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BCE, inc (NYSE:BCE)
Q3 2021 Earnings Call
Nov 4, 2021, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the BCE Q3 2021 Results Conference Call.

I would now like to turn the meeting over to Mr. Thane Fotopoulos. Please go ahead, sir.

Thane Fotopoulos -- Vice President and Investor Relations

Thank you, Mo, and good morning to everybody. With me here today are Mirko Bibic, BCE's President and Chief Executive Officer; and Glen LeBlanc, our Chief Financial Officer. You can find all of our Q3 disclosure documents on the Investor Relations page of the bce.ca website, which we posted this morning. Before we begin, I'd like to draw your attention to our safe harbor statement reminding you that today's slide presentation and remarks made by Mirko and Glen during the call will include forward-looking information, and therefore, are subject to risks and uncertainties. Results could differ materially. We disclaim any obligation to update forward-looking statements, except as required by law. Please refer to the company's publicly filed documents for more details on assumptions and risks.

With that, I'll hand it over to Mirko.

Mirko Bibic -- President and Chief Executive Officer

Thank you, Thane, and good morning, everyone. Our Q3 results demonstrated another quarter of consistently strong and disciplined execution across all our operating segments that is firmly rooted in a strategic road map that has guided us over the past 18 months. Operationally, our objective was to improve steadily each quarter from the trough experienced in Q2 of 2020 when COVID began to significantly affect our business.

And that's exactly what we've done. Q3 marked a very notable milestone in our recovery as total revenue and adjusted EBITDA are for all intents and purposes back to pre-pandemic Q3 2019 levels, with consolidated service revenue up 3.6% and EBITDA 4.2% higher than last year despite ongoing COVID-related headwinds affecting wireless roaming, business wireline customer spending and media advertising.

Even as we focused on recovering from those impacts, we pushed ahead with our capex acceleration plan building the best broadband infrastructure and remaining comfortably on track to hit our upsized network expansion targets for 2021. We invested another $1.2 billion in new capital this quarter, 12% higher than last year on direct fiber and fixed wireless connections as well as further expanding mobile 5G coverage and deploying 3.5 gigahertz capable radios as we continue to get ready for the launch of true 5G next year.

We leveraged our accelerated broadband network plan, retail channel strength, improved direct sales capabilities and multi-brand strategy to deliver 266,919 total mobile phone, mobile connected device, retail Internet and IPTV net additions in Q3, an increase of 10% over last year. In wireless, our sharp focus on higher-value mobile phone loading continues to pay off.

Based on peers who have already reported Q3 results, we led the Canadian industry once again this quarter in terms of wireless service revenue, ARPU and EBITDA growth. These metrics really matter in terms of providing an indication of the health of our underlying business not just today but also going forward.

As our smartphone customer base grows, roaming rebounds, the decline in data overage reaches an equilibrium point and 5G revenues materialize more meaningfully these levers should continue to support superior future revenue growth and operating profitability. I would also add that we achieved these results against the backdrop of lower wireless prices as we continue to make more lower priced options available that deliver significant value to consumers, and support the government's public policy objectives.

According to the most recent StatCan data pricing for wireless services has declined 25% since September 2019 at a time when overall inflation has been growing rapidly, while the price Canadians pay for all goods and services combined has actually increased 5%. For Bell Wireline, as our broadband fiber footprint advantage keeps expanding, we see the immediate tangible benefits on residential subscriber growth, market share and Internet revenue.

In fact, this past quarter, we delivered the highest number of Internet net adds in 15 years and strong residential Internet revenue growth of 9%. Clearly, the strategy is working. It's the reason why we're so confident in our accelerated capital investment plan. In business wireline, as the team continues to carefully manage near-term COVID financial impacts, which Glen will detail momentarily, our organization is also focused on putting the building blocks in place to ensure Bell is strategically well positioned to capture an industry-leading share of the IoT and next-generation solutions revenue enabled by the convergence of 5G and fiber.

As you know, I have a lot of optimism for the growth potential in this area. There are going to be thousands of applicants and they'll need access to our advanced broadband networks, edge data centers and IoT platforms. We are already leading the way in building momentum with innovative new consumer and business applications that leverage the speed and ultra-low latency of Bell's leading 5G network as certified by PCMag, Ookla and Global Wireless Solutions in their most recent studies of mobile network performance and new MEC alliances with AWS and Google Cloud, which we discussed last quarter.

Recent 5G consumer initiatives include the launch of TSN 5G view and an augmented reality collaboration with TikTok. On the enterprise side of things, we're working with Canadian AI start-up, Tiny Mile, to provide 5G connectivity for its growing food delivery robots in downtown Toronto. We also entered into a partnership with VMware to offer their advanced cloud software, which builds on Bell's agreement with AWS to support 5G innovation and accelerate cloud adoption across Canada.

