, great. Then on the cable and satellite side, similar or maybe easier this year?

Paul Robertson

You mean in terms of the increases we might enjoy?

Glen Campbell - Bank of America

Yes.

Paul Robertson

It’s not buoyant from that standpoint. I’d say that it’s fairly a flat to low growth market.

Brad Shaw

We’re still on contract on many things but we will see some network increases in certain areas and we’ll also have to see what comes out of the regulatory hearing as well. But nothing Glen, that I can say that’s unusual or out of scope with what we’ve normally seen in the past.

Glen Campbell - Bank of America

Okay, great. One quick last one. Do your subscriber numbers include unbundled loops that you provide to third parties? And can you give us a sense of how much of that there is in your base?

Brad Shaw

Don’t know that we can. I don’t have the number right in front of us and we’re happy to follow up.

Operator

Your next question will come from Phillip Huang with Barclays Capital. Please go ahead.

Phillip Huang - Barclays Capital

Question on the enterprise opportunity. I think you guys have mentioned in the past that you see solid opportunity in the enterprise market. I was wondering if you elaborate a little bit on that and whether it might involve increased collaboration with partners in going after those opportunities?

Brad Shaw

For sure, we see a tremendous opportunity in the business market. We think part of our reorganization has been to enable us to get the right level of focus and the right level of resources behind those opportunities. We’ve had success so far with really small businesses and we think we’re going to continue to have success with really small businesses. It’s absolutely a big part of our future. We are having great runs in some of our newer spaces including wholesale and partnership agreements with other providers. We’re having some great success on the medium side and about half of our growth is coming from medium, which is a space that is really almost completely new to us. We see the transition to the IP cloud base technology as a great opportunity for our business to enter that space. So I think those are some of the key opportunities we see in the short-term.

Phillip Huang - Barclays Capital

And when you talk about potential increased collaborations, do you think of it more as sort of sharing of infrastructure or like what type of partnership or collaboration would seem most logical as you go after these opportunities?

Brad Shaw

Phil its Brad here. I would think we would be, we’re always open to have discussion to see what moves the business forward and what makes sense from a timing point of view and a market point of view. As I look at and as Jay said, we have real nice opportunity here. We’ve done some restructuring here to really allow us to focus more on the divisions and we need to let that flow through a little bit and get that up and running. But we’re continuing to look at how we address the market and how you grow the market and short-term, mid-term looks well but how do you continue that. So we’re going to be open to seeing how best to move forward as we look longer-term.

Phillip Huang - Barclays Capital

Got it. And then second question on your spectrum sale; I believe the five year moratorium is up in September and given you received a $200 million deposit from Rogers last year, does this mean that you will need to pay them back on this if the spectrum sale is not approved by industry Canada sometime like in the next fiscal year?

Brad Shaw

Well the rules are pretty clear when we bought this spectrum that after five years you could transfer them to incumbents and so we still work on that premise and we are not sort of entertaining hypothetical ideas. But in the event to understand structure of the deal, in the event they paid us a $50 million non-refundable option premium and $200 million were not to be approved at some point in the future, will be refundable to them.

Phillip Huang - Barclays Capital

Got it. And then last question is on -- question on your investments in Pulser and SHOP.CA. It looks like the investments just based on the disclosure totaled roughly like around $46 million maybe in the quarter. Just wanted to better understand how these investments might fit in your future overall strategy?

Brad Shaw

Well, we have a ventures group that’s looking for things which are going to provide us with diversification, also looking at technologies that may be disruptive and looking at things that are adjacent to our business. REO is a very good example of a streaming music service, of something that’s adjacent to our business. It fits very well with our WiFi offering of taking your Internet with you and taking your music with you and so we have the Canadian rights to that and we’re going to be promoting that in line with our Internet and WiFi products. We think it’s a superior interface, superior service and we are very excited about that as being an added value and added service for our customers.

On SHOP.CA, SHOP.CA is a tremendous ecommerce platform in Canada. 2% of Canadian retail sales are done online, 11% in the U.S., 25% in the UK. So, we really lag because most people haven’t, most Canadians haven’t wanted to do too much cross-border with all the duty and all the rest of it but they have got 3 million products, 500 different merchants on there. It’s a great fulfillment engine and what’s very important since we made these investments and we will be working with them at our media venture group in terms of promoting the product as well and there’s lots of opportunities here for us to work together very favorably. But they have just done a deal with Amia which -- or with the Aeroplan so that every dollar that you spend on SHOP.CA will earn you an Aeroplan mile and we know that Canadians very much like their Aeroplan miles and that’s the first step and then there is further steps coming down the line.

So it’s a very robust marketplace of both well-established products, big brand names, big labels and also trending stuff that young people will enjoy as well. So it’s growing very rapidly and it’s a very impressive group of people.

Operator

Your next question will come from Drew McReynolds with RBC Capital Markets. Please go ahead.

