Rogers Communications (RCI) Guy Laurence on Q1 2016 Results - Earnings Call Transcript

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Rogers Communications Inc. (NYSE:RCI) Q1 2016 Earnings Conference Call April 19, 2016 4:30 PM ET

Executives

Amy Schwalm - VP-Investor Relations

Guy Laurence - President, CEO & Director

Anthony Staffieri - CFO & EVP

Analysts

Vince Valentini - TD Securities, Inc.

Jeff Fan - Scotia Capital, Inc.

Drew McReynolds - RBC Capital Markets

Simon Flannery - Morgan Stanley & Co.

Greg MacDonald - Macquarie Capital Markets Canada Ltd.

Phillip Huang - Barclays Capital Canada, Inc.

Maher Yaghi - Desjardins Securities, Inc.

Robert Peters - Credit Suisse

David McFadgen - Cormark Securities

Richard Choe - JPMorgan

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Rogers Communications Q1 2016 Results Analyst Teleconference. At this time, all participants are in listen-only mode. Following the presentation, we'll conduct a question-and-answer session, and instructions will be provided at that time for you to queue up for question. [Operator Instructions] I’d like to remind everyone that this conference call is being recorded on Monday, April 18, 2016 at 04:30 p.m. Eastern Time.

I'll now turn the conference over to Miss Amy Schwalm with the Rogers Communications management team. Please go ahead.

Amy Schwalm

Good afternoon, everyone, and thanks for joining us. I'm here with the President and Chief Executive Officer, Guy Laurence; and our Chief Financial Officer, Tony Staffieri.

Today's discussion will include estimate and other forward-looking information from which our actual results could differ. Please review the cautionary language in today's earnings report and in our 2015 Annual Report regarding the various factors, assumptions, and risks that could cause our actual results to differ.

With that, let me turn it over to Guy to begin.

Guy Laurence

Thanks, Amy, and good afternoon, everyone. This afternoon, we released our first quarter results. We delivered another solid quarter of revenue growth and continued improvements in our key subscriber metrics, despite sustained competition in both wireless and cable.

We executed well in wireless. Network revenue grew 4%. The best year-over-year improvement we’ve seen in three years. You can now see that we reestablished momentum in the wireless market.

Postpaid churn was 1.17%, representing a year-over-year improvement of 7 basis points. This marks our lowest churn in the past seven quarters and our best Q1 churn since 2010. We’ve posted two consecutive quarters of churn improvement at a time when our key competitors are trending in the opposite direction.

We delivered wireless postpaid net additions of 14,000, up 40,000 year-on-year. Favorable trends in churn and net additions are the results of three factors, our high-quality network, our value-add content offerings and continued improvements in customer experience.

Wireless adjusted operating profit was flat in the quarter, driven by the competitive market and the double cohort. We spent more to get the high-value customers we want and to drive improvements in churn and lifetime value. Q1 turned out to be more competitive than we expected and we will continue to go toe-to-toe with the competition to get the high-value customers we want.

Turning to cable, overall revenue was down 2% primarily due to the cumulative effect of subscriber losses in TV and Home Phone, as well as our response to discounting in the market. We continue to deliver upgrades on our navigator platform, launched two new Sportsnet 4K channels, and delivered the first 4K broadcast of a Major League Baseball game with the Toronto Blue Jays.

Consumer interest in 4K TV continues to grow. Thus far in 2016, half of all new TVs being sold in Best Buy in Canada were 4K. By year-end, we plan to deliver over 500 hours of 4K content including over hundred live sporting events. This will of course require a high-capacity network and I will come back to this in a minute.

This quarter we also launched our starter TV packages to provide additional choices to customers. It has certainly stimulated a lot of discussion and we’ve had a number of inquiries. However, interestingly, the majority of customers are choosing to stay with their current package.

The analogy I would give is that it's a bit like going to McDonalds. We’ve now given customers the chance to buy a basic hamburger and fries separately and some do, but most customers stick with the meal option of a quarter pounder, fries and a drink because they’re better value for money. This is only an intermediate step to full pick and pay late this year and so we'll have to see how the full picture unfolds as the year progresses.

Overall, we expect to see an improvement in TV figures towards the end of this year as our investment and upcoming product launches start to gain traction.

The highlighting cable continues to be Internet. Our residential product mix is shifting towards these higher margin associates where our robust network gives us a competitive advantage. Our success is driven by our ability to respond to customer’s ever increasing need for speed.