Notably, Bell is the first Canadian communications provider to offer AWS-powered 5G multi-access edge computing for business and government customers. Most recently, our business markets unit launched smart supply chain powered by Bell IoT Smart Connect, a Software-as-a-Service IoT aggregation solution designed for fleet and supply chain operators. And just earlier this week, we announced our newest collaboration with Esri, Canada's leading geographic information systems provider to create smart city IoT solutions for municipal governments across the country.

At Bell Media, TV advertising continued to strengthen with audiences that remain industry-leading. In fact, TV advertising revenue this quarter was 10% ahead of pre-COVID Q3 2019 levels. That speaks to the breadth and quality of our programming that differentiates us from domestic broadcasters and foreign content producers alike. Even though the recovery in radio and out-of-home was suppressed by the pandemic's fourth wave, results are better than last year.

Ultimately, advertiser demand will come back once normal activity resumes with a broader reopening. That's the traditional side of our media business. Then tremendous optimism for our digital-first strategy. The goal is to grab a bigger share of the digital ads spend in Canada, where global Internet and social media platforms dominate today. We will grab a bigger share with our asset mix and investments in ad tech and digital content platforms and by leveraging big data insights. The strategy is working.

We're seeing continued momentum there. Digital revenues now represents 22% of total Bell Media revenue, up from 9% only four years ago. So a lot of potential in the media business going forward. And we're continuing to make good progress as well on a number of Bell for better ESG initiatives. We're already taking concrete actions to reduce greenhouse gas emissions in line with the Paris Climate Agreement.

In support of World Climate Action Day on October 15, we announced that we have saved 71 kilotonnes of carbon dioxide equivalent emissions since 2008 and purchased more than 175 new electric vehicles that will be put into service by year-end. Bell has also partnered with an Universite de Sherbrooke to develop solar technology that will help reduce our reliance on diesel generators to power communications towers used to connect remote communities.

Recent field tests of the solar optimization technology have achieved diesel fuel reductions of 75%, significantly exceeding our goal of 40%. I'll now turn to slide five for an overview of some key operating metrics for Q3, and I'm going to start with wireless. The back-to-school period this year felt more like 2019 with all retail stores reopened and increased consumer activity. We added 115,000 new net postpaid mobile phone subscribers, up a strong 46% compared to Q3 of last year and even 22,000 higher than Q3 of 2019.

Notably, this result reflects significant year-over-year growth on the Bell brand. So that's very positive. Customers are coming back into stores, so pent-up demand helped drive higher transaction volumes. We're also so much better at direct and digital channel sales than we were a year ago. And postpaid churn of 0.93% was our lowest ever Q3 result and five basis points better than last year even with the step-up in competitive intensity that's typical and expected during this time of the year.

That said, we were quite measured and more targeted in our competitive approach during Q3. I've said this before, but our objective is not to lead in growth slowing. The goal is to get the right amount of market share and focus on higher-value smartphone subscribers to grow service revenue and ARPU. Wireless service revenue in Q3 was up an industry-leading 5%, yielding 2.3% higher ARPU.

ABPU growth was more modest at 1.1%, due mainly to a higher mix of bring your own device customers subscriber base versus last year and more postpaid customers on expired equipment installment plans. For mobile connected devices, although we added 71,000 new IoT subscriptions, up 73% over last year, total net adds, as you'll see, were only 33,000 as we continue to move away from unprofitable low-ARPU data device transactions.

In prepaid, we added 22,000 new customers which is our best quarterly result in the past year, solid performance that is expected to improve as immigration and international travel resume more fully. Turning to wireline. Again, really a very strong quarter from an RGU perspective with 34,000 new net retail customer additions, more than 2.5 times higher than last year.

This is only the second quarter in the past five years where we've achieved positive total wireline retail net adds, including home phone and satellite TV, which is a testament to the advantages of our accelerated broadband network investments and TV product leadership. At Bell Internet, we delivered 66,000 retail net customer additions. This is 5% higher than last year when we saw exceptionally strong demand because of COVID. And as I said earlier, and it bears repeating, this was our best quarterly result in 15 years. On the TV side of things, also a great result with our best IPTV net adds since the third quarter of 2019 as we benefited from the return of sports and a more typical student inward session this year.

We added 32,000 new subscribers this quarter, up a strong 68% versus 2020. Satellite net customer losses remained more or less stable compared to last year at around 21,000, while home phone losses improved 14% to 43,000. Turning to Bell Media. As I said, TV advertising was strong. We're back to the content funnel and timing of that content being what it used to be, both for live sports and other TV programming.

On the heels of our most successful upfront season ever, advertiser demand was robust, translating into strong bookings that drove a 25% year-over-year increase in TV advertising revenue. This was supported by leading viewership across all Bell Media properties. TSN and RDS were the top-ranked sports TV channels for Q3 and for the 2020-2021 broadcast year.