Drew McReynolds - RBC Capital Markets

Yes, thanks very much for taking my questions. Just a couple of follow-ups. Just maybe Steve for you, just on free cash flow priorities, as kind of we look into the future in the next kind of two to three years, your free cash flow growth profile certainly looks to be improving quite substantially. So, just can you remind us kind of where you are prioritizing dividend increases versus buybacks, debt repayment and maybe some tuck-in acquisitions? And then I have a couple of follow-ups after that.

Steve Wilson

Yes, I think we are still looking for opportunities in terms of tuck-in acquisitions and there are some interesting things out there for us to be considering. Dividend increasing of course. We have been very consistent with dividend increases and we will have to look at that again. We have said 8% last year, roughly 5% to 10% this year and we will examine that in light of certainly if the regulatory changes that are possible here. Share buyback, I don’t see us being a big proponent of share buybacks at this point ,given the nature of the valuation of our industry based on EBITDA as opposed to EPS.

And certainly from the debt point of view, we are two times debt to EBITDA right now and so we are really where we want to be. So we won’t be focusing on a lot of debt repayment at this point. So there is lots alternatives for us. And we have also, when we did the notes in January we did a two year FRN that expired in 2016. So we have the opportunity to repay those FRNs without penalty when they come up.

Brad Shaw

Drew, just to add to that a little bit, I guess you talked about tuck-ins and we did have discussion at the board and we are tending to look a little bit more at the datacenter business and the opportunities in a more meaningful way. So, just from your tuck-in point of view I just want to give you a little color on that.

Drew McReynolds - RBC Capital Markets

Yes, that’s all very helpful. And may be a couple of follow-ups here, just a little bit of a technical one. In your calculation of free cash flow you have a CAODC benefit funding flowing through. Can you just remind us when that comes to an end?

Brad Shaw

Well actually for this year I think it was $53 million and for next year it’s going to be about half that, roughly $25 million, $26 million and that’s because the old Canwest benefits that we assumed on the takeover of Canwest are fully done at that point and we’re just carrying forward then with the new benefits, as I say, around $24 million, $25 million.

Drew McReynolds - RBC Capital Markets

Okay, and is that $24 million, $25 million recurring kind of after 2015?

Jay Mehr

Yes. That’s got another probably four or five years left more to go.

Drew McReynolds - RBC Capital Markets

Okay, that’s great. And my last question, just wondering if you can give us a little bit of extra granularity around the business net additions in the quarter? Was there something that is recurring or just some additional context would be great?

Brad Shaw

Great, Drew its Jay. I’ll take that one. I think if you look at our growth in our RGUs and some of our mid-market growth doesn’t necessarily really reflect in RGUs because of how we deliver concerning small [ph] does. We have been relatively stable in terms of our internet growth in RGUs and relatively stable in terms of our phone growth in the quarters this year. The video business on the business side is more vertical specific. There is only three or four verticals that really value video, although the three or four verticals that we have that value video, value it a lot. And I think it’s fair to say that Q3 was our strongest quarter in business video this year, that having been said, I think we’re going to have a decent quarter in Q4 in business video as well. So it was certainly our best quarter we’ve had this year, and that’s why we disclosed it. And I think starting September you will be able to -- as we divide by business in consumer, you will be able to see even better granularity on those trends.

Jay Mehr

Yes. And the other to go there is with, you know we started the year $300 million of business revenues and we expected a forecasted growth of 20% and we are going to achieve that growth.

Drew McReynolds - RBC Capital Markets

That’s great, and that it is interesting on the TV side, on the business side, because I don’t think we hear a lot about that. Are these three to four verticals, are they currently with your competitor? Or is it just kind of new potential penetration of verticals that’s up for grabs?

Brad Shaw

The majority of our wins in this quarter were from a competitor.

Operator

Your next question will come from Maher Yaghi with Desjardins. Please go ahead.

Maher Yaghi - Desjardins

I wanted to ask you about the trends you are seeing in the use of the Shaw Go apps in terms of percentage of your base who are using it also. Are you planning to have a single platform to access live TV programming on other screens? And finally, as the use of the Go apps increase, how is that affecting your legacy broadcasting revenue model as more and more clients watch shows on demand rather than live broadcast?

Brad Shaw

Maher, I will take the first one and then let Steve take the revenue model question. So catching everyone up with where we are and TV Everywhere we’ve actually got 12 Shaw Go apps including Global History, CTV, Movie Central, NFL, NBA, Treehouse, YTV, A&E Family, Disney Junior and Disney HD. So we create a very rich Everywhere experience for our customers, all authenticated back to their video subscription. And I think we’ve shared - we’ve had 2.4 million total downloads today and so far our TV Everywhere strategy has 10 million hours of cumulative video review so far. When you ask about sort of aggregation, for sure our next generation video program contemplates many of those depths and takes it in parallel with the moves that we’re making on the rest of the next generation video program, and I think it’s fair to say that taken generally our path to next generation video is step-by-step hybrid and that we’ve said before our investments have been foundational. So I think the path that you will see us takes here looks a lot, looks very similar to the path of the majority of the other North American MSOs.

Steve Wilson

And Maher, just in terms of the general use of TV Everywhere, and this was something I have to give credit to Vince for reporting but, when you look at the first quarter, accounted quarter of this year compared to last year, online video viewing was up 46%. Now online video viewing is still challenged by the practice, very difficult to measure what exactly you are getting as an advertiser. But TV Everywhere viewing was up 250%.

