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Shaw Communications (NYSE:SJR)
Q4 2020 Earnings Call
Oct 30, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Thank you for standing by. Welcome to Shaw Communications fourth-quarter 2020 conference call and webcast. Today's call will be hosted by Mr. Brad Shaw, executive chair and chief executive officer of Shaw Communications.

[Operator instructions] The conference is being recorded. [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.

Trevor English -- Chief Financial and Corporate Development Officer

Thank you, Brad, and good morning, everyone. Considering the unique and challenging environment that emerged throughout the year, we are very pleased with our Q4 results and our overall fiscal-2020 performance, which deliver growth that was largely in line with our original guidance that we issued last October. We are proud of our results and the execution by the team considering the amount of uncertainty that we faced as the virus spread, commodity prices collapsed and parts of the economy shut down. Our consolidated Q4 performance continue to deliver stable results, with adjusted EBITDA growth of 3.7% due primarily to strong Wireless performance in the quarter.

Our Wireline segment has been resilient throughout the COVID pandemic, including business revenue that has stabilized. However, uncertainty does remain. While Wireline RGUs were soft in Q4, the broadband pricing that was implemented at the end of May, alongside reduced promotional investments have supported ARPU growth across all products. Combined with the overall effective cost management, we grew adjusted EBITDA by approximately 1.4% on a pre-IFRS 16 basis and improved our Wireline operating margin in both the quarter and year to over 48% on a reported basis.

Wireless service revenue increased approximately 15% in the quarter on the back of continued subscriber additions as well as ABPU and ARPU growth of 6.6% and 4.2%, respectively. On a pre-IFRS 16 basis, Q4 wireless adjusted EBITDA growth was approximately 25% over the prior year. Turning our attention to F '20 annual results, while customer activity was impacted by the pandemic, our Wireless business -- or pardon, our Wireline business remains stable throughout the year. Adjusted EBITDA grew approximately 1% and profitability improved.

Our Wireless segment, which continues to face an intense competitive environment added over 160,000 new subscribers, and we delivered service revenue growth of over 17% in F '20 to $815 million and adjusted EBITDA growth for the year at over 30%. Consolidated capital investments of approximately $1.1 billion were largely as planned. There were no material changes in our capital projects for F '20, considering our business performance. Wireline spending continues to decline even with record usage on our network.

This reflects decades of significant facilities-based investments. Wireless capital spending in 2020 supported the deployment of spectrum, additional retail locations related to Shaw Mobile, and preparations for the delivery of a 5G wireless service. Our focus this year resulted in substantial free cash flow of almost $750 million. This represents significant growth over prior years and a direct result of our focused strategy to enhance our connectivity business, and the transformation of our organization become more agile and capitalized on efficiencies.

With a strong free cash flow in F '20, we returned approximately $610 million to shareholders in the form of dividend payments and additional $140 million from the repurchase of 5.6 million Class B shares through our NCIB program. As we look forward to fiscal 2021, we maintain a great deal of confidence in the strong fundamentals of our business as well as we're excited about the new initiatives that will support our growth and strategic focus going forward. In F '21, we expect to generate continued positive EBITDA growth, capital investments of approximately $1 billion and free cash flow of approximately $800 million. While historically we've provided an EBITDA growth range with our outlook, we continue to be faced with ongoing uncertainty related to COVID and the unknown impact key areas of our organization, including Shaw Business and overall sales activity within our Wireless and Wireline segments.

However, we remain focused on delivering stable Wireline results and growing our Wireless business, supported by our robust facilities-based networks and a continuous focus on capturing efficiency opportunities. Our consolidated capital investment profile is moderating, and we're generating more than double the free cash flow compared to just three years ago. Yesterday, our board approved the renewal of our NCIB program, which enables us to repurchase up to 5% or approximately 25 million class b shares. While our NCIB activity was paused in April, as COVID was unfolding and we elected to preserve liquidity, we continue to have considering -- considerable balance sheet strength with leverage of 2.3 times, which is again below our target range and significant liquidity, including a cash balance of $760 million with no near-term debt maturities.

With stable performance of our business and improving and strengthening free cash flow profile and an attractive dividend, we continue to believe that an NCIB program is a flexible and efficient means to return additional capital to shareholders. Brad, back to you for closing remarks.

Brad Shaw -- Executive Chair and Chief Executive Officer

Thank you, Trevor. I'm so proud of our performance and our team over this past year. We are moving forward with our strategy on our front foot and remain committed to enhancing the customer experience while providing additional value to Canadians. Fiscal 2021 will bring new and enhanced services to both Wireline and Wireless customers.

We will focus on bundling opportunities with Shaw Mobile to deepen existing relationships and build new ones. We will continue to enhance our wireless network with the deployment of critical spectrum to enable 5G service this year. And we will further advance our digital initiatives to improve the customer experience and reduce the overall cost to serve. While we have accepted that our new environment is different, we are excited to continue playing a critical role in the lives of our customers.

In closing, I'm very pleased to announce the nomination of Steve White to our board of directors. Steve has an extensive background in operations and deep knowledge of the cable industry. For the past 11 years, he has served as president of Comcast Cable Division in the Western United States and has held senior positions at AT&T broadband and telecommunications. We look forward to Steve's contributions beginning in January.