While our English language entertainment specialty channels achieved record rankings, claiming the top three spots for CTV Comedy, Discovery and CTV Drama. And Noovo continued to gain viewership over its French language competitors with audiences up 18% in the current fall TV season. Consistent with our strategic focus to lean in more aggressively on digital, we continue to make good progress in growing our streaming distribution platforms and digital advertising markets in Q3.Total Crave subs increased 5% over last year while customers on direct streaming platforms grew a strong 33%.

This, together with our rapidly expanding CTV AVOD product and continued scaling of the SAM TV sales tool contributed to excellent digital revenue growth of 32% in Q3. So in summary, our strategic investments in advanced networks and industry-leading services significantly improved customer experience and outstanding operational execution by the Bell team delivered very strong year-over-year operating results in Q3. And perhaps more importantly, we brought the business's financial performance back to 2019 levels despite still facing ongoing COVID headwinds. Thank you.

And on that, I'll turn the call over to Glen for a more detailed review of our financial results.

Glen LeBlanc -- Chief Financial Officer and Vice Chair

Thank you, Mirko, and good morning, everyone. I'm going to begin on slide six. Our consolidated Q3 financials demonstrated another step forward in our COVID recovery as well as continued operational excellence and disciplined execution by the Bell team. With positive year-over-year contributions from all Bell operating segments, we delivered strong service revenue growth of 3.6% in Q3.

Total revenue was only up 0.8% due to the softer wireline data equipment and mobile device sales versus last year. However, this did not affect overall adjusted EBITDA, which increased a healthy 4.2% as product revenues are generally low margin. Net earnings were up 9.9% year-over-year on the flow-through of strong EBITDA growth and a noncash net mark-to-market equity derivative gain resulted in from the sharp increase in BCE share price this past quarter.

Despite higher earnings, free cash flow was down approximately $460 million this quarter, as expected, due to the higher capital spending under our two-year accelerated broadband network plan, higher cash taxes and a reduction in cash related to the timing of working capital. Turning to Bell Wireless on slide seven, another strong quarter with service revenue and EBITDA higher than Q3 2019 even without a material benefit from roaming, which improved only marginally this quarter and still remains 55% below pre-pandemic levels.

Bell again delivered strong service revenue growth, which increased 5% versus last year. This result was a reflection of strong mobile phone postpaid subscriber base growth over the past year, driven by our disciplined focus on higher-value smartphone loadings, higher ARPU as customers move to higher tiered unlimited plans and continued strong demand for Bell's IoT solutions.

The decline in data overage revenue improved this quarter despite a 74% increase in unlimited planned subscribers since last year. Product revenue was down 13.6% year-over-year due to lower upgrade volumes and a greater mix of bring your own device customers. The decrease in overall customer transaction can be attributed to the global supply chain handset constraints that we are actively managing with our suppliers, more refurbished premium brand handsets available in the secondary market as well as subscribers keeping their handsets longer, which is good for us from both a working capital and a customer lifetime value perspective.

We believe longer device lifetimes are the positive byproduct of the move to equipment installment plans two years ago, and the lack of new iconic handsets to generate buzz and stimulate the market. That said, these factors did not hamper our ability to generate higher year-over-year subscriber activations this quarter. As for EBITDA, it was up a healthy 5.6%.

This was driven by the flow-through of the strong service revenue growth and a 5.6% reduction in operating costs that yielded a 2.8-point increase in margin to 44%. Turning over to slide eight on Bell Wireline. Total service revenue growth in Q3 was positive. This was driven by strong continued residential wireline performance that saw top line growth of 2.3% on the back of 9% year-over-year increase in Internet revenue.

This, together with a 1.8% lower operating cost from fiber-related operating efficiencies and the non-recurrence of certain COVID-related costs from last year delivered solid EBITDA growth of 1% with a higher year-over-year margin of 44.2%. In business wireline, we're lapping some pretty tough comps from Q3 of last year when demand for conferencing services and voice connectivity peaked, and data equipment product sales spiked with large enterprise and public sector customers, spending on capacity and facilities to connect more employees working remotely.

However, on a positive note, as the reopening of the economy takes hold more fully, we are seeing the resumption of some customers spending on projects that were delayed because of COVID and modest growth from new services in the area of cloud computing. This drove a close to 4% increase in service solutions revenue which helped maintain the year-over-year rate of the business service revenue decline relatively stable when compared to the first two quarters of 2021.

Moving to slide nine, on Bell Media. In short, a strong set of financial results for Q3 as the recovery to pre-COVID levels of performance steadily continues. We saw higher year-over-year advertising spending across all media platforms with TV tracking ahead of Q3 2019 levels. While a rebound in radio and out-of-home remain modest, given only a partial reopening of the economy.

Total advertising increased 19%, reflecting stronger year-over-year conventional and specially TV performance from the timelier start to the new fall TV programming season this year more live sporting events compared to 2020 and incremental revenue generated from the federal election. As a result of the higher year-over-year advertising and a 12% increase in subscriber revenue, reflecting a growing digital contribution. Total media revenue was up 14.5%, which drove a 20.8% higher EBITDA in the quarter.

