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Rogers Communications Inc (NYSE:RCI)
Q3 2019 Earnings Call
Oct 23, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for standing by. This is the conference operator. Welcome to the Rogers Communications, Inc. Third Quarter 2019 Results Conference Call. [Operator Instructions] Following the presentation, we will conduct a question-and-answer session. [Operator Instructions]

I would now like to turn the conference over to Paul Carpino with Rogers Communications. Please go ahead, Mr. Carpino.

Paul Carpino -- Vice President, Investor Relations

Great. Thank you Ariel. Good morning everyone and thank you for joining us today. Today I'm here with our President and Chief Executive Officer Joe Natale; our Chief Financial Officer, Tony Staffieri; and our Chief Technology and Information Officer, Jorge Fernandes.

Today's discussion will include estimates 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 2018 annual report regarding the various factors assumptions and risks that could cause our actual results to differ.

With that, let me turn the call over to Joe.

Joe Natale -- President and Chief Executive Officer

Thank you, Paul and good morning everyone. Today, I'm pleased to share our Q3 results and our progress on key strategic initiatives. Let me start with some overall comments and then Tony will take you through the results in more detail.

In wireless we completed our first full quarter after the fundamental shift to implement plans with unlimited data. I'm pleased to report that Internet adoption is three times the rate we expected, when we now have 1 million subscribers on these plans. Normalizing for the anticipated decline in overage revenue we're very pleased with the underlying performance of our wireless business. We are seeing growing ARPU and data usage, notable cost saving opportunities and significantly happier customers.

As we work through this transition over the next several quarters, we believe our wireless business will be well positioned for the future. Cable continue to post improved performance underpinned by strong residential and small business Internet results. Despite eight [Phonetic] years of fiber-to-the-home investments by our major competitor, we continue to increase our penetration and deliver healthy loading, while almost doubling our cash margins during a period of major technology and products.

Importantly during this period of strategic transition, heavy investments, we delivered a long-term capital allocation program that strikes a healthy balance between maintaining a strong balance sheet, investing consistently in our core networks and 5G spectrum and returning sustainable on notable levels of capital to shareholders. While we have adjusted our 2019 outlook to reflect this expected short term transition in wireless, we remain confident in the long-term strategic positioning of your company.

Let me offer my perspective on the move to Infinite and what we're seeing. Q3 was the beginning of our critical and necessary shift in the Canadian wireless industry. The launch of unlimited data is fundamentally changing how Canadians user their wireless services -- and how operators drive sustainable growth economics into the long-term.

As I said last quarter, we made these changes after an thorough and thoughtful analysis on where the industry is going; what matters most to our customers. A quarter later the supporting KPIs highlight these strategic benefits and the accelerated adoption of unlimited plans. As you may recall, we led this change for three important reasons. First and foremost to stimulate data growth. The approach to overage in Canada had seriously decelerated data growth rates. Canadians had become increasingly afraid to use data given the evolution of overage rates in our industry. On a comparative basis average data consumption have fallen to one-third the U.S. average and the bottom quartile of the most advanced global markets in the world.

Overall, this dynamic was both unsustainable and limiting to our future with 5G. Second, to drive a step change in the customer experience, and as a direct consequence reduce the cost to serve our customers. By eliminating bill shock, reducing friction and in many cases the tension between family members in the data share plan, we collect a simplicity dividend. If you make things clear, simple and fair customers will call less, have fewer billing disputes, they will spend less time when they do call and we will be more satisfied overall. Ultimately this drives their likelihood to recommend Rogers.

And third, to improve the economics of acquisition and retention. In 10 years handset cost have escalated from a few hundred dollars to cresting around CAD2,000 today. Last year alone, we spent CAD2.4 billion on smartphones with an all-time record subsidy of 40% or over CAD950 million. Our recent move to equipment financing helps drive affordability for consumers, while improving subsidy economics COA and COR for our business. Overall, the rationale is straightforward, stimulated use lower operating costs, lower phone subsidies while driving customer satisfaction and growing customer lifetime value.

Let me share some of the strong underlying metrics that we are seeing when we analyze our Infinite base. First 60% of customers are operating at a higher price plans and 40% are downgrading. The resulting recurring ARPU is up 1% to 2%. On average subscribers are using over 50% more data. Likelihood to recommend is roughly 30% higher. This represents an unprecedented lift in this very important metric. In the call center, we looked at the top core drivers around billing and overage, they're down 50%.

Online hardware upgrades are up 30% and as we limit and eventually sunset subsidy plans, the shift from device subsidies to device financing is expected to drive significant cost efficiencies. While the savings are modest this quarter given the competitive dynamic by one player in particular, we expect the market demand for lower monthly device costs will stimulate penetration of these plans particularly as subsidy levels reduce. Data overage fees currently represent roughly 5% of wireless service revenue. In the third quarter, our results were impacted by a CAD50 million and reduced overage fees given customer adoption of these new plants. By this time next year, we expect to eliminate overage revenue by over 80%, in parallel daily use is expected to grow, and so as a recurring ARPU.

By the second half of 2020, we expect to return to ARPU growth, reflecting a markedly faster transition than the unlimited experience south of the border. Those trying to draw a parallel to the U.S. market a few years ago, our entry price for unlimited plans was set at a significantly different point. And therefore, we believe we will return to overall growth more quickly. As Canada's largest wireless provider we chose to lead this change. We believe this move was inevitable and it was the right time before we ramp into a 5G world. These plans reflects balanced economics for the industry, excellent value and simplicity for our customers and they will drive meaningful data growth into the future.

In addition, for our Fido customers, we introduced data overage protection, which lets customers pause and purchase data when they reach their limit. While it's early days this new service has shown positive results with 260,000 customers on the new plans using 14% more data.

Let me share a few quick but important highlights on the broader customer service front. In our customer solution centre our multi-year investments are paying off. We've seen a 13% reduction in calls while supporting the major transition to Infinite and wireless and Ignite and cable, and maintaining solid service levels. Digital adoption is up 11% and growing. We announced plans to open a new customer centre in Kelowna the new centre is set to open next summer will hand a 1 million customer interactions each year. It will also inject 350 jobs into the local economy. We also announced an exclusive partnership with enjoy to introduce Rogers pro on the go. It's an innovative new service that lets Canadians order device online, have a delivered and setup within hours of ordering anywhere they want. This free service will launch in the GTA later this month and other major cities next year.

Our wireless network investment program to 5G ready LTE-advanced technology is paying off. We are pleased with the recent recognition from P3, the international leader and benchmarking networks. They awarded Rogers best in test for overall wireless customer experience. This ranking is based on robust third party drive tests that measure the real customer experience across voice, data and applications. Looking back at our progress this quarter and looking ahead of the short and long term, I'm confident, we have the right strategy, the right plan and the right priorities to lead and win for both our customers and our shareholders. Like to thank our entire team for their incredible dedication and commitment.

And with that, let me pass it over to Tony. Tony, over to you.