The majority of new Internet customers continue to demand bandwidth of a 100 megabits or higher. The data usage we carry on our network continues to increase at close to 40% per year. It's worth remembering that the typical family now have 11 connected devices in the home, all competing for finite bandwidth.

Our Internet -- our IGNITE packages already enable them to use numerous data-intensive applications at the same time. On top of this, we’re on track to offer gigabit Internet speed to our entire footprint by the end of the year.

We are expanding our 1 gig service by an average of a 100,000 homes per week and we’ve announced we will offer 1 gig speeds to quarter of a million small businesses by the year-end.

In summary, our network will provide next-generation speeds well ahead of our competition and for a fraction of the capital investment.

Turning to media, overall revenue in AOP were down year-on-year, driven by softness in traditional advertising affecting our conventional broadcast and publishing businesses. In late January, we announced a restructuring plan, which is expected to be largely completed by the end of the second quarter. In contrast, sports revenues, which represents about half of the media segment, continue to grow with positive subscriber trends of Sportsnet.

Interestingly, ad revenues are being redirected to the Blue Jays. We will continue to innovate in the way we deliver content. For example, we recently expanded Sportsnet Now, making it available over the top to all Canadians. We have the first major sports channel in North America to do this targeting a water cord called Nethers [ph].

Moving to enterprise, we recently introduced Internet of Things as a Service. Our managed service will help customers take advantage of this transformative technology while keeping their focus on running their business. We continue to roll out a series of leapfrog technologies such as this to customers in the months ahead.

Finally, we’ve continued to make good progress on customer experience. On Rogers, the most recent mid year CCTS report shows we replaced our complaint rate by 65%. This was the best improvement amongst our competitors. The report also highlighted the work we’ve done on fixing roaming. Compared to three years ago, our roaming related complaints are down by almost 90%. Thanks to the popular Roam Like Home.

The competition have launched new tariffs that claim to provide better roaming, but they’re still a pale imitation to comparative Roam Like Home. We'll continue to talk about our improvements on customer experience every quarter, because this is a journey not a destination.

In summary, we continue to execute effectively in a highly competitive environment. I'm encouraged by our momentum in wireless, as well as Internet, both of which are key growth engines for us.

I’ll now turn over to Tony, to provide further details on our results.

Anthony Staffieri

Thanks, Guy, and good afternoon, everyone. I'll provide more context around our first quarter financial results, and then we can get to your specific questions.

We delivered another quarter of meaningful progress. The investments we’ve made in our network, content, and the customer experience, positioned us well to compete in this environment. We continue to deliver top line growth as our consolidated revenue, grew by 2% year-on-year to $3.2 billion.

Our adjusted operating profit of $1.1 billion was down 2% as competitiveness in the market lead to increased customer investments in both wireless and cable. And profit was also impacted in the quarter by softness in conventional media revenue.

Our media restructuring plan began mid Q1 and continues into Q2 as we work to align our costs to the evolving advertising landscape. In the coming quarters, we expect to report improved media profitability year-on-year.

We see opportunities for cost efficiencies and improvements in each of our segments and continue to expect growth in AOP as per our full-year 2016 guidance. Below the operating profit line, consolidated adjusted net income and EPS were down 4% primarily driven by lower AOP and higher depreciation, partially offset by lower income taxes.

Turning to our segments, wireless network revenue was up 4% year-on-year. Share Everything plans were an important driver of the revenue growth. The number of Share Everything customers was up 43% from a year-ago. This increasing penetration also lead to ARPA growth of 4% as customers take advantage of the opportunity to share services across multiple devices.

Blended ARPU grew 1% in the quarter, excluding the impact of the Mobilicity acquisition. So good progress on that front. Importantly, roaming had a negligible impact on both ARPU and wireless revenue growth profiles in the quarter, as volume increases offset roaming rate declines in the quarter.

We continue to see good momentum in building our subscriber base. Postpaid gross customer additions were up 10% and we reported net additions of 14,000. Wireless AOP was flat year-over-year impacted by the investments we made to attract and retain higher value customers in a very competitive market. Our wireless margins remain solid at 44%.

Turning to Cable, revenue and AOP were down 2% from the same quarter last year. We improved the decline in our total subscriber units or TSUs by 48,000 year-on-year, resulting in net TSU losses of 20,000 in the quarter.

