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Shaw Communications Inc (NYSE:SJR)
Q4 2019 Earnings Call
Oct 25, 2019, 9:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to Shaw Communications Fourth Quarter 2019 Conference Call and Webcast. Today's call will be hosted by Mr. Brad Shaw, CEO of Shaw Communications. [Operator Instructions] Following the presentation, there will be a question-and-answer session. [Operator Instructions]

Before we begin, management would like to remind listeners that comments made during today's call will include forward-looking information and there are risks that actual results could differ materially. Please refer to the Company's publicly filed documents for more details on assumptions and risks.

Mr. Shaw, I will now turn the call over to you.

Bradley Shaw -- Chief Executive Officer

Thank you, operator and good morning, everyone. With me today, are members of our senior management team, including Jay Mehr, Trevor English and Paul McAleese.

Our strategy in 2019 was clear. We were focused on growing wireless and broadband customers, improving execution in delivering stable wireline results, as well as managing through a critical year in respect to VDP departures. The industry shift to unlimited plan did not impede our ability to grow our wireless customer base. During the all-important back-to-school season, we delivered the best quarterlies to describe the results in the Company history with approximately 91,000 customers added into fourth quarter.

Our success is attracting and growing subscriber base is a product of our innovation, our improving and expanding network, and our effective advertising and messaging to consumers. In July, we continue to expand our service offering with the launch of the Big Gig Unlimited and Absolute Zero plans anchored around device pricing as our advantage. The results of this strategy have been positive as not only did we achieve our new subscriber record in the quarter, approximately 30% of all postpaid activations in the month of August were on a CAD75 or higher service plan. Due to the success in our subscriber growth, which included postpaid additions of 280,000 in the year, our wireless business surpassed CAD1 billion in annual revenues in fiscal 2019. We delivered strong service revenue growth of 24% and our wireless operating margin improved to approximately 20%, both of which supported significant EBITDA growth of 45% to over CAD200 million .

The wireless network team has done an incredible job as we continue to strengthen and expand the network, and enhanced network experience is a key driver of the material churn reduction that Freedom delivered in FY '19. We are approximately 70% complete with our 700 megahertz spectrum deployment in the western markets, and this will continue to roll out as part of FY '20 plan. In addition, we launched Freedom Mobile in 19 new communities, the majority of which happened in Q4, and we now have wireless service available to over 18 million Canadians.

In wireline, we grew broadband subscribers throughout FY '19, including over 11,000 in the fourth quarter. We exceeded our targets with respect to self-install, which was above 45% of total activations in the quarter, and launched Shaw BlueCurve regaining our position as a technology leader.

Beginning in March, we launched our IPTV service, which is now available to approximately 70% of our video footprint. This is a key transition of our legacy video platform that supports our digital transformation and lowers our cost to serve customers.

Our business division delivered another year of strong revenue growth, fueled by additional product launches, including gigabyte Internet speeds and the continued success of our SmartSuite products with small and medium business customers. In FY '19, Shaw business was also successful in winning some key enterprise accounts, which is attributable to the strength of our product offerings, network and our focus on this segment.

Our strong operational and financial results were accomplished, while also managing through the significant change in our business view, our digital transformation, where we ended the year with approximately 70% of our VDP program complete. As a result of our focus on improving execution and delivering VDP savings, our wireline margin improved 90 basis points to over 45% in FY '19.

We believe we are taking the right steps to grow and transform our business to enhance our customer experience and improve our day-to-day operations for employees. This focus is driving significant operating and capital efficiencies and in FY '19, we delivered adjusted free cash flow of CAD570 million. This is a remarkable 90% increase over FY '18, when removing the impact of the Corus dividends. Both the asset realignment and the internal transformation in our business over the last several years, has positioned us well and we are entering a key inflection point with respect to our free cash flow generation. This is evident in our F '20 free cash flow expectation of approximately CAD700 million, enabling us to implement some enhanced capital return initiatives, which I will now turn it over to Trevor to discuss along with our FY '19 results and FY '20 guidance.

Trevor English -- Executive Vice President, Chief Financial & Corporate Development Officer

Thank you, Brad and good morning everyone as Brad articulated, we had a busy and successful year, while making significant progress on several fronts. Full-year consolidated revenue increased 3% to CAD5.35 billion and EBITDA of CAD2.16 billion, grew 5% year-over-year. However, adjusting for both the CAD15 million one-time IP licensing payment in Q3, as well as a CAD10 million charge related to CRTC regulatory matters in the quarter, our adjusted FY '19 EBITDA increased 6.3% over FY '18, which met our commitments and guidance.

Growth in FY '19 was driven by a combination of continued strength in the wireless business, stable wireline results, and the delivery of CAD135 million of total operating and capital savings under our VDP program. With lower capital requirements, particularly in our wireless -- wireline business, we delivered free cash flow of CAD545 million or approximately CAD570 million when considering the one-time impacts previously mentioned. This is a significant improvement over recent years, which starts that we got substantial capital to improve the wireless experience for our customers and to support the wireline network to deliver faster speeds and new technologies.