However, EBITDA is expected to be significantly impacted in Q4, despite the expectation for continued healthy revenue growth due to an acceleration in programming costs and broadcast rights reflecting the return to a regular sports schedule this year and a higher volume of original TV productions compared to 2020 when cancellations and delays had a favorable impact on our operating costs last year.

Slide 10 summarizes the main components of adjusted EPS for Q3, which was $0.82 per share, up 3.8% compared to last year. Higher EBITDA was the key driver, contributing $0.08 per share of earnings growth this quarter. This was partially offset by an increase in depreciation and amortization expense driven by the growth in our capital assets and the accelerated depreciation of 4G network elements, as we transition to 5G and a higher year-over-year equity loss pickup from MLSE.

Q3 is typically a seasonally low quarter for MLSE. However, last year, they benefited from the resumption of major league sports following the suspension of play at the start of COVID. Let's turn to slide 11 on free cash flow. And consistent with our expectations and plan for the year, we generated $571 million of free cash flow in Q3, down $463 million from 2020.

Although EBITDA effectively returned to pre-COVID levels this quarter, contributing favorably to free cash flow, this was more than offset by the planned year-over-year step-up in capital spending, as I previously referenced. This quarter's results also reflect higher cash taxes due to the return to a normal installment payment schedule this year, and higher taxable income as well as a decrease in working capital from the growth in accounts receivable and timing of supplier payments.

BCE's liquidity position remains very strong with $6.1 billion of available cash at the end of September. This excludes the final 80% payment of approximately $1.65 billion for 3.5 gigahertz wireless spectrum acquired at the recently concluded auction, which has been pushed into Q4. Our balance sheet is well structured with an average term to maturity of just over 13 years on our outstanding MTNs.

Historically low after-tax cost of public debt of approximately 2.8% and the net debt leverage ratio that is the lowest among Canadian direct peers at approximately 2.9 times adjusted EBITDA. We expect this to increase closer to 3.1 times EBITDA pro forma the final spectrum payment. To wrap up on slide 12. With three quarters of strong consolidated growth already reported.

We are on track to deliver on the financial guidance targets provided in February, even with certain COVID impacts expected to persist in Q4. As we begin to look out to 2022, BCE's cash flow remains strong and reliable with growth opportunities ahead from continued COVID recovery, our accelerated fiber network investment 5G and digital media advertising.

And on that, I'll turn the call back over to Thane, and the operator to begin Q&A portion of the call.

Thane Fotopoulos -- Vice President and Investor Relations

Great. Thanks, Glen. So before we start the Q&A period, I'd like to ask you to limit yourselves to one question and a brief follow-up, so we can get to everybody in the queue and if we have some additional time circle back afterwards. So thank you for that.

With that mode, we're ready to take our first question.

Questions and Answers:

Operator

[Operator Instructions] Our first question is from Jeff Fan from Scotiabank. Please go ahead.

Jeff Fan -- Scotiabank -- Analyst

Good morning everyone. Great numbers. Mirko, I want to ask about the Magnum business initiatives that you highlighted. Were there any revenue contribution coming from these yet in the quarter? If not, can you talk a little bit about the timing and perhaps the nature of the revenue streams? Like how are they structured with these partners? And the related question is with these initiatives, what's helping you to get these initiatives in place? I'm just wondering is it the network? Is it the hyperscaler relationships? Or is it the B2B relationships that you have? Can you just talk a little bit about that? Thanks.

Mirko Bibic -- President and Chief Executive Officer

Thanks, Jeff. Thanks for the question. So on the enterprise side, particular like what we're doing, our approach is, obviously, managing the puts and takes of COVID in the near term as we continue to drive forward with our kind of customaries for lack of work. But at the same time, as you know, because I've been talking about it for the last few quarters, I'm really focused on making sure this organization puts in place the building blocks for industry leadership as the new wave of revenues come our way. So that's IoT scaling, that's 5G, converged 5G and fiber and that's multi-access edge compute revenues and then moving up kind of getting revenue further up the stack beyond mirror connectivity. So that's what we're trying to do, putting in place those building blocks. And I think the reason we're seeing a lot of early success in terms of securing deals or partnerships is really because of the asset mix we have. We have kind of an expanding fiber footprint. We have a leading 5G network. We have the largest presence in terms of kind of multi-access edge centers that we can deploy with hyperscaler partners. We have the most fiberized cell sites, and we have distribution leadership in the enterprise space. So kind of we're an attractive partner either for the hyperscalers or for application developers and you're seeing that manifest itself in terms of some of these announcements. Now you asked about the contribution from these partnerships. They're just beginning, right? So it's early days. What we're doing here, again, is putting in place the building blocks, creating customer awareness, driving attention to what we can offer in this space. The revenues will come. And then there's also the IoT segment, like with a more traditional IoT segment. And you saw our 73% growth in that, Jeff. That business has grown. It's a pretty sizable business now and it continues to grow. So that's going to -- I'm sure the team will continue to scale that. I hope that helps to answer your question.