As you may recall, CRTC eliminated the 30-day notice period for cancellation in January of last year leading to increased churn in the first quarter of 2015. If you normalize for that impact, we still improved TSUs by 9,000 in the first quarter of this year.

We posted Internet net additions of 16,000 in the quarter, an improvement of 23,000 year-on-year. Internet revenue growth continued at double digits; up 11% year-over-year as our popular IGNITE product gains further traction. Revenue from the Internet services continues to increase as a percent of total cable revenue.

Cable operating expenses were down 1%, largely due to the shift of higher margin Internet services. As Guy mentioned, there is an increasing demand for speed and as more customers migrate to the higher speed IGNITE packages, we expect to see a favorable impact on margins and household ARPA.

Cable OpEx also benefited from cost efficiency initiatives partly offset by higher advertising costs year-on-year as we increased our share of promotional voice in the marketplace.

We continue to invest in our cable network including the rollout of gigabit speeds to our footprint of 4.2 million homes. As we’ve mentioned previously, we are able to offer these speeds in 2016 at an incremental cost of less than $50 per home give us -- giving us a very efficient ROI growth model, particularly in comparison to incumbent telcos needing to invest in full fiber to the home in order to compete.

We generated operating cash flow of almost $600 million during the quarter. Free cash flow of $220 million was impacted by the timing of network investments as we make good progress in level loading our CapEx programs throughout the year. We continue to expect lower CapEx in 2016 and in combination with expected growth in AOP; we remain on track to generate free cash flow growth of 1% to 3% this year.

As discussed last quarter, we continue to be focused on moving our debt leverage ratio downward. Although we ended the quarter at 3.2x, up slightly from year-end, it was due to expected seasonal increases in working capital that typically occur in Q1. We continue to expect the leverage ratio to decline in the coming quarters. Overall, our balance sheet remains solid and available liquidity is healthy at $2.8 billion.

In closing, we delivered solid results under competitive market conditions with particular highlights in wireless and Internet. Going forward, we are confident in our ability to realize increasing value for shareholders from the investments we’ve made in our infrastructure, products, and customer experience.

With that, let's open up the call to any questions you have.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we'll now conduct a question-and-answer session. [Operator Instructions] Your first question will come from the line of Vince Valentini with TD Securities. Please go ahead.

Vince Valentini

Yes. Thanks very much. Good job on the wireless subscribers churn front, but can you give us a little more detail on the costs you had to incur to get that growth? I don’t see any mention of retention costs in the MD&A. If you can give us any color on directionally what happened to your COA and retention in the quarter, that would be helpful.

Guy Laurence

Yes, Vince. As you said, we don’t disclose the details of COA and COR, but directionally what I can tell you is you may recall last year we had tightened our investment in retention spending ahead of the double cohort. When you look at our retention spending this year, it's slightly down. When we looked at the dynamics of the components of COR on a unit basis, what we found was very good progress in the costs through our channel and that was offset by heightened hardware subsidies. You saw continued competitiveness in the marketplace in terms of the pricing of hardware, we continue to follow the market and so that put pressure on our unit cost, but overall from a COR perspective, slightly down from last year. That same phenomenon impacted hardware subsidy costs for our COA, and so directionally what you saw is again channel costs come down with hardware subsidies building up on the COA front. The higher volumes this year on gross ads clearly contributing to the higher overall equipment subsidy spent.

Vince Valentini

Thank you.

Operator

Your next question will come from the line of Jeff Fan with Scotia Capital. Please go ahead.

Jeff Fan

Thanks. Good afternoon, everybody. I want to ask a question about the cable operation segment. The Internet numbers were obviously very strong, both on subscribers and also revenue. But I guess home phone is starting to see a bit of a accelerated decline and I wanted to get your input on whether you're starting to see sort of an accelerated pace of cord cutting that's going on on the home phone side, because I guess that's one of the -- perhaps one of the trends that we're seeing in the marketplace. And then, the second part of that is, as you look forward, do you think the Internet growth is really going to be sufficient to offset some of the decline that you’re seeing both on television and home phone?