Tony Staffieri -- Chief Financial Officer

Thank you, Joe, and good morning everyone. Our Q3 results reflect the first full quarter of our strategic transition to our Infinite unlimited plans. So I'll start my remarks by outlining the impact of this transition to date on our financials. We want to be transparent in describing the moving pieces of this transition, so that you can assess the progress on our underlying fundamentals, and that is why we've disclosed the largest impact reflected in the approximately CAD50 million of overage revenue decline this quarter, as a result of the migrations to our unlimited plans.

As Joe outlined we're extremely pleased with the success to date of our Infinite plans and the implications for our key underlying customer value economics. However, as we highlighted, when we launched our Infinite plans, our results would be impacted in the short term, by the timing and reduction of overage fees that customers were previously incurring. The faster than expected adoption of these plans is resulting in a faster than expected decline in these overage revenues. As a result, rather than a transition and gradual decline in overage revenues occurring over a six to eight quarter time period, we now expect this transition to happen in as little as four to five quarters and have adjusted our 2019 full year outlook to reflect this dynamic.

Let me start by providing you with additional color on both the third quarter and on our unlimited plans. In terms of overall Wireless financials we reported service revenue that was down 2% year-on-year, as a result of the short-term impact of the overage revenue decline. Even though adoption of the value rich unlimited data plans continues to accelerate, the industry experienced a very competitive and dynamic market in Q3. For example, some players continue to offer heavier promotional discounting and hardware subsidies that in our view didn't balance the economics of the value rich unlimited plans. Additionally related promotional activity, particularly on out-of-line discounting further pressured our underlying revenue growth rate, although to a somewhat lower extent.

Looking forward, we expect our overage revenue to continue to decline over the next several quarters at rates similar to Q3 based on current uptake rates of these unlimited plans. By this time next year our dependency on overage revenue will be dramatically reduced and will likely represent less than 1% of our wireless service revenue. Wireless adjusted EBITDA grew 4% in the quarter, despite the flat revenue. When considering the declining overage revenue the margin growth reflects our continued cost efficiency improvements, including some related to the Infinite plans, which are already materializing.

Wireless margins remain strong at 49%, an expansion of 180 basis points from last year. We gain what we believe to be a healthy share of new subscribers in the quarter. Notwithstanding a heightened volume of switching in the market. As reflected in our heightened churn rate -- we delivered 103,000 postpaid net subscriber additions, along with 27,000 prepaid net additions. Our expectation is that churn will continue to be elevated for us and likely the industry for the next several quarters as the transition to unlimited plans continues.

Our Q3 blended ARPU declined 2% this quarter, again largely as a result of the overage revenue decline I mentioned. Excluding the near-term impact of overage revenue, ARPU would have been flat. We continue to expect similar levels of ARPU headwinds for four to five quarters as we ultimately transition the customer base to the higher unlimited data plan ARPUs.

Turning to Cable, we grew revenue by 1% this quarter and adjusted EBITDA up by 2%. Our Internet offering performed strongly and continues to be a key driver for our cable business. Internet revenue grew 7% this quarter, reflecting the movement of Internet customers to higher speed and usage tiers and a larger Internet subscriber base. We remain uniquely positioned to meet customer demand for faster speeds and higher data with our ability to offer Ignite Gigabit Internet across our entire cable footprint. In Q3, we reported 41,000 net subscriber additions -- net Internet subscriber additions, a 6,000 improvement compared to the prior year. This reflects the 17th consecutive quarter of increasing Internet penetration rates. In addition, Internet ARPU continue to grow year-over-year. Cable cash margins expanded to 21% and Cable capex intensity was again 29%. This year and it's consistent with the prior two -- and notably capital intensity this year is down a significant 720 basis points from the 36% at the end of 2018.

As reflected in these results, we continue to make good progress toward our stated goal of 20% to 22% capital -- Cable capital intensity and at least 25% cash margins by the end of 2021.

Moving to Media, revenue was lower by 1% year-over-year, largely as a result of the sale of our publishing business in the second quarter and lower revenue from the Toronto Blue Jays. This was partially offset by higher subscription and advertising revenue generated by our sports net properties. Excluding the impact of the sale of our publishing business, Media reported -- Media reported revenue would have increased by 2% this quarter. Media EBITDA was strong once again, up 78% driven by lower publishing costs and lower Toronto Blue Jays salaries.

Turning to our consolidated results, we delivered stable revenue from a year ago and solid adjusted EBITDA growth of 6%. We invested CAD657 million in capex for the quarter, which decreased 6% year-over-year. The decrease in capital expenditures was largely driven by our Cable business where we saw our initial set up investment for Ignite TV decline in the quarter. Capex intensity in Wireless was 12%. During the quarter we continued augmenting our existing LTE network with our Ericsson 4.5G technology investments, there are also 5G ready. Our commitment to generate healthy free cash flow and to return significant capital to shareholders remains strong even during this heightened investment cycle and launch of our Internet plans.

We generated free cash flow of CAD767 million this quarter, an increase of 22%. The notable increase this quarter was a result of higher adjusted EBITDA, along with capital efficiencies in Cable and lower cash taxes. We anticipate our cash tax rate to remain in the range of 6% adjusted EBITDA for fiscal 2019. We return cash to shareholders through dividend payments of CAD256 million and repurchased CAD93 million in Class B Non-Voting shares, bringing our total repurchases so far this year to just under CAD300 million. Impressively our total capital return to shareholders of CAD1.1 [Phonetic] in just the first nine months of this year is up CAD317 million or 43%.

Our debt leverage ratio at the end of Q3 was 2.8 times, down from the three times we reported at the end of the last quarter and I also remind you that this year's leverage ratio has a 0.2 increase as a result of the new lease accounting standard which credit agencies have previously taken into consideration. With a healthy business and strong free cash flow we expect to continue reducing our leverage over time, moving closer to 2.5 times in the future. However, given the current low interest rate environment, we expect to do so at a steady natural pace.

We had liquidity of CAD2.8 billion at the end of the quarter and have solid investment grade credit ratings with a stable outlook. Additionally, our balance sheet well positioned with long-term maturities and low interest rates on our outstanding debt. As you saw in our press release, we have updated our 2019 financial outlook originally provided in January to reflect the accelerated adoption of our Rogers Infinite plans. We expect total revenue growth for the year to be between negative 1% to positive 1%. Accordingly, our adjusted EBITDA growth is now targeted at 3% to 5% and our free cash flow growth target for the year is now anticipated to be in the CAD100 to CAD200 million range.

Capital expenditures are expected to be between CAD2.75 billion and CAD2.85 billion. These changes reflect the short-term impact on the business of the changes I described above, but allow us to be fundamentally stronger by giving Canadians unlimited data on Canada's number one network, as recognized by P3 best in test award, eliminating data of our overage fees to improve the customer experience, improving our cost structure, to reduce inbound calls, lowering our churn and driving more sustainable subsidies. Along the way we will provide additional transparency for you to monitor our progress.