Jeff Fan -- Scotiabank -- Analyst

So I guess just to clarify, the 5% service revenue growth that you're getting in wireless today, I mean, that's really coming from the consumer business, the existing business, the high-value segment that you talked about, nothing from this segment yet?

Mirko Bibic -- President and Chief Executive Officer

That's right. But it's not just the consumer, right? It's also the more traditional mobile phone commercial enterprise segment as well as consumer, yes.

Jeff Fan -- Scotiabank -- Analyst

Ok, Great. Thank you.

Operator

Thank you, Our following question is from Vince Valentini from TD Securities. Please go ahead.

Vince Valentini -- TD Securities -- Analyst

Yes. Thank you so much. And good set of results as well. Mirko, I'm hoping you can unpack the wireless market for me because I'm bit confused. Quebec reported this morning, and they said they took 37% share of the gross adds in Quebec this quarter. We've seen Shaw report, which seems to suggest Shaw Mobile still adding a healthy amount of customers in Western Canada. And of course, we saw 175,000 postpaid ads by Rogers a couple of weeks ago. So where is -- and your results were very strong as well. So where is all the strength coming from? Are you gaining share or doing very well in sort of some other pockets of the country other than the West and Quebec? If there's any color you can provide on that or just more overall color on how the market is so strong for everybody would be much appreciated.

Mirko Bibic -- President and Chief Executive Officer

Yes. I mean I think the market has kind of been pent-up demand essentially was, I'd say, Vince, that and we're all benefiting from a little bit of the rising tide lifts all boats kind of approach to this. But in our case, I'm quite pleased with our performance in pretty much every geography, Vince and focused particularly on what we're doing. And I think our results are a function of the strategy that we put in place and our strong execution against that strategy. So again, repeating myself, but obviously, quality smartphone loading, and in our case, particularly significant growth on the Bell brand. We've managed data overage really well. Like I'm really continue to be very pleased with the team's performance on managing the data overage decline. Prepaid is starting to come back. So maybe a little bit of frothiness there because there is some competitive activity in the flanker segment, which had an impact prepaid, but we nevertheless did quite well. And stores coming back helped in terms of capturing that pent-up demand. And as I said in my opening remarks, we're so, so much better at direct sales than we were a year ago. And finally, churn is helping those numbers. Like we -- our customer experience improvements are manifesting themselves in that record low churn, and that's obviously helping our underlying results.

Vince Valentini -- TD Securities -- Analyst

Okay. Maybe just a follow-up, which also relates to wireless market conditions going forward. Do you have any update on how long it's going to be before we get any sort of final rules and rates surrounding the CRTC's MVNO regime?

Mirko Bibic -- President and Chief Executive Officer

I don't have a good guess on that, Vince.

Vince Valentini -- TD Securities -- Analyst

Thank you.

Operator

Thank you. Our following question is from Jerome Dubreuil from Desjardins. Please go ahead.

Jerome Dubreuil -- Desjardins -- Analyst

Thanks for taking my question. Good morning everyone. So you made a comment on media EBITDA in the fourth quarter, possibly being significantly impacted. How you've commented on that previously, but now you might seem to put a bit more emphasis on this. So I'm wondering if you can please quantify this.

Mirko Bibic -- President and Chief Executive Officer

Well, Good morning. certainly, I'm not going to be able to provide Q4 outlook details, but let me just explain and unpack what I said. Generally, year-over-year in our media business, the sports schedules and the TV programming schedules line up such that you don't have a large differential in the recognition of your programming costs. Well, obviously, with the pandemic, we had a material shift in programming cancellation of programming and live sports that was delayed in their start. So the recognition of the broadcast revenues moved into Q3. So the -- for the sports. So what we're having happened here is that when we look at this year -- or excuse me, at Q3, Q4, when we look at this year, what's going to happen is that we are going to have a much higher recognition of the COGS related to the broadcast revenue recognition. So last year, we didn't have that COGS recognition, so it propped up the earnings. So this year, there's going to be a headwind on that. It's really nothing more than timing and it's nothing to do with trends and there's nothing to be alarmed by it. It's just the year-over-year differential on the recognition of the COGS.

Jerome Dubreuil -- Desjardins -- Analyst

That's helpful. And maybe a follow-up. You were confident earlier in the year regarding possible pension contribution positives probably next year. Given the increased interest rates, do you still have this view?

Mirko Bibic -- President and Chief Executive Officer

Yes. Great question. All of our major defined benefit plans are in great shape. They are in a solvency surplus position. As a matter of fact, our largest DB plan is at 109% funded position at the end of Q3. So I would say we've gained more and more confidence on contribution holidays, and now we're at a point that contribution holidays are imminent. It's no longer and if it's just a when. I'll provide more insight on that in February, as I see where year-end rates end on December 31. But contribution holidays are imminent and could start as early as 2022.