Now, it’s still early days for that, but what that shows is that people are willing to pay for a cable subscription if they get the benefit of being able to watch it anywhere at any time. And that there is a lot of cross value between that. So they may not be watching it on a TV but they are watching it where they want to watch Global Go [indiscernible]. And by the way if the CTV app and Global Go app are now both authenticated. So anybody who is a CTV subscriber or a Global subscriber can watch programs or live on either. So it’s a positive sign to say that TV Everywhere helps to lessen disruption overall in the base business.

Maher Yaghi - Desjardins

Right, but how about the media broadcast revenue model, because I understand it’s actually good to keep the customers paying for the cable side of the business, the BDU side, but how about the broadcasting side of the revenue model there? How is that getting affected by people usually seeing less advertising?

Paul Robertson

It’s Paul here. Currently we’re not seeing any material impact. I think as time goes forward, we’re going to have to get more effective at developing the advertising model and that’s all -- part of our plans is to make sure that we’re effective as possible at gleaming the advertising from the Go ads.

Maher Yaghi - Desjardins

So up to now you’re not seeing pressure on margins because of this move to online viewing.

Jay Mehr

No, we’re seeing and we expect to see increased online advertising next year. But I think it is important not to understate the fact that people are watching all of this content with ads in it, behind an authenticated window. Remember the TV Everywhere when I talk about it is a product that you have to have an authenticated cable subscription to get. So you’re not losing eyeballs necessarily or revenue as a result of that.

Operator

And your question will come from Greg MacDonald with Macquarie. Please go ahead.

Greg MacDonald - Macquarie

So this is a company that’s probably done the most in the last few years to prepare at least from a network perspective for future competition and it’s been a pretty comprehensive investment. It’s not just bandwidth upgrades and digitization, IPTV or IPVideo, the WiFi network. So what I’m going to try and ask is to get a sense of a future CapEx trends, and I guess I’ll direct it to Steve.

Steve can you tell us in your view what sort of a range of normalized capital intensity is for sort of the modern day now? Is this still you know, an 18% - 19% capital intensity business? I’m speaking on the cable side. And then secondly you spent well north of 20% for a number of years and I make reference to this kind of very comprehensive spend that you’ve had. Is this a scenario or am I being too optimistic to think that you can end up going through the downward cycle of a CapEx cycle in the 2016-2017 timeframe where you might actually be able to under spend relative to normalized capital intensity.

Steve Wilson

I think there are a few things there. One is, we have invested as you said a significant amount of money digitizing our network and that has great advantages for us. There’s the opportunity to digitize further and release a lot more analog capacity back into the network and that’s something that we’re looking to do. I would say that you know that there’s a price to pay for being able to maintain the quality of service for customers on the broadband side. We were seeing peak capacity increases of 60% year over year. You may have seen recently the Netflix study that came out that said that we were outside of bell fiber and bell line fiber. We were the number one leading service provider of Netflix to our customers over the internet and that speaks to the amount of money that we’ve invested in the network and providing our customers with that experience. We were equal to the best in the U.S. and out east there were some people who didn’t fare as well in that survey and it’s important for us because you’re paying the fee for internet and you should be able to watch what you want, you should be able to have a good service and when people don’t have that, they blame it on us, they don’t blame it on Netflix. So we’re keeping up there.

So I would say a few things. One is just the rate of growth of broadband traffic and data growth and also the second thing would be the speed at which we move on IPTV, and so how we scale that and how we move that forward will be a gating factor in how CapEx looks going forward. But certainly there are, you make a good point. There’s a lot of things that we’ve done already that have provided us with a superior network and a superior compelling customer proposition, not to mention even WiFi. WiFi’s only been a $100 million at this point and look at the benefit that we’ve gotten out of that.

Greg MacDonald - Macquarie

Right okay and so, so to Steve, not to put you in too much of a spot here but is capital intensity sub-20 kind of where we’re going in ’16 and beyond because of the spend that you have -- that you’ve had in let’s say the last two or three years.

Steve Wilson

Well I would say subject to those factors that’s possible.

Greg MacDonald - Macquarie

I can appreciate you not wanting me to get too optimistic but as you point out, you spend a lot of money on a lot of different things. I would suggest you’re ahead of the curve now when it comes to…

Steve Wilson

We are. We are. And certainly the accelerated capital from the money that we’ve been able to spend on that on broadband management capacity, those kinds of things have been -- our datacenter which will come online next September, all of those things put us ahead of the curve. So yes, you should see a reduction overall in CapEx intensity. I just -- I can’t be specific, there’s really, I think to be direct, IPTV is the one that will kind of decide where we are in terms of that. And we’re plus or minus 3%.

Operator

We seem to have no further questions at this time.

Brad Shaw

Okay, operator. Thanks very much. Thanks everyone. See you next call.

Operator

Ladies and gentlemen that does conclude our conference call for today. We thank you for your participation. You may now disconnect your lines. And have a great day.

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