With that, I'll ask the operator to open the lines for questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Simon Flannery of Morgan Stanley.

Simon Flannery -- Analyst -- Morgan Stanley

Great. Thank you very much. Good morning. So I wonder if you could just give us a little bit more color around the impact of the incentive plans. When you had second quarter earnings, you would obviously had a few weeks to see what was happening. And what sort of change during the quarter, I think the experience from the U.S. was that the people with the biggest overage move the quickest and then it's sort of settled down, but it sounds like you're saying uncertain your guidance implies about a 10% drop in EBITDA for Q4 that there will be more to come, that it's not going to really moderate for some time. So, any color you could give about what you've seen in the last month or two? That's really caused this change. And then any comments on the election, how we should think about some of the political commentary around cutting cellphone rates. Thanks.

Joe Natale -- President and Chief Executive Officer

Okay. One I will start, Tony and then you can pick it up on overall. So, Simon, in terms of some color around Infinite, we provided quite a list of insights, but let me add some color commentary around it. Q3 was the first really full quarter of the change. We expected somewhere in the neighborhood of 250,000 -- 300,000 migrations to Infinite, we got to 1 million, largely because customers solve the value and inherently wanted these plans. And you just look at sort of our gross loading for the quarter, it's up 5% year-over-year and a very strong gross loading performance on the whole.

If you look inside, you'll see a couple of things that we find very compelling. One is 60% of customers are upgrading to the unlimited plans, only 40% are downgrading. And as we mentioned, the underlying recurring monthly fee or ARPU is actually up 1% or 2%, so the overage -- the overage decline is what has been accelerated, just as we anticipated, is exactly in the same proportion that we anticipated. But the volume is far greater as a whole.

When we look inside that base, what do we see, we see a 50% reduction in the primary call drivers that we talked about, which is, bodes well for the future in terms of the cost reduction opportunity around propensity to call around, duration of calls everything we're seeing is lining up behind that very clearly. What we're also seeing is very strong early life cycle churn. I mean it's very hard to draw a complete timeline around churn of the Infinite base, given it's only been one quarter. But if you compare it to early life cycle churn of other new customers or the people who migrated in the past to our legacy plans, we're very pleased with the churn profile that we see from Infinite customers. I want to pause there and give Tony a chance, and I'll take it back on the election.

Tony Staffieri -- Chief Financial Officer

Simon, we had talked about, our overage revenue being just under 5% of the total service revenue. So we originally outline our expectation that decline of that revenue would take six to eight quarters. So what you're seeing is the same quantum, just compressed in terms of decline over what we now think four to five quarters. And as Joe said, it really relates to the volume of switch or to the new Infinite plans compared to our original expectations. While we reported Q2 results, so it's still early days in the launch of the plans and what we saw is a consistent cumulative acceleration of the adoption of these plans. So our comments are as we look to Q3, and the next several quarters, we're just taking that current run rate. And based on current volume trends, our expectation is, it will be about the same impact in Egypt in the subsequent quarters.

Joe Natale -- President and Chief Executive Officer

On the election front, I don't anticipate a lot of change or departure from what we've said in the past. Overall, first of all, Canada has some of the best networks in the world. I think it's really recognized by our government that we have some of the best networks in the world. The government is very supportive of making sure we maintain the thesis around investing in infrastructure, in Canada, especially given --kind of the population density and all the importance of making sure we connect Canadians.

And we're going to very much aligned on the topic of affordability, our moves to unlimited everything else that we've been talking about it, regarding the financing is very much aligned on that front. There is the potential of a new Ministry of Industry we're not sure, we're waiting for the cabinet to be announced. There is a new Deputy in charge of the industry portfolio. So we have an opportunity to sit down with people and just to work through and talk about how we've built such a great network capability in Canada and why perpetuating that capability into the future, especially around the digital economy in 5G is fundamentally, very important. So we're feeling good about things overall, on that front.

Simon Flannery -- Analyst -- Morgan Stanley

Okay. Thank you.

Paul Carpino -- Vice President, Investor Relations

Great. Thank you, Simon. Next question, Ariel.

Operator

Our next question comes from David Barden of Bank of America Merrill Lynch.

David Barden -- Bank of America Merrill Lynch -- Analyst

Hey guys, thanks for taking the questions. I guess, I wanted to follow up a little bit on Simon's question, Tony. Just in terms of the ARPU outlook is the messaging that we're kind of at the 66 level. And the net of the uptake of higher-end plans and the continuing pressure from overage will net out flat. And so 66 is kind of like the right zip code, as we think about into next year, when things start to grow again or is there incrementally more overage pressure than uptick pressure as we look into 4Q and 1Q? And then I guess the second question was on the lower capex guide. I think Tony, you mentioned something about the -- lower investment in Ignite. I think the plan for the year was to invest pretty aggressively. If you take advantage of the opportunities that Bell might be leaving on the table with the 50% of the footprint that doesn't have a fiber overbuilt. Has that plan changed? And if so, what's kind of going on with that? Thank you.

Tony Staffieri -- Chief Financial Officer

Okay. I'll start with the first one David in respective of ARPU. I remind you, there is always a bit of seasonality and each of the quarters with respect to ARPU. And so I'll make my comments with respect to growth rates rather than the absolute dollar ARPU that you were referring to. This quarter we had blended ARPU declines of minus 2%. And keep in mind when I talk ARPU I'm talking through IFRS ARPU. And as I said, the biggest impact if you were to compare it to private -- previous quarter is roughly 2 points on the overage revenue decline. We also saw a little bit of softness in our base as a result of repricing on some items and I made reference to add a line. And so with the launch of unlimited Infinite plans, one of our competitors launched more aggressive pricing on out-of-line and we match that in the marketplace.

And so that would be one of the more significant impacts that impacted our ARPU within the quarter. So as we look to the rest of the year, our expectation is that rate of decline would be about the same. As we get more volumes on the Infinite plans where they're underlying -- recurring monthly rate is growing at a rate of 1% to 2%, and we got some [Technical Issue] it will offset some of that natural decline. And so without getting too far ahead of ourselves, but as we think about the first part of next year, we see ourselves possibly moving to roughly flattish ARPU -- blended ARPU, still might be slightly negative, but improving over the first course of next year. And then of course, as we said, we get into the back half of next year and in particular, this time next year, having a substantial volume on these new Infinite plans, that uptake will overshadow what would be left in overage revenue. And we see ourselves returning to positive ARPU decline in the back half of next year.

And hopefully that answers your question on the first part. On the second part with respect to capex intensity on cable, one of the big things as we launch some of the new products around the Comcast set of portfolios, it started with the IP television product. There is also the adoption of our WiFi hub, which is the Xfinity platform and there is continues improvements on those and new products on the horizon, that we continue to invest capital in. And on the Ignite TV product, for example, we continue to inject some new apps including Amazon, our Sportsnet NOW app, as well as The Zone, to name a few. And so while we continue to invest in that type of enhancement to the product, the bulk of the fixed costs continue to come down. That's offset by a continued increase in the pace of migration.