Anthony Staffieri

Jeff, two pieces. I'll start with the second part of your question. We think about the business in terms of -- as we’ve talked about, we think about the business in terms of Homes Passed, our penetration of those Homes Passed, and the ARPU that we ultimately get from that particular home and what we see is with the trend in Internet, the continued need for speed and what that drives in terms of ARPU growth. So if you were to look at revenue at a 11% in the quarter for Internet, ARPU is very closely behind that, so very solid growth on that front. And so as you see some of the two dynamics in TV, I should highlight. One, the revenue decline that you see for TV is largely, as Guy mentioned a result of subscriber losses over the last year. ARPU continues to hang in there in a relatively solid way. And so, as we make progress on the subscriber front, TV video will continue to improve as the year comes along. And then on home phone to touch on the last piece of it, we continue to see that product declining both in terms of subscribers and so you get the cutting that you're talking about, but also competitiveness in the marketplace in terms of how it’s priced. So, that continues to move that down. And so, overall, from an ARPA perspective as we think multi quarters and multi years, we do see the ability of Internet to continue to move positive returns in the cable space.

Jeff Fan

Okay. Thank you.

Operator

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

Drew McReynolds

Thanks. Thanks very much. Tony, with respect to providing guidance last quarter, you have talked about factoring in trends in Alberta, factoring in the double cohorts, and the potential impact of unbundling, can you just give us an update on how each of those are tracking relative to the expectations that you set when you set guidance? Thank you.

Anthony Staffieri

So, a couple of things. On the double cohort, we’re certainly not over it, but I’d say we are into what you might describe as the long tail. It will continue to play out for several quarters, particularly as we head into the fall. As we see some customers holding on to their handsets to see what some of the iconic devices might look like in the fall. So, while we are past the majority of the double cohort, it's -- there is still some of it out there. In terms of -- and so I’d say on relative to the assumptions we had for the year, the way we're seeing it play out is not materially different from what we expected. If you look at wireless, in particular, in the West, we previously indicated that while we expected possibly a softening on ARPU levels, not much in terms of on the subscriber front, I’d say what we’re seeing is generally that. We aren’t significantly indexed to Alberta specifically, so it's less of an impact for us. And so we don't talk about region, I’d say on that particular one, it's playing out pretty much as we expected and for us not a significant impact.

Drew McReynolds

Okay. Thank you. And just on the unbundling, still early days on that front?

Anthony Staffieri

Still early days. So more to come on that.

Drew McReynolds

Thank you.

Operator

Your next question will come from the line of Simon Flannery with Morgan Stanley. Please go ahead.

Simon Flannery

Great. Thanks very much. Well, I’m following on that question, perhaps you can just touch a little bit more on the macro in the -- in Ontario and particularly perhaps just talk about some of the advertising commentary that you gave. Is that primarily structural issues, is it macro issues, and how do you see that evolving over the rest of the year? Thank you.

Anthony Staffieri

Simon, if you could just clarify, you're referring to the cable side, wireless side, or both?

Simon Flannery

Both, yes. Both.

Anthony Staffieri

So I think at a macro level, as we’ve said in the upfront commentary on the wireless side, much of the competitive intensity that we saw in the fourth quarter continued into Q1, particularly, in handset pricing. And so, that continues to be a very active environment that we saw in Q1. And that was spread out, I would say, across the country not necessarily just in Ontario. If we look to -- and I think your comment on advertising relates to some of the heightened advertising in our share of voice on the cable side. I would say we toggle that up and down, depending on the week, depending on the quarter, and we had some heightened activity out that in Q1 over the course of the year. For obvious reasons, we don't want to disclose what that looks likes in the remaining quarters. Suffice to say it will all be in within the AOP guidance that we’ve provided.

Simon Flannery

I guess I also wanted some -- just some color on advertising revenues out of the media segment.

Anthony Staffieri

Oh, I see.

Guy Laurence

Yes, so I’d say the issue is in conventional TV and publishing. To a tiny extent radio, but not the same degree. Sports is still strong. The nature which sports advertisers are directing their dollars to has changed a little bit depending on the performance of the teams. With hockey up, but still -- but not quite where we expected it to be and Jays better than we expected. So the real issue is in conventional TV and publishing and that's where we’re focused in terms of making sure that we have the appropriate cost levels for the revenues we are enjoying.

Simon Flannery

And is that structural or is that macro do you think.

Guy Laurence

I think it’s structural. I don’t think its macro.

Guy Laurence

Okay. Thank you.

Operator

Your next question will come from Greg MacDonald with Macquarie. Please go ahead.