Thank you. Operator, we will now take on some questions.

Questions & Answers:


Operator

[Operator instructions] The first question is from Vince Valentini with TD Securities. Please go ahead.

Vince Valentini -- TD Securities -- Analyst

Thank you very much. Three questions. I'll throw them all at you so you can think about them and decide how to order -- how to answer them in order. One is on dividends.

So, if we look at your $800 million in free cash flow target for this upcoming year, that would mean dividend payments of about $605 million, would be 76% payout ratio. If you increase the dividend 5%, that would take the payout ratio up to 79%. It's not a meaningful difference, still well covered. And as you know, your balance sheet is very strong.

So, your perspective on if and when we can get back to dividend growth would be very helpful. Number two would be on Internet, probably for Paul. Q4 obviously wasn't very pretty in terms of Internet sub adds, but you didn't launch Shaw Mobile until August. And I think there was a lot of distortion in June and July from consumer activity and pricing changes you did relative to TELUS.

So, if you can give us any context on how maybe September and October look relative to the weaker Q4, I think that would help people a lot. And last, maybe for you as well, Paul, on Wireless churn being up 10 basis points. Can you talk about what's going on there? And specifically, I'm not sure I -- how you treat it when you have these bounty offers from the incumbents trying to steal your customers. If somebody just wants to sign up for Freedom for two or three days and then switch to an incumbent to get one of their discounted offers, would you treat that as a gross add and then churn? Or does that not impact the higher churn that we're seeing?

Brad Shaw -- Executive Chair and Chief Executive Officer

Great. Vince, it's Brad. I just -- I'll talk about the dividend. McAleese will take the other two questions.

As we know at a macro level, it's, you know, the dividend increase from a Board decision and both management and the Board are committed to long-term sustainable dividend growth. You know, I would say right now, today, we pay a very healthy 5% yield. And that being said, we certainly are confident about the long-term free cash flow profile of the company. But I'd say in these uncertain times in this environment, you know, we really prefer the flexibility of share repurchase to return excess capital to shareholders.And, you know, I would also say, that, you know, just looking, you know, year-to-date at the Class B shares are down 14%, which, you know, creates an attractive price to do the buybacks.

And I would just say, you know, that we have a great -- significant cash balance, which we can deploy $760 million, which I think is very good use. And, you know, we continue to -- well, I would just say we continue to make sure we -- in this environment, you want to have sustainable dividend growth over the longer term, and it's something we feel that we'll continue to address as we go forward, and we'll leave that with the board to make the right decision.

Paul McAleese -- Chief Executive Officer

Vince, Paul. If you're good on that, I'll pick up on the other two. On Internet subs, you're right to comment that we had during the early part of the quarter a significant price disadvantage relative to TELUS. You'll recall that we moved to the launch of our Fiber+ Gig program in late May, May 27.

And TELUS didn't respond in any way until the first week of July on pricing and not -- and didn't at that point come all the way, so we maintain a price premium through the course of the quarter. So, we had a relatively slow start to the quarter. And, of course, we didn't launch Shaw Mobile until the very end of July. So, the things that we expect will, over time, help improve are Wireline market share, Internet market share, I describe them as a process.

You know, we've been very clear about what our objective is here, and that starts with returning our Internet base to positive subscriber growth. But it's a process with this very deliberate set of moves. It's not dissimilar to what we did in the Wireless business over the last two or three years. And while I'm impatient, these are all things that are now under way.

So, the first thing we did during the quarter, you would have seen, is make sure that we improve the product foundation for Internet. And that began with the launch of those two new high-speed tiers, getting Gig into the market to make sure that we were there to address the emerging needs of work from home and the other pressures that we're seeing at the residential Internet level. But overall, we felt that, through the course of the quarter, we made and continue to make -- and will continue to make in this quarter significant product enhancements for the customer experience. Those product changes aren't going to be supported by a broadened and improved distribution model for Internet.

You'll have seen and Brad commented that this week we brought Loblaws mobile shop, they've been a fantastic partner for us on our Wireless business in recent years. They've been a fantastic supporter of Shaw Mobile since its launch in late July. And you can expect to see us continue to build on our third-party distribution capability for Internet this quarter as well as continuing to open more of our very effective and stunning new corporate stores, Shaw branded corporate stores in B.C. and Alberta, where we frankly lapped an appropriate retail presence in a lot of markets.

We just haven't had been where people wanted to buy us. So those are all things that happen over time. Finally, we see the bundle here, Vince, as a really important part of our growth strategy. It has enormous potential to complement our Wireline profitable Internet business.

But we face a competitor in TELUS, a very, very well-managed competitor, who continue to spend very aggressively to acquire customers in a mature market. You don't have to look too far to look to find a $500 Visa gift card for signing up to TELUS Internet bundle. You've heard me in the past, be very plain about our view on the level of swapping between the two companies in a mature market. And we continue to think that that's unnecessary and lost economic rent.