To date, we have over 200,000 customers on the Ignite platform, this -- this month we are stop selling our legacy product. And so you'll see all new acquisitions move to the new Ignite platform and we will begin a campaign of accelerating the migration of customers from legacy to Ignite and that involves truck rolls, as well as some additional investment in CPE, notwithstanding that, we expect to contain that within the 29% capital intensity ratio, we have for this year. And as we look into next year and beyond we have a plan within Cable to continue to bring down capital intensity. And so it's really the cost efficiency that continues to offset the volume uptick that we expect during that migration process.

David Barden -- Bank of America Merrill Lynch -- Analyst

Great. Thanks guys.

Joe Natale -- President and Chief Executive Officer

Thank you.

Paul Carpino -- Vice President, Investor Relations

Thanks, Dave. Next question Ariel.

Operator

Our next question comes from Vince Valentini of TD Securities.

Vince Valentini -- TD Securities -- Analyst

Thanks very much. Two things, one, the move to equipment instalment plans, I know it hasn't gone quite as fast as you had hoped, but have you had any benefit from that in your numbers yet in Q3? And can you remind us even if you've seen that in your sort of run rates and volumes. How long it's going to take for any related cost benefits to flow through your numbers under IFRS?

And the second question is, I mean you seem very positive about the underlying trends on the move to Internet and unlimited plans and the data usage increases the cost savings and so forth. But obviously translated into lower results for this year because of the pace of migration. Can you answer this question, I mean without giving us hard numbers you would have had a plan for 2020 before that would have had some level of EBITDA growth in your mind. Would you now think the percentage growth in EBITDA in 2020 is higher than what your plan was three months ago, because the base is now lower and because of all the underlying positives from unlimited. Thanks.

Joe Natale -- President and Chief Executive Officer

All right. I'll take the first one, and Tony will follow-up on the second one. So, Vince, in terms of equipment instalment plans, we believe that is the right focus and structure for the industry. The impact in the quarter is modest. So I think we're just starting to see a change in a turn in that direction, it was exacerbated by one of our competitors taking a very aggressive stance with subsidies during the promotional period. And we're really trying to rearchitect the value proposition here for consumers to say here. Here is an opportunity to get unlimited data, get worry-free data and the like to stop some of the dilution from the premium brands that we've talked about and mixing in the flanker brands, stop some of the line stripping that was going on, in the premium brands, etc. And we think that the better model overall is to drive equipment financing and drive it hard. We think it creates better affordability, given the construct of the equipment financing for consumers.

In terms of financing the total cost, whether it's the tax costs, whether it's the potential recovery value at the end of term etc. So I think it'll take some time for that to shake out. And I think the readiness around systems and capabilities that hasn't been completely there yet overall. But it's a big number, it's a big number and we spent almost CAD1 billion last year on subsidy. And when cellphones were few hundred dollars, it wasn't as big rather than a cost. But now as they're cresting 2,000 and beyond, it's behooves us to take a look about how do we rearchitect or restructure that subsidy profile and approach. At the same time, make sure we create constructs that are affordable for customers as a whole, because it's just not the right way to drive the future of the business.

So we're going to see us really tried to drive discipline on this front, you're going to see us really build capabilities that continue to offer a feature sets around financing the customers will find attractive. And that's our view on it.

Tony Staffieri -- Chief Financial Officer

If I could pick up on that Vince, in answer to the other part of your question. I think you are getting, there is an expectation that we would see some [Technical Issue] this year on it. And the answer is absolutely, as Joe said, when we launch the plans, it was balanced set of economics on good value with unlimited plans, but a much lower subsidy. But that was complemented with very attractive terms of 24 to 36 months financing that kept their rate low for customers and would significantly reduce the almost CAD1 billion in subsidy on an annual basis that Joe talked about. That wouldn't evolve come into Q3 or Q4 this year, just under IFRS accounting, a couple of things happened indirectly, it really gets smoothed over a 24 month period. But notably hardware discounting or the subsidy that continued in the marketplace, just the way IFRS accounting works, a significant portion of that discount is offset against the ARPU. And so we provided a revenue and ARPU drag for us in the quarter and will in Q4 as well.

And so, when I made previous comments about the ARPU declines in the base, relative to our expectations that would be an additional factor for it. Notwithstanding that, we're confident that the industry, as Joe said, we're kind of realized the competitive dynamics or realized the need to get to this balance on subsidies and we'll have to see how that plays out, not only in Q4, but particularly as we head into the first quarter of next year. So we don't want to get too far ahead of ourselves to talk about how we think about EBITDA for next year. But coming back to the restated guidance for this year, you should think about it as largely attributable to two main factors, that we weren't expecting. One is the heightened overage revenues, a little bit of the additional out-of-line discounting that occur in Q3, that will impact us in Q4, combined with the heightened subsidies that impacts revenue because of the IFRS accounting, as I mentioned, as well as margins. Those are really the three big items that we weren't expecting that had a material impact.

Notwithstanding that, we continue to post good cost efficiency numbers, if you are to look at our wireless costs for this quarter, they're down 8% year-on-year. Year-to-date they are down 6%, that's fairly significant and that excludes subsidy in that number. If you look at our Cable side of the business we kept our operating costs flat, notwithstanding the migration that we've talked about to Ignite which carries considerable opex in terms of truck rolls and other related transition costs. But even with that year-to-date, cable costs are down, absolute 1% and then in our Media business this quarter, costs are down 15% year-on-year. Although large part of that is Blue Jays salaries, there are other operating back office costs within Media that continue to come down.

So I think what you see is an underlying business with good road map, we've talked about cost program delivering consistent improvements each quarter sequentially and year-on-year and you're seeing that, it just has that overage revenue comes down in the three factors that I talked about, it's really masking that underlying trend.

Paul Carpino -- Vice President, Investor Relations

Thank you, Vicne. Next question Ariel.

Operator

Our next question comes from Maher Yagi of Desjardins.

Maher Yaghi -- Desjardins Securities -- Analyst

Thanks for taking my question. So I want to go back to the comments you just made on guidance, Tony. So the delta on the revenue for the new guidance versus the previous guidance of CAD600 million and on EBITDA is CAD240 million. So you said in your MD&A that overage was about CAD60 [Phonetic] million of impact in the quarter. Assuming all of it, one straight to the bottom line -- I'm struggling to understand the reduction and your EBITDA guidance, because as you mentioned just now, your cost and operating in the Wireless business and the Cable business is down year-on-year. So what is causing the reduction in EBITDA beyond the overage here because it's assuming the overage impact in Q3 is also the same level or even higher. I still don't get the CAD240 million of EBITDA. And I have a follow-up question on ARPU.