Our wireline network is stronger than ever, with record low congestion and is supplemented by state-of-the-art customer premise equipment that both improve the customer experience and reduces our overall cost to serve. As we enter F '20, our strategy remains centered around wireless, broadband and business as the growth drivers and a relentless focus on delivering efficiencies through a more agile operating model.

We were pleased to introduce FY '20 guidance, including EBITDA growth that is expected to range between 11% and 12% versus FY '19 recorded results. Our guidance reflects the adoption of IFRS 16, which for us commenced on September 1. We will apply the new accounting standard on a prospective basis, and therefore we will not be restating FY' 19 results. However, we have some impact from IFRS 16 on fiscal '19 is approximately CAD155 million of which 55% is attributable to wireline and 45% to the wireless.

When moving the accounting impact, EBITDA growth in F '20 is expected to range between 4% and 5%, capital investments are expected to be CAD1.1 billion, and free cash flow is expected to approximate CAD700 million. Please note that both capex and free cash flow are not impacted by the IFRS 16 accounting policy change.

Through our VDP program, we expect to deliver a total of CAD200 million in savings or an incremental CAD65 million over F '19, with the majority of the incremental savings this year arriving to reduce capital expenditures. All VDP related efficiencies are embedded within our F '20 guidance and we remain confident in our ability to manage through the remaining departures of approximately 850 employees.

We believe that the FY '20 marks a significant inflection point and the strengthening of free cash flow profile is concrete evidence that our asset realignment and evolution of our operating model are both yielding positive and meaningful results that are flowing to the bottom line. As we've gone through a significant transformation over the last several years, we've maintained financial strength and flexibility throughout. At the end of FY '19, our leverage ratio stood at 1.9 times and this is -- and is the lowest among North American peers.

On October 1, we repaid CAD1 billion into the quarter of maturing notes from balance fee costs, which of course, had no impact on our leverage metrics.

Considering our sound business fundamentals, strategy and focus on execution going forward, current leverage, and strengthening free cash flow profile, we are pleased to announce some enhancements with respect to our capital return initiatives. Subject to TSX approval, we will implement an NCIB program that purchase up to approximately 25 million Class B fixed shares, which represents 5% of all issued and outstanding Class B shares.

Through recent years, where we made significant investments to drive our growth -- our long-term growth strategy, we maintained a healthy dividend. And we believe that an NCIB program is a flexible and efficient alternative to return additional capital to shareholders. With that [Indecipherable] free cash flow expected to be in excess of our total dividend, we also plan to satisfy our share delivery obligations under our DRIP program by purchasing Class B shares in the open market, thus avoiding additional future equity dilution and creating new synergies with the contemplated NCIB program.

In addition to this change, we also announced that we are eliminating the DRIP discount, which is currently at 2% and we expect this will lead to a significant reduction in DRIP participation. We remain committed to long-term dividend growth and are confident in our ability to generate sustainable free cash flow. However, we believe that the enhanced capital allocation initiatives announced this morning, provide us with a more balanced and flexible approach to return additional capital to shareholders.

I'll now turn it back to Brad, before we open the line for questions.

Bradley Shaw -- Chief Executive Officer

Thank you. Trevor, I am very proud to say that we have built our Company on the foundation of being a strong facilities-based based service provider. Just earlier this week, Ookla released the latest Canadian speed test report where Shaw ranks as the fastest ISP in all the cities listed within our footprint. In a separate monthly index compiled by Ookla, Canada ranged 11th the world for download speeds. Results like this speak to Canada's position as a technology leader, creating consumer choice and effectively sustainable competition, while providing employment and advancing infrastructure and possibilities in our communities.

Facilities-based competition from Shaw and Freedom is working and will continue to work for Canada. As an institute [Phonetic] we are all expanding and improving our networks. Consumers want more from their providers, not unless. We can offer these services and introduce new ones, because we have invested significantly in the breadth and quality of our networks on which these services so heavily rely upon.

The recent regulatory environment creates unnecessary uncertainty that has the potential to do more harm over the long term. If company can no longer have the opportunity to earn an appropriate return, they will change their investment profile, and therefore, innovation and services and technologies such as 5G, Internet of Things and the fundamentals of artificial intelligence will diminish along with the service levels that Canadians have been accustomed to.

Canada requires strong facilities-based investment to compete on a global stage. Since the announcement of the wireless MVNO hearings and the reduced TPIA rates, we have already altered our plans with respect to launching new higher-speed Internet tiers and additional wireless expansion beyond our current footprint. Throughout the regulatory process, we are hopeful that the government recognizes the critical role that facilities-based companies play and their ability to usher in new technologies and deliver better and faster services for all Canadians. Despite the recent regulatory uncertainty, we couldn't be more pleased with our strategy and execution to the entire Shaw team. The progress we have made over the past number of years is absolutely remarkable. And it could not have been with -- done without you. We have challenged each and every one of you in your day-to-day roles and responses have been overwhelmingly positive. Let's continue to build on our success and carry this great momentum in F '20.

Thank you, operator, we'll now open up for questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session [Operator Instructions] First question comes from Vince Valentini of TD Securities.