So, we -- as long as we face that economic pressure, those sort of acquisition pressures, we now have a tool in Shaw Mobile that we will deploy as necessary to meet our business objectives. You will have seen earlier this week we launched $25 unlimited plan. And we will see how that goes. But know that we have our hands kind of firmly on the throttle.

And as necessary, if we continue to see hundreds of dollars of investment from the other side of the house. We'll use those tools accordingly to make sure that we reach our numbers. So, look, we have -- we operate in a market where our competitor has their bundle and we have ours. We prefer ours.

We think mobile is a more compelling proposition from the consumer standpoint. And we'll see how it plays out over the next little while. You know, I would not expect to see a dramatic turnaround in our numbers over the course of this quarter. You know, it is a process, and it's going to take some time.

It doesn't -- these things don't happen overnight. But I like the plan that we have. And we've been able to execute similarly in the Wireless business before. So, I think there's some good lessons that we can bring from Wireless to Wireline here, and that process is under way.

On your Wireless question, yes, we continue to see kind of a disappointing lack of discipline on Wireless competitive -- the Wireless competitive front. It feels like the market is chasing, frankly, at a pretty considerable expense, a very small pool of available growth. With less integration and the financial pressures in the economy right now, I think real growth is at a very, very modest level. And the promotional pricing you're seeing out there is intense.

You know, you'll have seen this week, that all three competitors now have what I'll loosely call an EPP, but I think we all know is broadly just an available plan that has 20 gigabytes out at $50. That was $180 18 months ago. We are the fourth player in the market. We have less than 20% of the subs of the big three each.

We do not drive this ship. And if we're going to see that lack of discipline, it's -- I think any casual observer would come to the conclusion that you can't solve the service revenue problem, an ARPU problem by discounting at this level. Particularly when there's not a lot of market growth. So, you know, in the end, if we're going to see these bounties back and forth, as a new entrant with a smaller, less mature network, we're going to need to be priced below the incumbent.

So, there is a real risk that if this continues. It will drive us to price lower. I'm an optimist. So, I'd like to think that the market pressure on service revenue growth will ultimately prevail here, but we'll have to see.

In answer to your specific question, if a customer gets back and forth to take advantage of a bounty, we count that as a negative gross add. It doesn't affect our overall churn. So, the 10-basis-point inflation in churn was related to the impact of this kind of activity and just the general macro competitive pressure.

Vince Valentini -- TD Securities -- Analyst

Thank you.

Paul McAleese -- Chief Executive Officer

Thank you.

Operator

The next question comes from Drew McReynolds with RBC. Please go ahead.

Drew McReynolds -- RBC Capital Markets -- Analyst

Thanks very much. Vince covered off a lot of my questions, maybe two or three follow-ups here. I think, first, from a capex standpoint, Trevor, you alluded to, you know, obviously, a nice reduction in overall capex. I think it was $1.4 billion a few years ago.

Now, $1 billion guided for this fiscal. Just can you comment on, you know, kind of the degree of sustainability of that level of capex, given both of your Wireless and Wireline segments. The second, maybe to you, Paul, on 5G. I think Brad just mentioned that, that will be kind of launched in market, I think it was said this year, I'm assuming that this fiscal year.

Maybe comment on, you know, where Shaw is currently on. You know, that buildout, are you still intending to be a fast follower as more and more 5G developments play out over the next few years. Lastly, on the operating environment, more on the B2B side, you do sound cautious. I think everybody is cautious out there.

You know, maybe Trevor, could you provide what you're seeing as of today in terms of, you know, the trend from businesses? That would be helpful. Thank you.

Trevor English -- Chief Financial and Corporate Development Officer

Yeah. Sure, Drew, thanks for the questions, and I'll start on the capex sustainability. Obviously, you know, you've seen our capex intensity moderate over the last few years, as you correctly point out. And again, most of that is frankly within Wireline.

And I'd say a big part of that is, yeah, just related to our transformation that we embarked on a number of years ago, and we see that as being very sustainable. I would say, you know, continued sort of, you know, slight decline this year versus F '20 in terms of what we guided toward, the majority of that is within Wireline again and again, self-install supports that. Our networks are in fabulous shape, our Wireline network. And I'd say, again, that is due to the significant investments that we've done over numerous years.

We're going to continue to invest in the Wireline network as we need to. But again, that is moderating. We're sort of looking at more of 17%, 18% capex intensity going forward. On Wireless, we continue to make the right investments to improve the network and the customer experience in general.

We look at that sort of bucket as being very stable this year versus last year, around the $300 million mark. And, you know, we don't see significant sort of forklift capital required in the future. I think we can really live within the roughly $1 billion sort of capex envelope to fund the investments that we need to drive this business going forward. So, we're pretty confident, Drew, in that capex and that profile that we've got going forward and, of course, really supports a very, very attractive free cash flow profile as well.

So, we have a lot of conviction as a management team and the board about the free cash flow profile of the company, which reflects, you know, a moderating capital intensity in the consolidated business. That being said, we're not starving the business of capital either. We're still spending roughly $1 billion. And we think that's the right envelope now and into the future.