Tony Staffieri -- Chief Financial Officer

Okay. Couple of things Maher. One is the reduction in EBITDA from previous guidance occurrence depending on whether you're CAD240 million sort of takes the mid point. And I think if you were to look at the first half of the year given the lower revenue, we're trending toward the lower end of guidance. If I take that 7% to the midpoint of the new guidance range of 4% you get roughly on CAD6 billion of annual EBITDA, CAD180 million versus your CAD240 million. But let's say, it's roughly CAD200 million to help you walk through. Think about it as the overage now CAD50 million this quarter. We're expecting about the same for next quarter. And so that's half of it. About CAD100 million we saw some additional discounting and you see that in our blended ARPU coming down. And so you can put that in the range of roughly CAD50 million of unexpected run rate impact for the back half of the year.

And then finally, as I said the subsidy piece of it, our expectation was with reduced subsidy in the market, that it would not only help ARPU because of the accounting that I talked about in reducing the offset to it, but also reduce the net subsidy cost and that was expected to be in the range of CAD50 million to a CAD100 million in the back half of the year. So -- really the three components that impacted us that we weren't expecting. As I said in my scripted comments, everything else continues to be on track in terms of the underlying, and it's really those three main components that bridge to the roughly CAD200 million or CAD240 million that you referenced.

Maher Yaghi -- Desjardins Securities -- Analyst

Okay. So -- and so why were you expecting a reduction in subsidy in the back half of the year, even before you launched the unlimited plans? What -- that's, it seems like that was a implied in your guidance, but what was the reason behind that assumption?

Joe Natale -- President and Chief Executive Officer

Let me help you with that. As we thought about where we were trending at midyear, we were already experiencing lower than expected revenue. We still have two-thirds of our business to go. And so our expectation was -- there were some things in revenue that we were expecting that would allow us to continue to hold our guidance on each of revenue, EBITDA and free cash flow. And so, as we reevaluated at mid-year what we thought the back half was going to look like vis-a-vis, the guidance ranges that we provided in January that was some of the new dynamics that we had factored in at that time.

Maher Yaghi -- Desjardins Securities -- Analyst

Okay. And on the ARPU, if I look at the impact of the CAD50 million, comes up to CAD1.55 on ARPU. And I, if I look at the year-on-year, it's 2.7% lower. So you have said in the past that your overage accounts for about 5% of your total ARPU. So on 1 million subs that transitioned on unlimited out of a total of 9.3 million, you lost half of the overage, it seems pretty high. So I'm trying to figure out what were to go from here?

Tony Staffieri -- Chief Financial Officer

What we'll try to do Maher is rather than walk you through that detailed math on this call, we'll certainly share with you, help you with the reconciliation and for the benefit of others analysts on the call. We'll do the same in terms of sharing that. But we are not quite at the halfway mark of reducing overage is the simple answer. And there are other items that were helps in terms of revenue in ARPU that offset that. So as I said, rather than doing that reconciliation now, we prefer to do it offline with you and we'll broadly distribute that.

Maher Yaghi -- Desjardins Securities -- Analyst

Okay. Thank you.

Paul Carpino -- Vice President, Investor Relations

Great. Thank you, Maher. Next question, Ariel?

Operator

Our -- comes from Drew McReynolds of RBC.

Drew McReynolds -- RBC Capital Markets -- Analyst

Yeah, thanks very much. Good morning. Just first Tony, thanks for all the additional granularity, helping us kind of sort through this. Two follow-ups for me. First maybe Joe on the migration rate dynamics you are pretty clear through September what was happening, just wondering from Rogers perspective how you view the accelerated migration and the ripple effects were going to recalibrate here today, and the benefits and pros and cons of that versus maybe controlling that migration rate in a more measured way.

And then second kind of back to kind of Vince's I guess attempt on 2020 I'll make the same attempt. Do you think the point B here at the other end has meaningfully or materially changed in terms of the economics of the business or some of the growth targets and just dollar targets overall that you think the business is heading to?

Joe Natale -- President and Chief Executive Officer

Thanks, Drew. For the questions. First of all on the accelerated migration, let me be very clear, we're very happy with the fact that the migration is happening more quickly. We knew there was going to be a J-curve in this migration. We said originally be somewhere in the range of six or eight quarters. The fact that it's happening within four or five quarters. And that the underlying assumptions around where the value drivers would come from or holding true is a good thing, is a good thing as a whole. We really strive to make sure that the approach that we've taken is clear and simple, you heard me talk about the simplicity dividend. You know what, we've asked customers to do is to migrate the entirety of their share plans over to Infinite. Therefore creating a very simple construct, as a result.

We are seeing customers adopt those very readily. And I think it's, I think it's a good thing because the underlying savings in terms of the cost to serve, we're seeing evidence of that already. And we do anticipate that there will be another factor around equipment subsidy that we've talked about. The sooner we get to those points in time when we migrated through the vast majority of our base, the more quickly, we can resume the type of growth that we believe is on the other end, including the ARPU economics.

When we look inside this base, just to repeat the point from earlier, we are seeing that an Infinite customer on average their recurring ARPU is up 1% or 2% after this migration dynamic. So more is better. With respect to the migration path versus a longer approach to this. So as I said, we expect in the latter half of next year to -- worked through the overage from roughly 5% today to somewhere in the 1% range at that point. And then we'll get the full benefit of the upside that I've just described servicing and really being sort of the new structure economically of a growth-oriented wireless business. That just wasn't sustainable to continue the overage.

Go back to my comments earlier to continue the overage regime that have been created. The overage was almost double, that -- in a couple of years ago, it was closer to 10%. So like it or not, we've been, we've been eating through that overage through a series of complicated structures around data top-ups and data bonuses and things of that nature, because overages is a big pain point for customers. Rather than continue to perpetuate that complexity which drives all kinds of hidden factory costs in our organization. We said no, let's bite the bullet, let's get a very simple construct and let's get to the simplicity dividend as quickly as we can. And we had a great path of instruction to look at. We saw exactly what happened in the U.S. We sat and watched every chapter of that movie. We saw it evolve clearly very specifically over time.

We saw what was done well -- wasn't done so well and we saw that come out the other side with growing ARPU, with cost improvements with a margin that was up 10 points, and vastly simpler business to manage and navigate and very different subsidy economics. Well, when you kind of look at that movie -- we say why can't that movie happen in Canada, we believe it can happen in Canada. Along the way, what we create, happier customers, higher likelihood to recommend and a greater overall healthy business, that sustainable well into the future. So we think the faster is better as opposed to finding artificial means to prop-up and slow down the effect, including mixing and matching of share plans where some members of the family might be unlimited and others are not unlimited. The complexity that drives in terms of a conversation would be immense. So we are very much committed to the simplicity of one simple size and approach that fits the entire family. That's where the real goal is in this. And with that, driving the right equipment financing structure around it, I think is exactly the direction, which we had. And then, the faster the better, frankly.