Jerome Dubreuil -- Desjardins -- Analyst

Thank you.

Mirko Bibic -- President and Chief Executive Officer

You're welcome. Thanks for the question.

Operator

Thank you. The following question is from Simon Flannery from Morgan Stanley. Please go ahead.

Simon Flannery -- Morgan Stanley -- Analyst

Thank you. Good morning, I wanted to touch on the broadband business, if I could, another strong quarter. And it was really nice to see the broadband momentum given what we saw in the U.S. with some of the cable companies reporting ads down 50% year-over-year. So perhaps you could just give us a little bit of color how you see the momentum on broadband? What's driving that? And it would be really great if you could give us more color on the fiber opportunity given usually first pass penetration is going to kick in at a low level, but ramp over time. So presumably, you've got a bit of a tailwind from that. So any color around sustainability would be great.Thank you.

Mirko Bibic -- President and Chief Executive Officer

Well, thanks for the question. I look to start with the point that our fiber strategy is working, and we're on track on the capital acceleration program, which -- a lot of which, as you know, is going into fiber. So there's -- basically, that's to kind of convey that there still is runway here. We've done a tremendous job over the last few years, in particular, the last two, three years to ramp up our fiber coverage across our footprint, but there's still a ways to go. And I view that only as an optimistic scenario because the more fiber we lay, the more penetration we will deliver. In some -- again some of our cable competitors, we're about 50% fiber overlap, and we're doing extremely well. So we got 50% more to go. So we'll continue to do very well for quiet a while. And really, the underlying trend is there's a customer shift to quality. That's the bottom line. And it's not like a onetime COVID impact if you need connectivity in your home, you need connectivity in your home, you're not going to disconnect once COVID subsides. So it's the shift to quality. And in terms of kind of financial performance that comes with it, we all know like we've got 10 years of experience now with fiber. Churn is significantly lower. We have fiber. Lifetime value can be up to upwards of 50% better. Our ARPU growth is stronger, we have fiber. You mentioned the penetration growth and then on the cost side. The annual support and service costs are materially lower where we have fiber. So I think there's the momentum ought to continue, both on subscriber loadings and on the financial performance associated with that asset.

Simon Flannery -- Morgan Stanley -- Analyst

Great. Just one follow-up. To what extent are the gross adds on broadband coming when people move? Or is this happening without a move?

Mirko Bibic -- President and Chief Executive Officer

Well, I think our results, particularly on the financial side reflect a pretty healthy balance between volume, tier mix and price. I don't know if that directly answers your question, but I think basically what we're doing is we're getting a nice balance between new to Bell customer additions and existing Bell customers you're migrating from legacy technology to new technology and customers migrating up to higher speeds.

Simon Flannery -- Morgan Stanley -- Analyst

Great, Thanks a lot.

Operator

Thank you. The following question is from Tim Casey from BMO. Please go ahead.

Tim Casey -- BMO -- Analyst

Hello, Thanks. Goodmorning, Mirko, two from me. One, you talked about BYOD being a bigger mix. Is that something that you're stimulating from your call centers and your promotional activity? Or is that driven by the market in terms of supply chain issues? Or do you think that is driven by a change in customer preferences away from subsidized devices? And second question, just a follow-up on an earlier one related to the timing on clarity with respect to MVNO rates and whatnot. Could you -- I realize you don't have a timetable, but could you tell us how that dynamic evolves? Is it a -- like are there negotiations going on? Or is it just kind of a black box in the regulator within the regulator, and then let you know at some point down the road? Any color you could provide there would be helpful.Thank you.

Mirko Bibic -- President and Chief Executive Officer

Well, on the second one first, Tim, on the second question first, and the model is, the model is designed to encourage negotiations first and in the absence of successful negotiations, then it moves over to the regulators. So it isn't -- doesn't kind of first sit with the regulator in that box, as you said. And I now leave it at that. On the first question, in terms of the BYOD volumes. I think it's a mix of all the factors that you actually laid out. So that you mean you laid that out quite nicely. I think the supply chain issues are definitely a part of the growing mix of bring your own device customers. Tim, but on the other hand, what you're seeing like -- what we're seeing with this phenomenon right now is you're starting to actually see the structural benefits of installment plans as our first cohort of installment customers are reaching the end of their first two-year contracts. They're actually hanging on to their devices longer because they paid for them, and combine that with kind of the supply chain issues, they're also motivated to hang on to their devices longer. And as Glen mentioned in his opening remarks, I mean that's good for the economics of our business and the overall lifetime value and what's particularly interesting here or a particular benefit here, they're not churning away. And that's due to the vast improvements we've made in our customer experience. So financially speaking, right now, kind of that structural shift certainly has been a benefit.

Tim Casey -- BMO -- Analyst

Thank you.