Vince Valentini -- TD Securities Inc. -- Analyst

Thanks very much. First off, can you just clarify some -- Trevor, the CAD10 million charge for the CRTC decision, that should be a hit to revenue, I believe, in your consumer division or did you just bucket it as an expense?

Trevor English -- Executive Vice President, Chief Financial & Corporate Development Officer

No, it's an impact to revenue as well. It's actually split between consumer and business a bit, and I -- just to be clear, Vince, it's about CAD6.5 million or so in revenue. EBITDA, the results were another regulatory provision that we took as well to aggregate to [Indecipherable]. Really it does impact revenue as well.

Vince Valentini -- TD Securities Inc. -- Analyst

Thank you. On the free cash flow guidance, congrats CAD700 million is a great target to go toward. Can you just clarify a couple of things for us? So you will save about CAD70 million in interest costs from that bond you just paid off with cash. Do you -- did your guidance in -- add that you will refinance with some longer-term debt and incur other interest costs to replace some of that CAD70 million or is that CAD70 million expected to flow through?

Second, can you just let us on -- along restructuring costs and contract assets? Is there anything that we should expect to be materially different in those two lines in 2020 versus 2019?

Trevor English -- Executive Vice President, Chief Financial & Corporate Development Officer

Yeah, the information shows that it's the full CAD70 million and we do expect some financing in the year. So I don't -- there is not a CAD70 million decline in interest to get -- that's driving the free cash flow growth. I think the driver of the free cash flow growth really is EBITDA growth of 4%, 5%, which is roughly CAD85 million to CAD110 million, and then of course, on capital. And the capital moderation, frankly is, it's about CAD100 million lower than reported FY '19 results. That moderation is sort of split equally between wireline and wireless.

On the wireline side, some VDP-related savings and efficiency there and our partnership with Comcast. I think historically -- and we haven't articulated the strategy as well if we could have, but there has been some -- there are some OpEx trade-off for significant capex efficiencies through the technology roadmap and the partnership that we've embarked on with Comcast and other global scale providers. Self-install is really working for us, is about 45% as Brad mentioned in his remarks, and we continue to see that accelerate. So there is real wireline moderation.

On the wireless side. Brad mentioned in his opening remarks, it was a busy year on the wireless side of things, expansion into '19, new communities, expansion into retail -- significant retail and that's sort of behind us. We're going to continue to call through the CAD700 million. We're about 70% in Western Canada, that will be done by the end of calendar year. And then in the East, it will be substantially complete or fundamentally complete by the end of '20 as well. So there really is a moderation of capital like Brad said. Maybe some of the capital within wireless is a little bit holding a bit back considering some of the regulatory uncertainty that's in the market right now. But the free cash flow profile we're very proud of and we continue to see that strengthen going forward.

Vince Valentini -- TD Securities Inc. -- Analyst

Excellent. If I can throw one in for Paul. I'm sure there will be lots of questions on wireless, but I just want to ask you, how are you thinking about competitive intensity right now? It certainly seems from the Rogers results here this week that they are -- they are hurting a little bit. If you look at your book and did sort of lifetime value of customers over the past three months, let's say, I mean if you factor in the ARPU you're getting, the likely increase in equipment subsidies given the Absolute Zero program and then the superior volume of subs you're adding, are you happy with where all those vectors lineup or do you think yourselves and the industry could be doing a little bit better if somebody got more disciplined and others followed?

Paul McAleese -- President, Wireless

Well, it's hard not to argue with you -- [Indecipherable] I agree with a lot of points. I think by any objective measure, it's fair to describe Q4 is one of the most competitively intense periods the Canadian wireless industry has ever seen. You've got -- you've got all of the incumbents launching unlimited, two of those guys being the two largest media players in the country. So we certainly saw some significant pressure over the course of our 90-day period. In there, I would argue, and I think you saw earlier this week, that there is something on the lack of pricing discipline in the market really across our board.

In my perspective, is -- unlimited came out and [Indecipherable] comparably should have done and certainly the results you saw here will probably support that. So overall, just in broad summary of your question, we still -- we're getting access here for us, was an absolute home run. We were able to 30% of our postpaid adds to a rate plan of CAD75 and above. We are clearly moving into the neighborhood of the premium brands and we saw that in our reporting numbers. It was certainly an expensive quarter from a subsidy standpoint, but what we got in exchange for that trade was something we would take again and will do again.

So we like where we are. There is probably 10 basis points to 15 basis points in churn that I would put in the seasonal category and attributable to that intensity. But we expect that to moderate during the course of the next year and we still see the churn for us is somewhere in that range of 1.32% to 1.35% over the course of the next 12 months.

Vince Valentini -- TD Securities Inc. -- Analyst

Thank you.

Operator

Our next question comes from Drew McReynolds of RBC.

Drew McReynolds -- RBC Capital Markets LLC. -- Analyst

Thanks very much. Good morning. Starting with back to the wireline side, maybe for you, Jay or Trevor, when you look at the trajectory of that business in fiscal 2020, obviously a lot of recalibration and focus on base management over the past couple of years. Can you refresh us on what your assumptions are for the topline and the extent to which potentially you can get EBITDA margin improvement over the medium term?