Paul McAleese -- Chief Executive Officer

Yes, Drew, hi. On the 5G question, following on Brad's comments, we'll -- you can expect to see us live in the market in early calendar '21, so kind of in calendar -- early -- kind of mid-calendar Q1. And we're hugely optimistic and bullish on 5G's potential. I think you've seen from other operators and globally just the potential that this has.

That said, in the short term, while we are essentially a fast follow simply because of the way that the spectrum auctions work and the fact that 600 hasn't been unpacked yet, we -- we're excited about this, but I think in the short term, the voice of the customer is kind of what's really important here. We do extensive research, as you can imagine, about this. And while the industry is talking up 5G, I think, in a quite sensible way right now, there isn't really a compelling use case. You know, even -- we've done some research in the last number of weeks against in tenders for the Apple 5G iPhone.

You know, the people that are buying it from us tell us they want the new iPhone, but they're not really that interested in the 5G part of it because there's not a use case that's really driving that at this point. So that will happen, and it will happen in time. And we will take advantage of that. I think the industry may want to reconsider how it monetizes that over time.

We're kind of a little bit disappointed that at this point, the signal from the Canadian industry is that it will be not directly monetized, but sort of just moved up into specific rate card -- rate tiers. That's a strategy, I suppose. I'm not sure it's necessarily the best one. But over the early part of F '21, you'll see us fairly prominently in the 5G game.

And until that time, we'll be able to service our customers with a fast LTE network that is more than capable for the vast, vast mass majority of the uses that consumers are applying it to today. So excited about it long term. I think it's got great potential. We continue to believe it's going to open up all kinds of new doors for Shaw, particularly given some of our other relationships in Western Canada and what it might do for businesses.

But at this point, we will be slightly behind the market in terms of timing, but not concerned about that delay.

Trevor English -- Chief Financial and Corporate Development Officer

And Drew, I think your third one was just on the overall sort of environment with respect to, you know, the SME and the business market here in Western Canada. And clearly, it's something that we're extremely proud of in terms of still delivering 2% growth during the last year. I think the teams led by Katherine Emberly did a fantastic job working, you know, individually with each one of our customers. We had a lot of customers in the spring that went on temporary.

Suspension of services, a lot of those have come back. However, I'd say they've come back at reduced services, specifically within hospitality and the restaurant industry. You know, they lit up their Internet service again, but their TV services and some of the others were maybe not to the same levels. You know, really, you can see from the revenue trajectory, it really has stabilized over the last couple of quarters.

And there's still some uncertainty going forward through. It's -- the Western Canadian environment is – you know, still continues to be challenging. You've started to see some consolidation within the energy landscape recently. And I think most are anticipating that that'll increase.

That being said, the teams have actually done a great job in terms of some additional sort of enterprise wins, new business. You know, and the announcement yesterday, I think, around the tech deal is, again, another example of sort of these innovative solutions that we're providing to the business market. And also, I'd just say, generally speaking, the disruptor, the value proposition that we're providing to small and medium businesses, we're pretty encouraged by the product suite that we have in front of us. We've launched some additional products that's really focused on, you know, helping businesses and their employees work from home.

So, you know, there's puts and takes, but it's clearly something that we're very cautious on, Drew. It's one of those things, like, one of the reasons why we're not necessarily prepared to come up with more of a -- as prescriptive as guidance from an EBITDA perspective as we historically have. We have been generally growing that revenue on our business segment, you know, around 5% a year over the last number of years. This year was 2% because of the pandemic, and it's really tough to see where that's at.

But we think we're doing the right thing for our business customers, and it has stabilized. So, I don't want to scare investors, but it's really tough in terms of immediate line of sight on where things are going here.

Drew McReynolds -- RBC Capital Markets -- Analyst

OK. Understood. Appreciate the end detail. Thank you.

Trevor English -- Chief Financial and Corporate Development Officer

Thank you.

Operator

The next question comes from Jeff Fan with Scotiabank. Please go ahead.

Jeff Fan -- Scotiabank -- Analyst

Thank you, and good morning, everyone. A bigger-picture question for Brad, perhaps to start, and then I'll ask the others as well. The big-picture question is, I guess, over the last few months since we spoke last quarter, there's been more news about the potential for cable consolidation here in Canada. So, Brad, wondering if you have any kind of high-level comments that you want to make about cable M&As in Canada and what role potentially Shaw will play in that.

And then the other question is just on the Wireless growth as we look out to '21 and perhaps even beyond, and this is probably a question for Paul. In light of the competitive landscape that you talked about in light of the Shaw Mobile launch, do you see a bit of a shift in terms of how service revenue growth, Wireless service revenue growth looks and the contributors to that, i.e., like subscriber growth versus ARPU growth? You guys have done a good job of growing ARPU in the last couple of years. Wondering if there's a shift there in terms of a greater focus on driving subscriber growth, especially if this environment kind of continues? And also, like in light of that, can you still grow EBITDA and margin if ARPU growth slows down?

Brad Shaw -- Executive Chair and Chief Executive Officer

Jeff, it's Brad. Thanks for the question. I kind of expected something like that would come on this call. You know, just a couple of things.