Operator

Thank you. Following question is from Drew McReynolds from RBC Capital Markets. Please go ahead

Drew McReynolds -- RBC Capital Markets -- Analyst

Yes, Thank you very much. Good morning. Following up on, I guess, Tim's question, broadening it out, Mirko to wireless EBITDA margins just in general. It looks as if there should be certainly some expansion looking forward there's obviously, operating leverage that you have to roaming coming back it seems like equipment margins and the IP impact has been positive. And then we're seeing lower churn, you've got digital initiatives and BYOD. Just love your thoughts, obviously, not looking for specific guidance going forward, but just kind of the structural tailwinds here for wireless margins for Bell specifically?

Glen LeBlanc -- Chief Financial Officer and Vice Chair

Good morning Drew, it's Glen. Thank you for your question. Look, we're extremely pleased with our wireless performance and our wireless margins, and I would agree with all of your comments as we look forward that we have some great opportunity for margin expansion. But we also have pressures in the business as we manage the government's desire to ensure affordable wireless pricing in this country. So we're managing that. But all of that said, I think we have some healthy upside for margin management. I think this past quarter is really demonstrative of what we can do when we focus on the high-value customer and what we can do to drive 5% service revenue growth and a healthy 5.6% EBITDA by focusing on the right customer segment. You are right that roaming has been slower to return than we would have forecasted, and we expect that -- and I would even say early indicators in the October tell me that recovery is starting to happen. So we'll expect that to give us a little bit of a tailwind for calendar 2022. So I would say, yes, look, healthy margins remain in that business. We have to manage the pricing pressures and the competitive landscape, but we have all kinds of opportunity, and as you alluded to enrolling will be a tailwind to help us with that. So positive '22 for sure, Drew.

Drew McReynolds -- RBC Capital Markets -- Analyst

And just while you're there, congrats on the 109% solvency surplus just for those on the line that have lived through pension questions for a decade, it's quite amazing. A follow-up just on the Internet side, again, just really stunning kind of momentum on residential Internet. Wondering if you can unpack a little bit in terms of what the fixed wireless contribution is to the overall trend there. That would be great.Thank you.

Glen LeBlanc -- Chief Financial Officer and Vice Chair

Yes, we've had good growth on the fixed wireless, of course. We -- and you'd understand why and when we come into a community that has had very poor Internet service or no Internet service, and we come with quite a robust fixed wireless Bell branded solution. The uptake is strong. So there's been -- the numbers that you see here are really a reflection of extremely strong growth on the fiber side, good growth on the WHI or fixed wireless side and losses on the legacy copper side.

Drew McReynolds -- RBC Capital Markets -- Analyst

Got it, Thank you.

Operator

Thank you. The following question is from Aravinda Galappatthige from Canaccord Genuity. Please go ahead.

Aravinda Galappatthige -- Canaccord Genuity -- Analyst

Hi, Thanks for taking my question. Congrats on the very consistent results. I wanted to start with Internet. I know you've discussed the drivers of the 9% growth number. I wanted to sort of go back to one element there. I know that one of the items that may have helped you is sort of the somewhat tepid promotional activity through most of '20 and perhaps even the early part of '21. I was wondering if you can kind of give me an update as to where things stand on that front? Are you starting to see some of those discounting, some of that promotional activity come back? And then a quick follow-up on the media side, 22% of it being digital is definitely encouraging. I know that a bigger part of that is still Crave. Any kind of insight you can give us as to where Crave's profitability is that at this point would be helpful as well.

Mirko Bibic -- President and Chief Executive Officer

Yes. So on the -- Glen, why don't you take the Crave?

Glen LeBlanc -- Chief Financial Officer and Vice Chair

Yes. So obviously, we're not going to give specifics, but Crave continues to be a profitable provider -- a profitable part of our media business and overall profits to BCE as a whole. Each quarter, as we expand our subscriber base, that only gets better. And as we mentioned, when we had a 5% subscriber base increase. We're able to move further and further to direct-to-consumer with our customer base, as Mirko mentioned earlier, going 33%. And that is -- that is a very simple delivery mechanism for us. So that even provides a greater opportunity for margin improvement. But Crave has been a positive contributor and for BCE for some time now. And I only see that expanding as we continue to grow the subscriber base.

Mirko Bibic -- President and Chief Executive Officer

And thank you, Glen. On the first question, I think you see our financial performance on the Internet side, which continues to be strong, and that's strong gains pretty strong showing last year. In other words, we're lapping a pretty strong Q3 2020, and we're still delivering some good growth. And -- but I would say, Aravinda, that the promotional intensity has come back a little bit in Q3 and into Q4, especially compared to last year. So we're managing through that. It is a competitive environment. But we're still able to deliver the results you see despite some of that promotional intensity coming back.

Aravinda Galappatthige -- Canaccord Genuity -- Analyst

Thank you.

Operator

Thank you, The following question is from Sebastiano Petti from JPMorgan. Please go ahead.