And then secondly, a couple of housekeeping items. Just to confirm, Trevor, growth guidance excluding IFRS 16 for fiscal 2020, that's off the 2161 [Phonetic] number, and then secondly just comment on the cash tax rate year-over-year, if there is any really major move there. Thank you.

Trevor English -- Executive Vice President, Chief Financial & Corporate Development Officer

Okay. There is a lot there Drew. Will take the easy ones first. Yes, it is of the -- just to be clear, the growth guidance that we gave is of reported results. And the cash taxes, we expect it -- certainly in the last couple of years, it's approximated around CAD160 million. We expect that to be about the same for F '20 as well.

Maybe I'll start then on wireline. Your first question on wireline trends. I think F '20 is really going to be a continuation of our overall strategy to deliver growth through wireless, but then also broadband business while managing through the VDP exits in F '20.

On wireline, F '19 certainly delivered an improved broadband growth of around 35,000 subscribers. We expect this trend to continue, offset by declines in some other categories, more maturing products like TV and home phone. Overall Drew, on the top line, if you look at consumer revenue, it had been decreasing over the last seven years at a rate of about 50 basis points. And frankly, we expect that trend to continue and maybe modestly accelerate a little bit as we -- there is additional OTT competition with Disney coming into the fall. And that accelerates cord-cutting or cord-shaving a little bit. We're cautious on the video business, and what it does from a revenue perspective.

Traditional home phone is going to continue its current pace of declines just due to wireless substitution. And then on the Internet revenue side, continued growth there, there is no doubt about it, but perhaps we're just going to really monitor the competitive dynamics that's happening out there specifically within the [Indecipherable] space as well, considering a lot of the uncertainty there. That's all going to be offset by continued growth obviously in business as well. We're targeting 5% to 7% again, and combining those two.

Really F '20 looks a lot like F '19 which is sort of flat to maybe down a little bit. Consumer revenue is the way that we run in the business and then from an EBITDA perspective, there is some VDP savings, incremental CAD25 million of OpEx that we're going to deliver to the bottom line, but there is some incremental costs coming with our strategy, which is significant capital efficiencies. Again just want to highlight the free cash flow and the simple free cash flow that's being generated out of the wireline business, it's very impressive. But from a margin perspective, we continue to see opportunities, but there is going to be some offsets through the VDP, through higher syndication cost with our partners, some other outsourcing costs as we move to the cloud.

That being said, if you look at sort of reported EBITDA growth rates at 2.1% on wireline, 3.3% is for the year adjusted, when you take out some of those one-times, we continue to see wireline growth this year and maybe a bit of wireline margin expansion. But we do think it's fairly modest and it really is about stability and profitability again of the wireline business that's really the focus, and hopefully, everyone saw last year quarter-over-quarter, it was sort of anywhere between CAD490 million and CAD500 million. It was -- in the quarter very consistent, stable wireline EBITDA results and that's what we're focused as a management team, again to deliver this year.

Jay Mehr -- President

And it's Jay, Drew, building on Trevor's remarks. It's kind of qualitatively good [Indecipherable] affecting for us was about focus on non-recurring revenue, focus on churn, growing Internet customers every quarter, and super proud of the team. We did all the -- all three of the things we set out to do. I think as we stand on that foundation F '20, it's all about customer data segmentation and some of the right product or right customer. Our systems, our communities have become so much more advanced in this area and where you can see it in our strategy and in our tactics that I think you'll see it in everything we do. And really driving that in pursuit of customer lifetime value in F '20, and tremendous opportunity there. I think that's a lot. So more of the same base management focus that we've talked about and we're finally continuing to work hard in that planning.

Drew McReynolds -- RBC Capital Markets LLC. -- Analyst

That's great. Great color. Thank you.

Operator

Our next question comes from Jeff Fan of Scotiabank.

Jeff Fan -- Scotia Capital Inc. -- Analyst

Thanks, good morning. Just a quick housekeeping before we get into the real question. On the CRTC CAD10 million charge, the revenue impact sounded like was CAD6.5 million. What was the split between business and consumer, if you can just help us with that, because it looks like business...?

Trevor English -- Executive Vice President, Chief Financial & Corporate Development Officer

It is both. Sorry, Jeff. It's about CAD2 million in business and the rest of [Speech Overlap].

Jeff Fan -- Scotia Capital Inc. -- Analyst

Yeah. Okay, got it. And then my questions are one, for Paul, on the wireless side. I think given what we saw with some of the incumbents moves in the quarter, you guys did a great job in attacking the handset pricing and you continue to leverage subsidies to get your customers in. It sounds like you're quite happy with the results that you've got. And am I right in reading that subsidies will continue to be an important part of your customer loading and retention?

And then the second wilder question is around ARPU, 0.5% growth. It's great that it's still positive considering what we're seeing in the industry, but can you talk a little bit about the mix impact, because you really have strong prepaid and maybe even the loading and Absolute Zero, and how subsidies may have impacted your service revenue? And how do we think about ARPU growth in 2020?