Certainly, as a family, we're very committed to the long-term strategy at Shaw. You know, we have a solid strategic plan. We're delivering on our commitments. We have substantial and growing free cash flow.

And I think, you know, when you look at the balance sheet and be a financial position, right, with strong liquidity tied to that. And I just – you know, when I look kind of going where we're going from here. And we just launched Shaw Mobile and truly believe we have some untapped growth opportunity realized both on the consumer side and then eventually on the business side, which also includes, of course, you know, a 5G service. And then I just – you know, I think about just the technology and the partnerships we have with Comcast and -- which really allows an enhanced video and broadband services.

And finally, I would just say, 50 years in business as a company, we're very proud of our legacy of serving our customers and our communities over that period of time. And, you know, we're pretty comfortable where we stand now with where Shaw looks and are comfortable in that position.

Paul McAleese -- Chief Executive Officer

Jeff, on your Wireless question, which was quite broad. So, if you can just indulge in a moment. We've been clear for my time here over the last three years that we look to grow our Wireless subscriber base by something in the range of a quarter million subscribers a year. And we will continue to reiterate our expectation that we will grow our Wireless subscriber base by a quarter million subscribers a year.

So just in case that's unclear to anybody on the call. The means by which we'll get that may change over time. And you'll certainly see, for example, the stronger bias to Western Canada than we would have had in the past. And we signal that some time ago, historically, Western Canada has been about a third, 30% to 33% of our gross adds.

That number is clearly shifting upwards with our new priority on Shaw Mobile. And ARPU, and this is probably a longer conversation for another day, but ARPU will, of course, start to moderate as a result of lower-revenue Shaw Mobile customers, but of course, there's a value trade there with the Wireline side. So even if you look at the move we made earlier this week, it's $140 plus for our customers to buy that $25 plan on our Gig. So, you know, it's going to -- that will have a dilutive effect on ARPU, but it will have a materially positive effect at the residential level for Shaw.

So, we may be prepared, or are prepared, to trade some of those traditional metrics in a way that enhances value for the organization. So, I think there's going to be some kind of reporting things. We will have to get to probably next fiscal, then may change that. But just as you start to watch our metrics, know that there's going to be some impact from that over the next little while.

I'm thrilled with how well ARPU performed. I think we were nicely above consensus on the beat this quarter. And certainly, the more successful we are on -- in kind of Western Canada, you'll start to see those numbers moderate. We're definitely seeing impairment, not to the same extent of the big three, but we're seeing impairment that looks semipermanent on roaming.

Of course, ours was a larger -- rather a smaller percentage of our overall ARPU, but that's difficult to replace. And it's certainly difficult to replace against the backdrop of the Wireless intensity that we're seeing. So, my earlier comment about my optimism was driven by the fact that I think it's hurting the other guys worse than us. And if you are a believer in how well-managed this category has been,and I am over the years, you'd like to think that kind of greater sense prevails.

You know, aybe it's worth observing that, you know, for a long time, these have been growth businesses for the big three and right now, they're just not growth businesses, not really on a net basis. There's a lot of stuff kind of buried in the numbers, as we all know, in terms of new subscribers. And maybe they need to be managed more like a mature business than a growth business. And if that was the case, then I think we probably stopped doing stuff like 20 Gig for $50 and chasing the other around the market.

So, I'd like to think that MRC is going to be a bigger contributor to ARPU than it has been in the past. It's going to need to be if overages are gone, if roaming is impaired, and, you know, those look like, unfortunately, longer-term propositions at this point. So, you know, we remain enormously bullish on our Wireless business. We continue to believe that our growth aspirations are manageable and achievable.

But we are at the whip end of the market on a lot of things here, right? We're a small player, and we don't dictate the terms of market conditions. So maybe a question you will need to ask some other folks over the coming weeks.

Jeff Fan -- Scotiabank -- Analyst

OK. Thank you, both.

Paul McAleese -- Chief Executive Officer

Thank you.

Brad Shaw -- Executive Chair and Chief Executive Officer

Thank you, Jeff.

Operator

The next question comes from Aravinda Galappatthige with Canaccord. Please go ahead.

Aravinda Galappatthige -- Canaccord Genuity -- Analyst

Good morning, everyone. Thanks for taking my question. A couple from me. First of all, I think you alluded to sort of the Teck deal that you announced, I think, yesterday.

I wanted to kind of build a little bit on that and get your thoughts on that sort of product line, particularly in terms of economics as well as sort of, you know, the runway to kind of expand in that particular area. Private networks is getting more and more popular. So, wanted to get your thoughts on that and perhaps any kind of capital commitments that you'd have to employ to further that area. And secondly, on bad debt provisioning, I wanted to get a sense of what you're seeing in terms of collections? Is there any sort of variances that should be highlighted? And a quick follow-up on the Internet net adds.

I was wondering if you can talk a little bit more about the retention aspect. I mean, it sounds like it's mostly gross adds. But just on the retention aspect at the high end where there was, there continues to be sort of a more meaningful differential in pricing. I'll leave it there.

Thank you.