Tony Staffieri -- Chief Financial Officer

On the second part of your question Drew in terms of 2020 EBITDA, again I -- we don't want to make this a Guidance Call for 2020. But to be helpful and here the moving pieces as we think about 2020. We've talked about the overage decline -- overshadowing the underlying growth in wireless. And so we will likely see a year where the first half will continue to be pressured on revenue and it won't be till the second half of 2020, that we start to see net-net wireless revenue growth and that's true of ARPU as well.

On the cost side of it, you should expect us to continue to deliver the type of absolute cost reductions and efficiencies that you've seen and we're fairly confident about our cost program on that. And then the third piece of it in, that one is really going to be driven by market dynamics. We continue to believe that instalment financing is a win-win for us, the industry and consumers in many ways. So it will be -- we'll have to see how the market adopts those and at what pace, but that will yield significant savings for us in the industry in 2020, and so that will be a big determinant of the overall EBITDA profile for the year. But I think, I would characterize the year overall as slower start in the first half and a different growth profile in the second half. Where that nets out for the full year in many respects is less relevant and we think it's more of the quarterly direction of travel that's going to be important.

Drew McReynolds -- RBC Capital Markets -- Analyst

Yup. Understood. Thank you.

Paul Carpino -- Vice President, Investor Relations

Thanks Drew. Next question, Ariel.

Operator

Our next question comes from Jeff Fan of Scotiabank.

Jeffrey Fan -- Scotiabank -- Analyst

Thanks. Good morning. Lots of details have been given. So I won't go too far into the details, but question for Joe and Tony. You guys are obviously happy about the migration pace to Infinite. But at the same time lowering the outlook is probably was not probably part of that plan. So if you look back, is there anything that -- that you think you could have done would have done differently that would have made this transition, perhaps a little bit easier? Because I don't think anyone is debating whether this move is inevitable? Just I think both of those things kind of need to be reconciled. And then just lastly on the subsidies -- again, not to point too much to 2020 but competition kept subsidies in place and what is your assumption that all operators are going to go to EIP only plans at some point in the near and medium term in the industry?

Joe Natale -- President and Chief Executive Officer

Let me start and then Tony maybe you can talk about our views on subsidies. Jeff, thanks for the question. We spent a lot of time talking about the move to Infinite. And we did a lot of careful announces as I said. And we drew out for ourselves the J-curve and what it might look like. The thing we can thoroughly test was the rate at which consumers would rally and gravitate toward these plans. And that ended up being three times the rate that we had anticipated, which I think is a good thing. So to your point, we are positive around that, that move. Looking back, I wouldn't change anything, frankly. And we had a long discussion with our Board before we did this. We talked about the reasons for doing it and stood firm collectively on the ground. This is the right thing for consumers, the right thing for the industry. Let's go, do this.

And if it takes eight quarters, great if it takes four quarters, great. We'll just figure out as we go, just the pace at which is going to happen. I think everything else that we anticipated is coming in, largely in line with what we thought. The pace is very hard to gauge, despite the fact that we did a bunch of focus groups and we talked to customers and we saw initial great enthusiasm, it's really hard to figure out what is that base. Would we have liked to have a better view on what that might have looked like, so we could have been had -- that it wouldn't -- we wouldn't be surprised by three times the pace? Yeah, but like, at the end of the day it's a right direction, the right move and we think that when the change of thing overall, frankly.

Tony Staffieri -- Chief Financial Officer

On the second part of your question, Jeff. When we launched this, we thought, when we launched the Infinite unlimited plans, we also launched the instalment plans. But we kept in place the legacy subsidy model and it's less about -- the EBITDA savings is less about whether its instalment plan or the subsidy model which bundled together, the service with the cost of the phone. But it's more about the inherent discount that's provided on the base. And so back in July what we did say is we were going to keep the subsidy plans in place to help consumers understand the transition. We very much like the simplicity and appeal of the phone. And as we said it was a great value in terms of connectivity with the unlimited plans. And the device was very simple, it's the cost of the device over the term you want to the customer wants to finance it.

And so we thought that simplicity had terrific appeal. But we kept in place the subsidy ones for those customers that weren't quite sure yet. And we did them both at the same economics, so they were much reduced subsidy. So in the past, on average, as you would know, Jeff, the average subsidy would sit in the CAD400 to CAD500 range previously, in terms of what was the pure discount on hardware provided to the customer for entering into a two year contract. We reduced that substantially. When we launched our plans in July, in both the instalment plan as well as on the subsidy.

Our point is that the market continue to offer subsidies throughout Q3, largely in the CAD400 plus range. And in order to compete we match that. We've seen that those numbers have come down, post the quarter end. And so it's difficult to predict where the market is going to go in Q4. And as I said, particularly into Q1, our expectation is that, as you head into the New Year, we will move and we think it's the right move, to move to all instalment plan. But if there continues to be subsidy in the marketplace that some customers want, as we see our competitors continue to offer it. Then we'll do the right thing and match. Of course, but we think the move to instalment is the right plan and it's taking a little bit longer than we expected.

Jeffrey Fan -- Scotiabank -- Analyst

Great. Thanks for the color.

Paul Carpino -- Vice President, Investor Relations

Great. Thanks, Jeff. Next question, Ariel.

Operator

Our next question comes from Tim Casey of BMO.

Tim Casey -- BMO Capital Markets -- Analyst

Thanks. Two from me. Tony or Joe, could you talk a little bit about what, how we should think about the inherent cost reductions that come out of this migration? In other words, do we need to get to a point where you've bled off all the overage sort of the end of 2020. Before you see -- before we'll see a marked reduction in costs associated with the call centres and whatnot now. In other words, when will the simplicity dividend come through in the numbers specific to the plans?

And second, just to talk about wireline for a second. Tony, you mentioned, you were going to invest in an acceleration plan -- and you're no longer selling the legacy plants, but you're going to try and accelerate the migration. How should we think about that in terms of financials? Is that -- are you going to be able to do that with your current cost base or is there another transitional sort of one-time costs that you're setting us up for there? Thanks.

Joe Natale -- President and Chief Executive Officer

Well, I'll take the first one, and Tony grab the second one. Tim in terms of the pace of the cost improvements, think of it this way, I think this quarter, we made an investment -- in speaking to 1 million customers around Infinite plans or supporting them through the transition. Typical number of price plan changes in the quarter may have been one-sixth or one-seventh for that number.

And therefore, there was a specific associated cost with helping customers to make this transition. What we're seeing is from the customers that adopted right away, what their behavioral patterns are around calling and interacting. And their early churn behavior as a whole. So think of it as we get through the bulk of the transition, and as we come out sort of the other side in terms of the rate in which it's happening, the simplicity dividend will overtake the investment effort required to make the transition happen, I mean, I got a calculus professor, it is sort of that by the way we -- we're going to get through and I think we'll start to really see it manifests itself more clearly in the latter half of next year as Tony was describing. But in the meanwhile, you count on the fact that we'll be looking at all the specific details, to make sure that the direction of travel, all of those key metrics is going in the right direction. And what we're seeing right now is, it's exactly that we're seeing that direction of travel.