And then my last question is for Trevor on the capex CAD1.1 billion for next year, do you think this is sustainable both on the wireless and the wireline side? Just want to make sure that this is not a one-year kind of debt before we go back up. Thanks.

Thanks .

Paul McAleese -- President, Wireless

Jeff, it's Paul. Thank you. I'll take the first couple. On your push with the subsidy EIPs, we have a very different view with our EIPs and some of our peers. I think it's worth spending a minute on kind of highlighting those distinctions. First, I think other operators have described EIPs like they sort of magically remove hundreds of dollars of subsidy investment without any customer. And that's a remarkable oversimplification from our perspective. Simply put, EIPs, the way they can characterize in the Canadian market later on, really just a massive price increase wrapped up in our fancy financing bow. We think Canadians are smart enough to do the math on that, it's painful. And when the incumbents launched their unlimited plans over the summer, they clubbed much of the rate plan more than we saw. But their ambition to coincidentally introduce EIPs and to pay for those rate reductions, has clearly not come to fruition.

New cycles in that area earlier this week, and I want to be clear about our strategy on subsidy. We are going to continue to use device pricing to distinguish Freedom from our competition and we don't take direction from the competition on its own pricing. So the promise of a CAD75 unlimited plan and a subsidy-free EIP is the one that we plan on adhering to. If we can't make that promise, we're not going to keep it.

Secondly on point of ARPU, there's been a lot of interest in not understanding that over the course of last couple of days. I want to be clear that for us that we continue to see ARPU as a growth metric in F '20. Our expectations are to meet or exceed F '19, performance is 3.2%. This is of course subject to continued rational competitive activity. But we're confident in that outlook, because we don't really share the same ARPU risk profile which some of our peers do and specifically in two key areas. One is, we don't have the exposure but we [Indecipherable] that you've seeing kind of glaring terms this week, how gravity ultimately affects toxic revenue.

And then early in 2020, we finally begin to read the ARPU accretive impact of the three-year iPhone cohort rolling off the subsidy amortization schedule. So it means that our ARPU gains for this year are very much a second half at '20 Jeff. But we feel confident we can deliver that through the course of the year.

Trevor English -- Executive Vice President, Chief Financial & Corporate Development Officer

And on the sustainability of the capex, Jeff, let me break it into the two components. On wireline, you saw we went from 24% capex intensity in F '18 to around 19% this year, and we continue to see that moderating and sustainable moderation going forward. We don't see step down as much as we did obviously from F '18 to F '19, but we continue to see that more in that 18%. And some of the drivers there, Jeff, again is just our networks in fabulous shape to handle the loads in the traffic on our wireline network.

We've got IPTV now rolled out to the 70% of our footprint, and that will continue throughout the year. There is a significant capital savings related to that, not just on TPE, but more so, frankly, on our cost to serve and just their self-install. We weren't able to self-install a TV customer last year with the technology that we had out there with IPTV we can -- and that's just again, the benefit of -- the holistic benefit of the partnership with our technology providers being Comcast. So that's very sustainable.

On the wireless side, there is some moderation this year as well. I think I talked about it with my previous response to Drew, just in the overall free cash flow guidance. It's coming down a little bit this year, some of that is because of the activity that we've done, some of it's because we're a bit concerned with the regulatory environment. When Brad mentioned in his remarks, we had some plans in -- on some corridors between some of the cities in light of some of the hearings that are kicking off in January. We just want to make sure that when we're spending capital within all of our businesses, including wireless, that we're going to get an appropriate return on that capital.

So we have dealt that back a little bit and that's something that may -- depending on the outcome and the environment, that may be something that -- there is some additional capital that goes into wireless versus if we think about F '21 versus F '20 looking forward. But we don't see it being materially higher than probably the F '19 total capital that we spent of CAD385 million.

Jeff Fan -- Scotia Capital Inc. -- Analyst

Right. I mean if I can just ask one quick follow-up, Paul, on the ARPU. On the Absolute Zero customers that are coming in or migrating, what kind of ARPU are you getting, if you can share that?

Paul McAleese -- President, Wireless

Yes, I mean Absolute Zero is a little bit tricky to keep track of because it has a pretty significant accounting implications the way that we've got it structured. But a quick math on adjusted is that, we bring those customers in on the CAD75 rating plan or above and something around 40% of that gets booked in the month. So we hit consensus on EBITDA in the quarter, but that means that we've got about 40% of the cost of that subsidy already in the books and behind us. Prospectively, it means that we'll then amortize the remaining 60% odd over the course of the next 24 months. So the ARPU coming in on those plans today is kind of in the high 40%s. But important to remember that's over the first 24 months when we roll into the 25th month and beyond for those subscribers, that ARPU will revert back to CAD75. So a lot of the benefit that we're seeing in our growth story really I don't think start to work into a math until a couple of years out. But we really like what we're getting on, on those under subscribers and that's the story we're going to continue to present to.

Jeff Fan -- Scotia Capital Inc. -- Analyst

Okay, thanks very much.