Paul McAleese -- Chief Executive Officer

Thanks, Aravinda. It's Paul. I'll take the first one and the third one, and Trevor will take the second one. Yeah, I'm thrilled with the Teck deal, and Katherine and the team, I think, did a great job of bringing up to market.

Really a first of its kind private LTE deal in this country, and we think the first of a number that we'll look to announce over the course of the coming quarters. This is a decent-sized opportunity and really a great spark. It's a great indication of the fact that there's still life in the resource sector in Western Canada in a lot of regards. We are seeing a lot of interest on deals like this.

There's been inbound even since the release. And the team continue to work that file. It is very efficient for us. It's one of those sort of wonderful opportunities of – you know, that's not spectrum that would have typically been deployed, you know, in any residential or consumer way.

The fact that we're able to deploy it in a manner that is so useful for those companies is really, really exciting. And it does kind of signal a new opportunity just broadly for our Wireless business. The capex side of it is actually quite efficient. Oftentimes, we're able to work the cost of that right into the deal.

And this is typically equipment that is owned and operated by the company themselves or third parties that they brought in on their behalf. So, it's quite efficient from a capex standpoint. And we are expecting to see more progress here over the coming quarters, but great work from the team there.

Trevor English -- Chief Financial and Corporate Development Officer

Yeah. Let's say they're sort of -- generally speaking, there have been a long-tenured deals as well. So, there's -- but to Paul's point, each deal is somewhat unique from a capital perspective, but most of that is generally covered by the customer. From a bad debt perspective and just collections in general, I'd say we continue to be extremely, you know, pleased from the payment history, both on the Wireline and the Wireless customers over the last number of months, or eight month,s since COVID-19 came about.

There hasn't been any significant material issues that we've had to deal with. We're watching it on a daily basis. If you remember, Aravinda, we took about a $5 million charge last quarter related to bad debt across the enterprise. We did take some incremental expense related to bad debt in Q4.

However, I would say it was fairly immaterial and was less than the charge that we took in Q3. So overall, you know, we think we've provisioned it appropriately. It's less than about $10 million, just around $10 million, a little bit less for the year. And again, we're very, very, very pleased with the payment of all of our customers.

And I think it goes to value proposition, specifically on the Wireless side in terms of the average ARPU, just over $40, you know, and the utility that we're providing to customers in their home and to businesses, they are paying their bills, and we're watching it closely. But it's clearly a risk going forward, Aravinda, and we'll update you and the entire street if there's material changes. But as we sit right now, here at, you know, October 30, we feel like we're in good shape.

Paul McAleese -- Chief Executive Officer

And Aravinda, back to me on your question about retention on Internet, and I'll maybe answer it a couple of different ways. We -- for a number of years, we were, frankly, losing ground to tell us in terms of the way the customers perceived our Wireline network, specifically the Internet product. And the launch of Fiber+ and our new rate plans back in May has very quickly started to turn that around. So, while I acknowledge the softness in Internet net adds in the quarter, I would draw your attention to the fact that we also had significantly better-than-expected contribution from that line of business as well.

So, we focused a little more on quality during the quarter while we were rebuilding that game plan that I spoke to earlier. And one of the things that has been a nice outcome is that we have started our 715-gig speed tiers, have started to appeal to part of the market that we were previously losing on a pretty much exclusive basis to TELUS. Those more affluent families, those folks that are looking to just simply improve and harden the network quality within their residents really are now provided with a choice in the market where previously there wasn't one. And we're seeing a nice uptick in our shift in demographics in terms of who's now buying that product.

So, encouraging signs on that front as we kind of move up into the right on the speed tiers. And then just on a separate related comment on retention, I'd also tell you that while it's early, Shaw Mobile is, by definition, a tool designed to secure and entrench our relationship with our existing Wireline subscribers. So, you know, by definition, to be a Shaw Mobile customer, you need to be a Shaw Internet -- qualified Shaw Internet customer. So, as we grow that market over the course of the coming quarters, we will essentially introduce into the math a cohort of subscribers who are essentially very, very well-secured and very well-protected from competitive offers.

And we essentially fall out of the denominator of potential churners. So, while it's early, we're starting to see some nice security on that front. And again, as designed, Shaw Mobile is there to protect and cover our Internet base higher-margin product side.

Aravinda Galappatthige -- Canaccord Genuity -- Analyst

Thank you.

Paul McAleese -- Chief Executive Officer

Thank you.

Operator

Your next question comes from Tim Casey with BMO. Please go ahead.

Tim Casey -- BMO Capital Markets -- Analyst

Yeah, thanks. A couple for me. Paul, I'm wondering if you could expand upon your comments about your concern regarding the monetization model for 5G that you see out there. You know, what kind of model would you be supportive of or aspire to with respect to that? And maybe if you can talk about how you're monetizing the private network model with Teck as [Inaudible] foray into that? And the other question was, could you talk a little bit about your digital onboarding ability in Wireless? You know, reduced foot traffic, those type of things, obviously, would hinder a traditional retail distribution model.

Just wondering if you can give any stats on how you're progressing with respect to onboarding people without the traditional model, you know, be it a hybrid model or a pure-online onboarding model? Thanks.