So, bear in mind that we talked earlier that we saw a 13% reduction in calls this quarter, right, as a whole as a business, 30% reduction is significant. That's after taking into account the efforts required to transition 1 million Infinite customers, and the efforts required to transition of another 40% of the Ignite customers, which are not insignificant efforts in terms of the customer handholding required and the digital adoption going up 11%. So we'll continue to have broader macro plans that will deliver the cost savings that Tony quoted a few minutes ago. While we're looking specifically at this migration path to make sure that the benefits are materializing, which they are.

Tony Staffieri -- Chief Financial Officer

And the second part of your question, Tim, related to the Ignite migrations. The migrations carry -- both capex and opex as you would expect. And so, think about our cable capex we've talked about being on a trend to continue to lower it and our expectation is, notwithstanding the migrations, that we're expecting. We will continue to improve our Cable capital intensity into next year, from the 29% that we're seeing this year. On the opex side, there are some initial, what I would call upfront costs as you would expect in terms of heightened training for technicians etc., that fall in the range of opex, rather than being capitalized. And so for a couple of quarters, you may see our Cable margins pressured a little bit, in terms of the net between the growing Internet revenue and some of these investments.

Too early to call out now. Much like Infinite, the pace of these migrations is still customer-dependent. And so it will depend on the pacing of that. So, you may see some of that pressuring on the cost side for Cable, but -- we don't expected on a net basis to be significant.

Tim Casey -- BMO Capital Markets -- Analyst

Thank you.

Paul Carpino -- Vice President, Investor Relations

Okay. Thanks, Tim. Our next question, Ariel.

Operator

Our next question comes from Richard Choe of J.P. Morgan.

Richard Choe -- J.P. Morgan -- Analyst

Hi. Just wanted to follow up a little bit on the plans. Given the popularity and the simplicity of them. Is there any way that we might see these plans expanded beyond the current? I guess base, that's being targeted?

Joe Natale -- President and Chief Executive Officer

Richard, these plans are very much focused on the Rogers brand. A brand that is the premium offering in the marketplace that has a share construct around it, that is a brand that has a number of other service features and metrics, including the one we just launched, we just launched Pro On-the-Go, where someone will come to your home or to your office and get you setup kind of a retail store, on the go approach. So it's really we're focused on that brand. The Fido brand is focus more at a lower price point, digital first type brand with capped plans and Data Overage Protection instituted and organized by the customer. And we think that is doing very well. And we look, even in the midst of Q3 and everything that happened with the change to Infinite, the Fido brand performed very well. So we think -- one thing we've managed to achieve with this is much clear and crisper brand differentiation between the two. And our goal is to create a margin profile on Rogers or Fido, that is roughly the same.

Again, one is a premium brand. The other is aimed at the Smart Shopper, and therefore we'll be largely supported by a digital set of service and tools. And if we can get to that place we become in some ways in different to the nature of the loading and where it comes from. And that's very much what we're focused on doing next year for the Fido brand and as well, as we perpetuate the move to Infinite.

Richard Choe -- J.P. Morgan -- Analyst

And then in terms of the margin and there is a lot of moving parts given the overage and some of the subsidy and promotions. But in going through the migration or transition -- and then the transition with the handset financing, it seems like the second half of next year could see a real uplift in wireless margins, is that fair?

Tony Staffieri -- Chief Financial Officer

Richard we entered the shift on with a view that this was an opportunity to expand margins in our wireless business. As we've talked about, there is a few moving pieces, the inherent subsidy is certainly a big part of that. But as we said [Technical Issue] was to come out the other end, with improved margins.

Richard Choe -- J.P. Morgan -- Analyst

Okay. Thank you.

Paul Carpino -- Vice President, Investor Relations

Great. Thanks, Richard. Next question, Ariel.

Operator

Our next question comes from Aravinda Galappatthige of Canaccord.

Aravinda Galappatthige -- Canaccord Genuity -- Analyst

Good morning. Thanks for taking my question. I wanted to focus in on a little bit on this on this 1 million cohort of subs that have taken out -- the unlimited plan. I know, Joe, you mentioned that the underlying ARPU growth is around 1% to 2%. I'm trying to get a sense of what this cohort would have looked like prior to the migration? Are they -- would they that 1% to 2% comments suggest that they would even previously somewhat higher priced subscribers that kind of moved up a little bit to unlimited? But then of course there can be a mix as well. What I'm really curious about is the ability about CAD75 unlimited plan to pull up subscribers who could have been CAD60 or CAD65 attracted by sort of the unlimited features. Could you give us a sense of whether you're seeing sort of a cohort and stuff or segment of those million that were previously in that bucket, that you've kind of pulling up more materially?

Joe Natale -- President and Chief Executive Officer

Sure Aravinda. So 40% of the 1 million downgraded in terms of what they were spending on a monthly basis, and 60% upgraded. So 60% were spending less than the CAD75 price point. And there is a distribution there that ranges across a wide spectrum. So it wasn't just someone that was spending CAD70, it was a wide distribution and won't give the details because it's sensitive. But, so 60% upgrading, 40% downgrading is a very key metric. And the result and economics are strong. As well we're seeing quite a healthy number of subscribers opting for the higher plans. The plans that are pegged at 95 to 120, which is great. Which says, that the consumers are looking for worry-free and looking to share the unlimited plans as a whole and looking for simplicity in the construct. We did two things that were very important. One is, we allowed our base to migrate to these plans, out of the gate.

We felt it was important -- that in the spirit of driving the simplicity dividend, we had to make it available to the base. And the second thing we did is that we drove simplicity around the structure where everybody in the plan needed to be on unlimited. Those two things created this 60-40 dynamic, which I think is a very healthy dynamic. And that's why I know you're seeing that 1% to 2% ARPU increase. And we think the economics are working from that perspective.

Aravinda Galappatthige -- Canaccord Genuity -- Analyst

Great. Thank you.

Paul Carpino -- Vice President, Investor Relations

Okay. Thank you, Aravinda. Next question please?

Operator

Our next question comes from Adam Ilkowitz of Citi.

Adam Ilkowitz -- Citigroup -- Analyst

Hi, good morning. Thanks for taking my question. I wanted to understand, into the fourth quarter, on the wireless competitive landscape. There has been some recent pricing changes in the next couple of days, actually, from one of your competitors, how that is important and what you're thinking about the plans? And then on Cable, I'm kind of intrigued by the ARPU changes you're seeing. Most of what we expect is ARPU flexibility on the Internet side, but it seems like your video ARPUs are rising, much faster than your Internet ARPUs which are rising on 2%, I think. Can you kind of go through how the pricing structure is working in Cable and what's kind of driving that dynamic?