Greg MacDonald

Thanks. Good afternoon, or good evening, guys. So guy you mentioned willingness to spend more to get the subscribers that you want. And indeed, it’s nice to see the churn numbers coming down in the sub and revenue numbers are going in the right direction as well. I wonder though, if you might put some of the costs in context of revenue. Arpu is flat yet, ARPA is growing 4%. Could you, yourself or Tony talk about margin per account for example or lifetime value of customer, like are you measuring on those metrics and being scrutinizing in the way that you spend money on device subsidies? Thanks.

Anthony Staffieri

Yes, a couple of things Greg to help you get, as you said ARPA strong at 4%. Blended ARPU is what we do disclose we’ll say on the postpaid ARPU side while we don’t disclose it. It’s trending nicely and on the positive side of where we previously had been in terms of postpaid ARPU growth. So that’s moving well. So in terms of your question, how does that relate to the lifetime values? I would say, we continue to see very strong lifetime value. So while we’re spending more on handset subsidies, then you would have seen us say a year ago and even before that, what we are seeing come in very nicely is the ARPU coming -- APRU in as we describe it. And so we’re seeing that up year-on-year, and so that’s a big plus. When we look at lifetime value, again positive indices on that and so we like what we’re seeing there. Share everything has been one of the key catalyst for the churn improvements that you see. And so as we put that whole portfolio together, looking at churn, looking at ARPA and looking at ARPU together. All of those are contributing to strong lifetime values.

Greg MacDonald

Can you say, Tony, what the margin per marginal customer on postpaid was this quarter to give us a better sense of x-ing [ph] out the subsidy on the handset or promotional cost?

Anthony Staffieri

No, we don’t disclose that.

Greg MacDonald

Would you be willing to say what the churn per marginal customer is?

Anthony Staffieri

Maybe what we’ll do Greg is, the answer right now is, no. But if we decide to disclose it then, then we’ll make it widely available.

Greg MacDonald

Okay. Thanks guys.

Operator

Your next question will come from the line of Phillip Huang with Barclays. Please go ahead.

Phillip Huang

Thanks. Good afternoon. I want to follow-up back up on the wireless margin side. I was wondering to what extent the reduced discount on the BYOD plans and therefore a higher mix of traditional subscribers requiring a subsidies is driving a little bit higher cost on the quarter, since you guys put through some of the pricing changes as everyone else has as well earlier into the year? And then a quick follow-on on the cable side; we’ve see some pretty -- we’ve seen the increased promotion on fiber service from Dell in buildings where they have passed fiber to the home in Toronto. Just wondering if you’ve seen any significant reaction from customers in those buildings or neighborhoods where they have stepped up promotions especially since you guys have already have very high speed developed ones very soon, 1 gigabit per second services, well. Thanks.

Guy Laurence

So on the -- just dialing a little bit back to Greg’s question and your question Phil, is I’d say the BYOD mix has changed a little bit. So, it has gone down a little bit, but not much. I don’t think it -- I wouldn’t describe it as the biggest factor affecting the figures this quarter. But I mean we have better level of sophistication in terms of knowing where to invest acquisition money’s and the likely LTV part time value that we’re going to get from those customers is, that gives us more confidence to invest in certain types of customers at a higher levels than maybe we previously have. So actually under the kind of COA particularly figure there’s lots of different things moving about, some BYOD shifts, not major and there is an appetite to go after higher value customers and pay the appropriate acquisition costs, because we have more certainty on their LTV. The second part of your question on competitor activity in cable, I’d say I’m surprised at the level of discounting that we’ve seen in particularly MDUs, and I find it difficult to reconcile that with the enormous investments required to service that market with fiber. So, I mean, I don’t know they’ve -- I think they just have a different calculator to us, because I can't get it to add up.

Phillip Huang

Right. Ballpark, what is the market share split between say the wholesalers and BC and Rogers within your footprint? Do you guys know that or is it a 50/40 turn, or is it 60/30 turn type of market share split?

Anthony Staffieri

Well, we don’t disclose that.

Phillip Huang

Okay. Thanks very much.

Anthony Staffieri

What I can tell you Phillip is, it hasn’t changed materially over the last for to eight quarters, and I’ll leave it at that.

Phillip Huang

Okay. That’s helpful. Thanks very much.

Operator

Your next question will come from the line of Maher Yaghi with Desjardins Capital Markets. Please go ahead.