Operator

Our next question comes from Aravinda Galappatthige of Canaccord Genuity.

Aravinda Galappatthige -- Canaccord Genuity Corp. -- Analyst

Good morning. Thanks for taking my question. First question is on, obviously your expansion on the wireless side, to a lot of the communities in the West. I think the total population is sort of close to 1.5 million. I wanted to get a sense of sort of the different dynamics within those territories versus the areas you've been competing and have been -- could you characterize that -- as I know, it's always competitive, but would you relatively speaking characterize that as more sort of low-hanging fruit that could help sort of potentially ramp up your net adds going forward?

And then secondly, with respect to the capital efficiencies that you talked about, obviously the 45% self-install numbers sort of jumped out as a key positive. I was wondering if you can give a little bit more color on that. Are you talking about all installs, but it's in an IPTV or on bundled basis 45% being self installed and the proportion of savings actually emanating from that? Thank you.

Trevor English -- Executive Vice President, Chief Financial & Corporate Development Officer

Yes 45% is of our total number of installs and it's a fantastic result ahead of our target. We have a terrific back-to-school period. We were busy. We only got to school this week, this year, and I got a little [Indecipherable] base from our VP of Operations wondering when the installs were going to come through, and I've not seen that in 23 years of back-to-school here. Some of this changes everything.

I think if you look at our success in terms of our truck rolls and operational savings, it will be easy for you to figure out the math. Important to note with IPTV, there is no in-home wiring as well. And so, there's a real complexity that comes with getting -- not using the cable in their house, the whole plan is hard. The promise that we talked about through the transformation is absolutely being delivered, and we're going to build off 45% this year and look at a much bigger number for that in F '20. So you're seeing that in the free cash flow characteristics of our Company.

Paul McAleese -- President, Wireless

Aravind, this is Paul. On the first question regarding the new markets into last year, just under 1 million -- under 1.4 million subscribers we added this year in terms of coverage, were in West. And great work from the engineering and network team to build that out in such rapid fashion. I don't know if I characterize it as [Indecipherable], it's certainly got two dynamics occurring at the same time. There is certainly a pent-up demand and a lot of customer anticipation as we go into those markets that were met with open arms. And we see some good early -- early volume there, but the other side of it is that those -- the network and the brand are new in those markets. So they are subject to obviously just some betting in, that we have to build each of those in a way that makes them familiar in those markets.

So I mean that's probably about a push over the course of the first year that they are in the market. We love growth in the West in wireless because it ultimately sets us up when we bring the two businesses closer together, wireline and wireless, we have the opportunity build those markets by ourselves. I think that story gets written a little more over time, but we're certainly happy with the initial results in those new markets.

Aravinda Galappatthige -- Canaccord Genuity Corp. -- Analyst

Thanks, Paul and just a quick follow-up to that point, are you still sort of in that sort of roughly speaking 60/40 split with respect to East West, in terms of gross adds?

Paul McAleese -- President, Wireless

So it's 70/30 of vendor, which has been its historical level.

Aravinda Galappatthige -- Canaccord Genuity Corp. -- Analyst

Thank you.

Operator

Our next question comes from Tim Casey of BMO.

Tim Casey -- BMO Capital Markets Corp. -- Analyst

Thanks. A couple from me. But Paul, just on the subsidies again, I totally get where you're coming from, but one of the -- the pushbacks or for us the other operators that are making that with the high cost of handsets, it is -- with subsidy model it's punitive over the long term. I'm just wondering how you think about balance sheet management in that as high-end handsets are obviously quite expensive. And just one spectrum question. Any chance you could talk about how your plans are coming to deploy the 600 megahertz spectrum? Thanks.

Paul McAleese -- President, Wireless

Thanks, Tim. We view subsidy not in isolation. So our perspective from -- reading from your customer outwards is a bit more total cost of ownership structure. So I understand the commentary around the the price increases that we've seen in the market on under license, although that has moderated significantly with the launch of the iPhone 11 over in September. We've seen a -- seen reduction in those entry level prices. So there has been a bit of shift in the other direction. I'd perhaps provocatively argue that the significant decline we saw in the price of unlimited from the --from the Big 3 might have been pre-judged to be perhaps on the [Indecipherable] in a bit too early.

That's going to be one of the things that factors in to their overall cost of ownership as well. So we just don't look at devices in isolation. So in our -- from our perspective, we are very comfortable with the level of subsidy opening in the market. It has been coming down and will continue to decline over the course of the year. And in the overall mix, we're happy with the -- with the [Speech Overlap] they we're getting here. So I don't think there's much of a story there. EIPs that we discussed earlier on are not a magic to cure anything. It just all has to go into the math, and what we saw in August and continue to see is, very strong consumer response.

So we like our model and we're going to continue to present to it. On 600 megahertz, I think it's early for that. As I think we mentioned in the last call, we will continue to make sure that our infrastructure is ready for 600 megahertz when you get to unpack from the broadcasters. So we will be -- we'll will be reporting more on that in subsequent calls as we get closer to the dates.