Joe Natale -- President and Chief Executive Officer

Sure. I take the first one, Tony will talk to the ARPU commentary. What we're seeing in Q4, so far is a couple of things. One is subsidy overall in the marketplace has come down substantially, we think that's good, in terms of the competitive dynamic. We have seen one of the competitors raise the entry point -- raise the entry point to CAD85 for unlimited. We don't think that drives the right dynamic as a whole, I think it creates too much complexity around. As I said earlier, mixing and matching subscribers are going to share plan overall. I'm not going to comment exactly in terms of what we're going to do in terms of pricing move, that's again competitively sensitive. But we think we pick the right price point at CAD75, and we think it's driving the right mix of upgraders and downgraders and is driving the simplicity that we were after overall. And I think the discipline around simplicity and the discipline around subsidy are the magic ingredients here. And we're committed to driving disciplined in both those areas because we think that's how to rearchitect the economic structure that we've been professing.

Tony Staffieri -- Chief Financial Officer

In the second part of your question, and if I understood it right, it's really reconciling the ARPU growth between Internet and the video piece of it. I would say on the Internet side we're pleased that we continue to see growth. But the growth on Internet ARPU continues somewhat to be dampened by the competitive offers that are out there, that continue to be beyond three-month period. And so -- and as we said before, we'll continue to match on those as needed to win in the marketplace. We do it first and foremost on product superiority, but where we need to, we will match on price and you're seeing that dampen some of the Internet ARPU.

On the video side, you're really seeing the strength of the product through. And so as we see customers migrate from legacy to Ignite TV or new customers coming in on Ignite that's accretive to us on an ARPU basis. Ignite is sold largely almost entirely as a bundle with the Internet. So when you look at the two products, we continue to see CAD10 to CAD12 ARPU increase on a household that converts from legacy to the Ignite platform. And so it really speaks to the premium nature of the platform. And for the premium segment of the video viewer that's willing to pay for that functionality.

Now having said that, there is admittedly a bit of an allocation that happens between Internet and TV, but we try to stay true to that based on relative market prices between the two. And so they are a fairly accurate reflection of market dynamics in each of them.

Adam Ilkowitz -- Citigroup -- Analyst

Thanks. And maybe following up to Joe's answer, I noticed that upgrade rates on the equipment side -- inside wireless continues to fall. And your gross adds have been about flat, so are you seeing any change in the mix of customers taking BYOD as a result, and is that having a negative impact on ARPUs, as well?

Joe Natale -- President and Chief Executive Officer

Yeah. Growth is actually up 5%, Adam. So we've seen a great -- very strong growth performance and gross loading. I think it's a combination of our distribution strength. And the way we position the merchandised Infinite and the simplicity of it coming home to attract customers to say that's -- that makes a lot of sense, we're seeing the growth strength as a result of that. Sorry, I forgot about the second part of the question. Was...

Adam Ilkowitz -- Citigroup -- Analyst

Just if you're seeing a greater mix of BYOD customers pressuring ARPU as well?

Joe Natale -- President and Chief Executive Officer

No. The mix has been relatively stable overall. We've seen greater growth overall in terms of out-of-line and out-of-line retention and out-of-line growth as a whole. We talked about the out-of-line discounting that happened in the quarter. And that certainly had an impact because out-of-line discounting went from CAD5 to CAD15, so which we think is aggressive overall. But now, we haven't seen any change in that mix.

Adam Ilkowitz -- Citigroup -- Analyst

Thank you.

Paul Carpino -- Vice President, Investor Relations

Great. Thanks Adam. Next question, Ariel.

Operator

Our next question comes from David McFadgen of Cormark Securities.

David McFadgen -- Cormark Securities -- Analyst

Hi, thanks for taking my question. Two questions. So just looking at wireless, you say that about a year from now you expect the overage to be only 1% as opposed to say 5%. I was just wondering, can you give us an idea approximately what percentage of the sub-base, you would expect to convert unlimited to get to that point? And then secondly, when I look at your wireless operating expenses, as you noted, they were down 8% in the quarter, and I was just wondering how much of that [Technical Issue] is reduced call volumes, I guess, largely from migrating people over to unlimited. Thanks.

Tony Staffieri -- Chief Financial Officer

David, I'll take both of them. In terms of the second part of your question, think about our opex really coming through a few areas. Certainly, call centre is one of the big ones that we've seen call volumes come down, the digital adoption is up 30% year-on-year. So we're really pleased with that transition. As we said in our scripted comments, we're already starting to see some of the Infinite benefits come through on the call centre in terms of material reductions and time spent on the call. But also once the customer moves to these plans a material reduction in the number of callbacks we get, as customer second-guess their plan, it's the simplicity of these plans that really avoids that second call.

And then also importantly, the reduction in churn that entails for those customers that moved to the plan. And while it's early days and it's only four months. If you look at cohort to cohort of previous versus new, there is substantial reduction in that churn piece of it. The second piece of it continues to be what we would call back office efficiencies and -- the digital adoption certainly helps drive some of that simplicity is certainly a piece of it. But continuing to incorporate things like AI into some of our back office machinery is certainly helping. So, those are sort of be the big buckets as you would expect. And then David, the first part of your question, just repeat that.

David McFadgen -- Cormark Securities -- Analyst

Sure. I was just wondering what percentage of your postpaid sub-base would expect to be on unlimited to get you down to say 1% of your service revenue is still on overage?

Tony Staffieri -- Chief Financial Officer

So let me answer it this way. For competitive reasons, we just want to be careful in anything that allows our competitor to understand how many Fido customers we have versus Rogers. So we're very sensitive about that for obvious reasons. And so what we can say is by this time next year, we expect the vast majority of our Rogers customers to be on the Infinite plans, and maybe we just leave it at that.

David McFadgen -- Cormark Securities -- Analyst

Okay. All right. Thank you.

Paul Carpino -- Vice President, Investor Relations

Next question, Ariel?

Operator

This concludes the question-and-answer session. I'd like to turn the conference back over to Mr. Carpino for any closing remarks.

Paul Carpino -- Vice President, Investor Relations

Great. Thank you everyone for sitting in on the call today, we will be available for additional calls later today. Thanks for your time.

Operator

[Operator Closing Remarks]

Duration: 79 minutes

Call participants:

Paul Carpino -- Vice President, Investor Relations

Joe Natale -- President and Chief Executive Officer

Tony Staffieri -- Chief Financial Officer

Simon Flannery -- Analyst -- Morgan Stanley

David Barden -- Bank of America Merrill Lynch -- Analyst

Vince Valentini -- TD Securities -- Analyst

Maher Yaghi -- Desjardins Securities -- Analyst

Drew McReynolds -- RBC Capital Markets -- Analyst

Jeffrey Fan -- Scotiabank -- Analyst

Tim Casey -- BMO Capital Markets -- Analyst

Richard Choe -- J.P. Morgan -- Analyst

Aravinda Galappatthige -- Canaccord Genuity -- Analyst

Adam Ilkowitz -- Citigroup -- Analyst

David McFadgen -- Cormark Securities -- Analyst

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