Paul McAleese -- Chief Executive Officer

Yeah, certainly. Thanks, Tim. Thanks for those. Yes, the comment about 5G monetization was more a reflection that I was hoping that the industry didn't simply absorb the cost -- the incremental costs of that 5G spectrum and buildout into a declining pricing environment.

And I appreciate that initially there was a signal from the market that it would be temporarily suspended and then monetized to some incremental degree, perhaps $10 or $15 more for those faster rate plans. And it looks like the market's kind of come off that. And now we're simply saying we're just going to -- as long as you're on a certain level of plan, we will include 5G. I -- you know, it's -- I would have liked to have seen a little more of a consumer test there and to see whether or not there was a capacity and willingness to pay for that.

Anybody that operates in Toronto and drives along the toll road that is the 407. Sometimes you pay for faster lanes and you're willing to do so. There would have been nice if there was an opportunity to kind of test that, and I'm not sure that we're going to get that opportunity. So, the risk here is that we spend billions of dollars on spectrum and build-out and simply just absorb it all.

So, from my standpoint, I would have preferred to see something that maybe look a little bit like the 3G LTE pricing back in the day where it was bit of a step-up to the higher speed. But again, we're not the driver of that particular pricing strategy. So, we will probably be the kind of the price taker on that front once the market decides where it's going to net out. On the private LTE deal, where the terms of those deals are, as you imagine, are confidential, but suffice it to say that we, as Trevor pointed out, these are long-term deals that are -- because they're built into these facilities, are very, very secure.

Essentially no churn, and very, very encouraging kind of from a pricing standpoint. So, we like the partnerships there. Digital onboarding, I would characterize us as being somewhat behind the industry, but I'll kind of charter -- we will fill in the blanks on the why. When we look at our Wireless business today, which has been historically 70% in Ontario, we compete against operators there, specifically Rogers and Bell, who have had the opportunity to curate their residential partners or residential customers for credit.

So really, a lot of what they -- when they talk about kind of clicks and bricks, I think they're often talking about, really, hybrid of recognizing that they know the creditworthiness of a lot of these households because of their Wireline relationship, and then able to sort of manage them accordingly. So today, in Ontario, for example, if someone wanted to buy a new iPhone 12 and gave me their address in Oshawa, we'd have a really difficult time determining whether that household was sufficiently creditworthy and kind of trustworthy from a fraud risk standpoint because I think we don't have any other relationship with them. Rogers or Bell, if they have a payment history with them on that home for the last three, or five, or 10 years, is in a much better position to establish whether or not that's a risk they can take. We -- so I think on Wireless in Ontario, they have an advantage there that is probably structurally permanent relative to us.

In the western part of the country, we've been busy working with our finance colleagues to develop exactly the same capabilities. And to make sure that our data analytics and our digital capabilities are one of our top development priorities. I'd say we're rapidly closing the gaps that exist between ourselves and the incumbents, but I'm quite comfortable saying that this is an area where we have lagged. Frankly, you know, having been the owner of this Wireless business for four years now, most of our priority early on, Tim, was making sure that we brought our network quality and distribution up to speed.

And these are some of the things that lacked. It would have been nice to have been more on top of the digital capabilities. And I'll take responsibility for not having done that over the last couple of years because I was in the seat. But it is something that we're now quickly bringing things up to speed on.

You know, one of the reasons I'm so excited about having partnerships for Wireless in the West that look like Walmart and Loblaws is because regardless of what might happen in traditional malls, a good friend of mine says, people still need to eat. So, we will continue to see traffic, considerable traffic, in Loblaws and Walmart's retail footprint here in Western Canada. And because of the strength of our partnership with them on the Wireless front, we will continue to have opportunities there as well. So, expect us to get better at digital.

Recognize that we probably have a structural disadvantage in Ontario and in the West, we will then have a structural advantage.

Tim Casey -- BMO Capital Markets -- Analyst

Thank for that. If I could just squeeze one follow-up in. Regarding Internet loading, and the aspiration you had set out earlier this year to get, you know, more of your fair share of net loading in Western Canada, do you think that's an achievable target for fiscal '21? Or are we more likely to see something trending to that in '22 or '23?

Paul McAleese -- Chief Executive Officer

Yes. There's nothing like someone bringing back your first comment from being in the new job. Thanks for that, Tim. You know, we -- I have enormous aspiration and confidence in our team that we'll be able to get our fair share.

Let me maybe take this opportunity to redefine fair share. It's a tricky piece of evaluation. And we had this conversation yesterday with our board around what is actually in the denominator for ourselves and tell us when we report. And without trying to sound like I'm hedging on this, one of the things we struggled with here is the lack of transparency, probably from both organizations, on what's in Internet net adds, is difficult to make an apples-to-apples comparison.

So, I don't think there's any debate that we have been in a losing position on market share over the course of the last number of years. But what I want to make sure we do as accurately as possible is not over or underreact to competitive moves that we may not necessarily have even an opportunity of sharing. So I'll use, for example, the market of [Inaudible] here where a large ski community that is covered by TELUS' wireless network but not really -- doesn't have much of a wireline presence for anybody. And TELUS has a very strong presence for their wireless hub product, which, I believe, gets reported as an Internet net add, and which we have absolutely no ability to have any market share there because we don't have deployed spectrum in that market.