Maher Yaghi

Yes. Thanks for taking my question. I want to include just the, on cable price promotions as you mentioned there’s been an increased volatility in promotions in Ontario. But I wanted to ask as well on your side, I’ve seen some price guarantees being offered for two years to protect share. I wanted -- I mean in the past we’ve seen companies try to protect share by offering discounts. This experience is often resulted in lower margins and profitability, especially the shares being protected with price guarantees. Could you describe the experience you’ve had so far with these promotions and how long are you willing to stick with them? And just on, on wireless, I have not seen such disparity in the monthly price plans across different provinces as we have right now, compared to lets say Ontario, Alberta on share everything plans with Québec and Manitoba or Saskatchewan. It seems, though, as if discounts are taking place in provinces where you have four strong competitors and not three. So I would like to get your view on the risk in ARPU leakage in additional provinces like BC and Alberta, when Shell becomes a more meaningful competitor?

Anthony Staffieri

So on the cable promos, I mean to us we in any one quarter we experiment with different mechanics to attract and retain customers. So I’m not sure which particular campaign you’re referring to. But we run multiple campaigns north of 20 in any one quarter. So, and we basically look at the return on investment we get for them and that’s not particularly new, I just think we’re getting better at it in terms of experimentation and learning, putting stuff into the market, putting out. But it’s not some, its no major change I would say other than we’re getting better at it. A little bit similar reply actually on wireless as well. So, again as we get more sophisticated in terms of [indiscernible] fighting by city level not even province level, then we decide whatever tactics we see fit in that market place. I mean Wind has been a competitor of ours for quite a long time, and I don’t think much has changed in 12 weeks in terms of anything structural in terms of what they’re doing. So, you may see more variation in what we’re doing by province simply because we’re doing, we’re trying out more things, but its not particularly I think, because Wind has done anything significant to the last 12 weeks. They continue to be a good competitor and a strong competitor and as simple as that.

Maher Yaghi

Yes. I was kind of more figuring out little bit down the road as they upgrade their network and become more aggressive probably. Do you see this as risk to your long-term outlook for ARPU increases or ARPA across the country when especially in Alberta and BC where you have very high ARPU levels?

Anthony Staffieri

Hard to say at the moment, I mean official its going to be a dog fight. But it’s just very hard to give you a concrete prediction about the future because you’re talking about competitor and I don’t know what their plans are. So I know what our plans are, and we’re pretty confident. But I don’t know what their plans are.

Maher Yaghi

Okay. Thank you very much.

Operator

Your next question comes from the line of Robert Peters with Credit Suisse. Please go ahead.

Robert Peters

Hi. Thanks for taking my question. Maybe just looking at the internet side of things, it’s good to see the continued ARPU growth. But I was just wondering, you mentioned the dynamic between subscribers upgrading their services on the Ignite packages versus kind of the standard price increase flowing through. Would you say the service upgrades are driving about two thirds of the ARPU growth or how should we think about the breakdown between the price increases and the kind of up-scaling of the packages?

Anthony Staffieri

I would say it’s, I would think about it as both. Certainly the ones coming in that are new to Rogers are coming in at the higher packages, and so you generally see for a number of different reasons coming in at a 100 plus is being generally the most popular entry point for new customers. Our existing customers were seeing good volume of up-speeding or moving up tiers. Not sure how to answer your question in terms of which one is contributing which. I’d probably put them, if your question is in terms of ARPU growth, how much of it is new versus existing. I’d probably put it in the category of existing up tier migration probably being a little bit more of the majority in the overall ARPU growth, just because of the size of the base.

Robert Peters

Perfect. And maybe the follow-up on that, once you get into the unlimited packages, so Ignite 100 unlimited. Are you seeing subscribers that are in that package even going further up the package more for speed or is there a little bit of a consumption based driving of kind of the switching of the packages?

Guy Laurence

No, the people -- as people discover the need for speed, so they start to move up. It’s all linked back to this point I was making about the number of connected devices in the house. The average be 11, it seems staggering. But if you actually count your own house already putting another million miles away. And so what happens is, there’s a lot of devices connected and that people want to consume internet in different rooms simultaneously. And that’s what drives to higher speeds. So the unlimited takes away the worry, but then the need to have multiple users in the use using the internet at the same time is then what drives them to go to the higher speeds. In the old days, I mean the whole family sat down and watched hockey night in Canada and it was an appointment of you and all the rest of it. Now sort of dad sat in the lounge by himself, and his kids are up in the bedrooms doing their stuff, and mom is doing something else and all the rest of it in my stereotypical family. And as a consequence, the demand on the network are very high and every -- no one wants to be the looser in that bandwidth fight within the household and therefore they need to be at the right speed if they’re going to handle that contention issue.