Tim Casey -- BMO Capital Markets Corp. -- Analyst

Thank you.

Operator

Our next question comes from Maher Yaghi of Desjardins.

Maher Yaghi -- Desjardins Securities Inc. -- Analyst

Thank you for taking my question. My first question is on the guidance. Looking at your 4% to 5% growth organic here, well apples-to-apples, the range is quite tight CAD20 million buffers on a total base of 2.2 [Phonetic] approximately. What gives you this kind of level of granularity in terms of giving this outlook with such a small bracket? And I have a question on -- the initial cohort, obviously around -- I will ask a question on another one?

Bradley Shaw -- Chief Executive Officer

I think -- hopefully you saw it last year, live within our commitments when even last October when we came out with 2019 guidance of 4% to 6%. There was a lot of questions about that, and whether that range was too tight or too conservative. And clearly, we had some one-time impacts that impacted the guidance. But we -- we really delivered it, the management team here is laser-focused on execution and running the business on a daily basis looking at key metrics and KPIs and feel very, very comfortable about the budgeting process and the planning process that we went through in excruciating detail this year.

So you're right, it's a fairly narrow range when you look at a company of our size, but we're very comfortable with the range. And we're going to go and deliver this year, just like we did last year.

Maher Yaghi -- Desjardins Securities Inc. -- Analyst

Well I'll take it another way. It seems like you're so confident that you're giving this quarter a small range. So I'm trying to figure out what our -- what median, let's say not go to 6%, if you have this kind of confidence in giving this range? Like...

Bradley Shaw -- Chief Executive Officer

I think -- I think that's sort of the competitive environment. I mean, we are -- we know where consensus estimates were at, they were above a 5% range. We didn't want consensus to stay where they're at. I think I walked here and articulated the realities of the wireline business. But listen, we're very comfortable with the wireline business and the free cash flow generation of the business. So I think -- I hope investors are really not just looking at EBITDA and the EBITDA guidance range, but really focusing on the free cash flow generation of the business. And yeah, competitive dynamics in the wireless business are intense. We just went through probably one of the more intense back-to-school period. So we don't want to get over too much on wireless as well, about whether it's growth in service revenue and flow through the EBITDA margins and margins expansion. So we're very comfortable with the guidance range that we have out.

Maher Yaghi -- Desjardins Securities Inc. -- Analyst

Okay. Well, that gets me into the free cash flow, because I wanted to ask you a question on that. CAD700 million and you said in your prepared remarks that you're embarking on a improving trend in free cash flow and because of that, you started with the NCIB and the DRIP change. What do we have -- if you look further out, what are the things that you would like to see the Company perform in terms of free cash flow growth rate beyond the CAD700 million in 2020? How should we look at 2021 and 2022? Is that a continuous improvement in free cash flow that you're expecting longer term, or is there something in 2020 with the cape being reduced like that, that is a one-time in nature?

Trevor English -- Executive Vice President, Chief Financial & Corporate Development Officer

No, I think I talked about it earlier on the wireline capital side. Again, specifically with the strategy that we've embarked on a number of years ago in the transformation, the capex savings are real sustainable and we continue to focus on other efficiency opportunities in front as well. And a lot of those are on the capital side of things. So we feel very, very comfortable about the right level of investments in our wireline business and it's moderating and we continue to see opportunities going forward. So we don't foresee any big capex spike. We did talk a little bit already about wireless, maybe we're holding a little bit back this year, but it's not that much. And we don't see any significant spikes in wireless capital from -- for example, the run rate that we delivered in F '19 of CAD385 million.

So we continue to see EBITDA growth rates beyond F '20. And we consider to see all that flowing through to the bottom line and that combination of things that continue to generate strong free cash flow above our CAD700 million in future years.

Maher Yaghi -- Desjardins Securities Inc. -- Analyst

Is it fair to say that you're holding back a little bit on the wireless, because of what -- the upcoming hearing is going to bring out in terms of change or not in terms of policy in Canada?

Trevor English -- Executive Vice President, Chief Financial & Corporate Development Officer

Yes, a little bit. So if I wasn't clear with my previous remarks, that's what we're trying to imply on.

Maher Yaghi -- Desjardins Securities Inc. -- Analyst

Okay, and my -- and my last question is on the iPhone. And I'm trying to figure out what you kind of implied in your guidance, when it comes to the cohort of iPhone customers that you loaded closing in on two years now in this November, early December. What kind of churn rate implied in those -- in that cohort versus the churn rate you're currently having in your base and the type of subsidy that you are implying to retain those customers?

Paul McAleese -- President, Wireless

Thanks Maher, it's Paul. We'll get into the specific levels of that, but I will just give you a couple of guiding principles. First, anytime we have a customer in a two-year device financing plan, we see a significant improvement in their churn profile, looking more in the sort of 1% range than in the 1.3% [Phonetic] range. So when we report postpaid churn, that of course includes BYOD which has a higher churn profile. So you can always feel that we're looking to put people into a device financing plan, because that has great characteristics on all fronts.