So that likely counts in their net adds. There is the Internet for Good program, which they've been very aggressive with during COVID, which is obviously a very low-revenue piece of the pie. I -- our aspiration here, Tim, to be clear, is to ensure that we get our fair share where we compete. And I should have been more specific about that when I talked about it in April.

So, I'll clean that up now. But where we have facilities and where we compete against TELUS, that's what we're looking to get our fair share of.

Tim Casey -- BMO Capital Markets -- Analyst

Can you put a parameter on that? How much of your footprint would you say you have the ability to compete?

Paul McAleese -- Chief Executive Officer

Well, honestly, Tim, we're doing that analysis now. Our -- and when you think about fixed wireless, for example, that's an example – you know, we have probably somewhere between 200 thousand, 300 thousand households in Western Canada where we have wireless coverage but not wireline coverage. I suspect that number is significantly higher for TELUS. That's where we're doing that math now.

But it's probably going to have to wait for the next call for me to give you a more thorough answer on that one.

Tim Casey -- BMO Capital Markets -- Analyst

Thank you.

Paul McAleese -- Chief Executive Officer

Thank you.

Operator

The next question comes from David McFadgen with Cormark Securities. Please go ahead.

David McFadgen -- Cormark Securities -- Analyst

Hi. Thank you. Yeah, a couple of questions on Shaw Mobile. I don't know if you can provide us with these data points, but that would be helpful.

I was wondering if you could tell us what percentage of your net adds were actually Shaw Mobile in the quarter. And then of those Shaw Mobile net adds, what percent are taking the bundle? I would imagine, it's probably 100% or close to 100%. And then, lastly, when you look at the Internet performance in the quarter, has Shaw Mobile delivered any brand-new Internet customers for you? Or is it just too early because it just launched and all the Shaw Mobile customers are pre-existing Shaw Internet customers? Thanks.

Paul McAleese -- Chief Executive Officer

Good question. Thanks, David. Yeah, in order consistent with what the treatment that the incumbents used for delineating between brands, we won't be breaking out Shaw Mobile versus Freedom brand at any more than the others do between their flanker fighter and primary brands. So that -- just going forward, you won't see us break that out at any point.

It is, if you'll recall, we launched on July 30. So, we only had a month of that activity within the year's numbers. So – within, excuse me, the quarter's number. So you can kind of get a sense of how that may have impacted the quarter.

You're correct. 100% of the people that are on Shaw Mobile are in the bundle. So again, today, a qualifying event for Shaw Mobile is that you need to be within one of the applicable Internet plans. And to be clear, if you were to remove yourself from that Internet plan, your pricing changes on Shaw Mobile.

So, there is essentially a reward for staying within that bundle. And so far, we've seen essentially everybody stay within it. So, the churn on that group is exceedingly low during the quarter. And then -- sorry, the third question was on new subscribers, our new Internet subscribers.

Yeah, fundamentally, the early appeal of this, which you won't be surprised by is for existing subscribers. But increasingly, as you see some of the product changes we've talked about and some of the distribution changes, and then the move earlier this week to reward disproportionately people that take our higher-value plans, that will have a higher pull-through of competitive users, I suspect.

David McFadgen -- Cormark Securities -- Analyst

OK. And then maybe if I can just have one follow-up. Did you see any discernible negative impact of Freedom from the [Inaudible] of Shaw Mobile in the marketplace?

Paul McAleese -- Chief Executive Officer

I wouldn't call any of it negative. There is certainly a small degree of brand migrations, which we are very comfortable with. So, we do have people that are on Freedom who may also be a Shaw customer. And we were very prepared and quite happy with them coming over, locking -- moving from Freedom mobile over to Shaw and locking into the bundle.

We love that value trade, and if we can secure that, we'll take that all day long. It's a relatively small percentage, though, David. So, I wouldn't characterize it as something that's going to have an impact on any of the Freedom metrics.

David McFadgen -- Cormark Securities -- Analyst

OK. All right, Thanks so much.

Paul McAleese -- Chief Executive Officer

Thank you. Very welcome.

Operator

This concludes the question-and-answer session. I would like to hand the call back over to Mr. Shaw for his closing remarks.

Brad Shaw -- Executive Chair and Chief Executive Officer

Great. Thank you, operator, and our best wishes for everyone to stay safe, and we'll talk to you in the new year. Thank you.

Operator

[Operator signoff]

Duration: 61 minutes

Call participants:

Trevor English -- Chief Financial and Corporate Development Officer

Brad Shaw -- Executive Chair and Chief Executive Officer

Vince Valentini -- TD Securities -- Analyst

Paul McAleese -- Chief Executive Officer

Drew McReynolds -- RBC Capital Markets -- Analyst

Jeff Fan -- Scotiabank -- Analyst

Aravinda Galappatthige -- Canaccord Genuity -- Analyst

Tim Casey -- BMO Capital Markets -- Analyst

David McFadgen -- Cormark Securities -- Analyst

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