Robert Peters

Perfect. Thank you. And maybe just one quick question on TV. I know you had mentioned it’s very early days in the pick and pay, and I think your comments is very consistent in the sense that we’ve seen a lot of value in the current packages. But I was wondering, if you are seeing some customers look at the new packages; is there a specific type of customer that’s tending to look at this or is it just did you -- you’re kind of getting across the board, some people being interested and other people not?

Guy Laurence

[Indiscernible].

Robert Peters

Thank you.

Operator

Ladies and gentlemen, we have two more questions. The first of which will come from the line of David McFadgen with Cormark Securities. Please go ahead.

David McFadgen

Hi. Thank you. I have two questions on wireless. So in order to meet your guidance for the year, are you counting on the wireless EBITDA margin to be flat to up for the full-year? And secondly, we’ve seen two quarters of improvement on the churn number, and I was wondering if you have visibility so far into Q2 to expect that you could see some more improvement in Q2 on the churn?

Anthony Staffieri

David, on the churn number I’m going to pass on that in terms of providing any forward looking guidance, and I will say that we continue to invest well in our base, and so we expect that to continue to reap awards in terms of churn. And so we’ll see how that plays out for the rest of the year. And back to your question, in terms of overall wireless margin, I think your question, you fitted out a bit was, the expectation for wireless margins for the full year given to one, is there an expectation that for the full year it would be flat to higher. Was that your question, David?

David McFadgen

Yes. Yes, that’s the question.

Anthony Staffieri

Yes. I would put in the category of generally flat wireless margins. I mean there is still three quarters to go and so still a lot of volatility in the numbers of things that could happen, most significantly of which probably is the type of the devices that get launched in the fourth quarter. So we’ll see how that plays out.

David McFadgen

Okay. And if I could just squeeze one more in; could you sort of give us some commentary on what’s driving the strength in the Internet net apps, because they’re fairly strong this quarter.

Guy Laurence

Well, I think it’s just a superior network and the higher speeds and 4K and the need for speed and a number of connections in the house. So it’s all of those things. There’s no -- that is it. Simple as that, and people have woken up to the need for speed.

David McFadgen

Okay. Thank you.

Operator

And your final question will come from the line of Richard Choe with JPMorgan. Please go ahead.

Richard Choe

Great. Thank you. I just wanted to follow up on the Internet side. Should we think about the roll-out being a very steady 100,000 per week? And so, as we march through the year, you can kind of get more market share? And then in terms of the ARPU uplift -- I think following up on an earlier question, can you give us an idea of how many kind of dollars is on average Internet ARPU lift when you move from a normal to an IGNITE sub?

Guy Laurence

So on the first part of your question was about 1 gig; can you just repeat the questions?

Richard Choe

What the holds is going to be pretty steady, or is it back end loaded? Just help me [multiple speakers]?

Guy Laurence

Its 100,000 a week. My CTO is not allowed to go home on a Friday evening until he’s done a 100,000 houses subsidy lineup with him. So and that just runs out until we finish the rollout. So that will be steady as she goes. And the second part of your question was on ARPU, was what will happen when they go from non-IGNITE to IGNITE? [Multiple speakers]

Anthony Staffieri

Yes, we don’t quote it. I would say, just think about it in terms of tiers. As I said the, if you think about it 100 megs plus, your entry point for that is generally in the, between $85 to $95 range, and so compare that to the existing ARPU and that will give you a sense of the potential upside for ARPU growth.

Richard Choe

Great. Thank you.

Guy Laurence

Richard, you’re based in Boston or New York?

Richard Choe

New York.

Guy Laurence

Okay. I was trying to find sort of your space in Boston, just so I could go na-na-na-na-na, because we beat Boston twice with the Jays. It’s just such a shame no one [multiple speakers].

Richard Choe

[Indiscernible] anything to talk about.

Guy Laurence

All right.

Operator

And ladies and gentlemen, this concludes -- that concludes the Q&A session for today. And I will now turn the call back to Ms. Amy Schwalm for any closing remarks.

Amy Schwalm

Thanks everyone for joining the call, and we’ll end it here.

Guy Laurence

Thank you.

Operator

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating, and you may now disconnect your lines.

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