When we launched the iPhone in December of 2017, of course every month, we've been taking essentially another cohort of financed subscribers into our amortization schedule. And we have not had the benefit of customers rolling off that 24-month schedule. And if you do think about the license, I think the average license of an IoS [Phonetic] subscriber in Canada's is 2.9 years, according to Apple, which means that once they roll-off the amortization schedule, mind it 25% through say 35%, 34% 35% they pop back up to their complete ARPU. So there is no -- there is no longer an accounting impact to that.

So it means that in December, January, this coming year and you'll start to see that first cohort roll off, that will be accretive to ARPU. It's not a big pop right out of the blocks, because of course, we're also adding people then behind it. But it means that our ARPU story starts to get incrementally better over the course of the last half of the year and that's a benefit that we have -- we're looking forward to. The other operators, of course, have already had that 24-month rolling thing. We've still been filling up that bucket. So we have three or four more months left of filling it up and then we get to sort of start to take withdrawals from it, which is a positive to our story.

Maher Yaghi -- Desjardins Securities Inc. -- Analyst

Okay. That helps. Thank you very much.

Operator

Our next question comes from David McFadgen of Cormark Securities.

David McFadgen -- Cormark Securities Inc. -- Analyst

Hi. Yeah, a couple of questions. I mean, I'll start with the first on the clarification. Just on the 700 megahertz spectrum, did you say that -- as far as Western Canada, you'll be done deploying that in calendar 2020, by Eastern Canada you will be done in fiscal 2020?

Jay Mehr -- President

I told you David, with that -- Paul, just correct me, we mean calendar 2020, it will be done by.

David McFadgen -- Cormark Securities Inc. -- Analyst

I apologize.

Jay Mehr -- President

In Western we're going with that. And substantially in Eastern Canada by the end of F '20.

David McFadgen -- Cormark Securities Inc. -- Analyst

Okay. Okay. So it's calendar 2020 first then F 2020 after. So just a question on wireless, suppose -- now we're in the Q1, have you seen any impact on your loading from the incumbents and the rate plans?

Paul McAleese -- President, Wireless

David, this is Paul. I mean, probably the most significant impact we saw would have been in the early days of it, if you had kind of an initial rush in that. That certainly impacted us, as I indicated for -- from a churn basis kind of 15 basis points. So we saw an initial bit of activity there. We continue to like what we see for loading both the quality and quantity. We've been very clear and kind of telegraphing that we look to have a balanced scorecard in a minute and we do manage to write on this business, which means we're looking to do something in the area of 250,000 net adds over the course of each year and continue to have a strong revenue and EBITDA growth story.

And we continue to be tracking nicely on that front. So I think the -- for all of the energy and initiative that we faced from the victory, we weathered that storm brilliantly through the course of the summer and continue to do so now.

Okay. And then another question just on the wireline side of the business. So when you look at the video -- the cable video losses, we think this has kind of be hanging in at this rate, is there anything in your mind coming on the horizon that could actually potentially lower them?

Jay Mehr -- President

This is Jay, again. I mean first of all, we were very pleased with our Internet loads and a grade-on strategy for the quarter, which is significant. And we're very comfortable with what's happening in the satellite field space. And there is the natural seasonality which I will see in Q1, so we've got ARPU of CAD84 in time right now and that business is very profitable, so that'll be a continuation of trend.

I think your question was specifically about the broadband or cable video. We had a significant loss CAD32,000 in the quarter. And that really reflects, we launched our IPTV platform in -- up to 70% of our customers in the last five weeks of the quarter, with some of it being launched with two weeks in the quarter. So we in a little bit of a technology team, so we're holding our powder a little dry and also a little bit more focused on [Indecipherable]. You'd probably have seen this week that we launched our next-generation [Indecipherable] total that really brings all of the advantages of the Comcast program, the very best in the Comcast roadmap to consumers. And so, we're already seeing a significant uptick in that percentage of double play installed for this quarter as opposed to Q4. So we will get ahead of ourselves. I mean, the video businesses is the video business and we're steady as she goes in terms of how we're pursuing it. So we'll be certainly disappointed if we had another number like Q4 in Q1.

David McFadgen -- Cormark Securities Inc. -- Analyst

Okay, all right, thank you.

Bradley Shaw -- Chief Executive Officer

Great. Thanks, everyone and we're really looking forward to F '20 and we'll see at the next call or talk to you in the next call.

Operator

[Operator Closing Remarks]

Duration: 53 minutes

Call participants:

Bradley Shaw -- Chief Executive Officer

Trevor English -- Executive Vice President, Chief Financial & Corporate Development Officer

Paul McAleese -- President, Wireless

Jay Mehr -- President

Vince Valentini -- TD Securities Inc. -- Analyst

Drew McReynolds -- RBC Capital Markets LLC. -- Analyst

Jeff Fan -- Scotia Capital Inc. -- Analyst

Aravinda Galappatthige -- Canaccord Genuity Corp. -- Analyst

Tim Casey -- BMO Capital Markets Corp. -- Analyst

Maher Yaghi -- Desjardins Securities Inc. -- Analyst

David McFadgen -- Cormark Securities Inc. -- Analyst

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