Sebastiano Petti -- JPMorgan -- Analyst

Great. Thanks for taking my question. Just following up on the BYOD and the elongated device upgrade cycle, the dynamics that we have seen in the U.S. is that this will ultimately lead to a lower switching pool over time and could therefore create challenges on the loading front. Could you perhaps update us on where you are with the IP penetration today? And maybe any color around the transition to unlimited? And to that point, just following up, there remains a question in the U.S. as you shift to 5G, do consumers understand the importance of the benefits of 5G? And will that be a tailwind to not only loading but service revenue growth as you walk folks up to rate later. So if you could just comment on those two things, that would be great. Thank you.

Mirko Bibic -- President and Chief Executive Officer

Okay. So thank you. Look, I won't comment or give a particular disclosure on our unlimited plan penetration or EIP penetration either. I would say that customers continue to move over to unlimited. As I mentioned in my opening remarks, I'm quite happy with how we're managing that whole shift. When consumers move to unlimited, like 60% are migrating up to higher rate plans, which is positive. And of course, I'm parking the overage impacts for when I say that. But then now if I reintroduce the overage impacts, as you know, we've managed that quite well to the point where it's actually no longer a headwind or a tailwind, and I think we'll reach an equilibrium point pretty soon on data overage decline. On the installment plans, as I mentioned earlier, I think you're seeing the structural benefits with the elongated device upgrade cycle that you mentioned. I think on the 5G upgrade cycle, I do believe it will come. I mean we're seeing scaling of 5G subscriber ship right now, and it's continuing with double the data usage on 5G compared to 4G. So that trend continues. 5G customers continue to spend more than 4G customers. So that trend is continuing as well. And I mean, we'll see. I mean, there may be some headwinds as we go through this, and they may be the ones that you identified. But on the other hand, think about all the 5G, IoT, MEC revenues that we'll be able to generate because we have 5G networks and edge and fiberized cell sites and low latency solutions, etc., etc.. So there's a ton of opportunity on the enterprise side as well.

Sebastiano Petti -- JPMorgan -- Analyst

Great. And one quick follow-up. Glen, any color perhaps you could give on the lower opex in the quarter in underlying drivers of that on the -- I'm sorry, on the wireless side?

Glen LeBlanc -- Chief Financial Officer and Vice Chair

Yes. The biggest driver on the wireless side is the fact that product sales were down so much. So we had, as I mentioned in my opening remarks, significant softness in product sales related to the supply chain issues. So obviously, the associated product COGS is the main driver of that.

Sebastiano Petti -- JPMorgan -- Analyst

Thanks.

Operator

Thank you. A following question is from Batya Levi from UBS. Please go ahead.

Batya Levi -- UBS -- Analyst

Great, Thank you.Can you talk a little bit about the trends you're seeing in the enterprise segment, aside from the impact of nonrecurring COVID-related sales? But what do you see in terms of maybe any change in demand for type of services in the funnel and the pricing environment? And just a quick follow-up on -- with fixed wireless. Can you share any maybe speed performance metrics and usage that you see from subscribers. Thank you.

Mirko Bibic -- President and Chief Executive Officer

On the second one, you have to follow-up with to the extent that there's information there that we can provide. On the first one, look, I think we're seeing some IT spending coming back. There's modest growth that's encouraging in the cloud computing space. And so we are seeing some growth in business service solutions. So that -- some of that spending is coming back, again, an encouraging trend. And the service revenue performance essentially been quite consistent with previous quarters. So there's not much more to add than what I've said in the past, and you actually in your question asked me not to kind of really park the kind of COVID-related bump in spending last year. So I would just basically answer to say it's more or less what we've seen in the last two or three quarters, and with some delays in spending in some categories and some spending coming back, particularly in some of the solution business solution.

Batya Levi -- UBS -- Analyst

And anything in the pricing environment you could call out?

Mirko Bibic -- President and Chief Executive Officer

No. I mean the enterprise space continues to be pretty competitive, and it all depends on which category of service you're talking about.

Batya Levi -- UBS -- Analyst

Alright. Thank you.

Operator

Thank you. We have no further questions registered at this time. I would now like to turn the meeting back over to Mr. Fotopoulos.

Thane Fotopoulos -- Vice President and Investor Relations

Thank you, Mo. So thanks again to everybody for your participation on the call this morning. As usual, I'll be available for follow-ups and clarifications throughout the day. So have a good rest of the day, everybody. Thank you.

Mirko Bibic -- President and Chief Executive Officer

Thank you.

Operator

[Operator Closing Remarks]

Duration: 53 minutes

Call participants:

Thane Fotopoulos -- Vice President and Investor Relations

Mirko Bibic -- President and Chief Executive Officer

Glen LeBlanc -- Chief Financial Officer and Vice Chair

Jeff Fan -- Scotiabank -- Analyst

Vince Valentini -- TD Securities -- Analyst

Jerome Dubreuil -- Desjardins -- Analyst

Simon Flannery -- Morgan Stanley -- Analyst

Tim Casey -- BMO -- Analyst

Drew McReynolds -- RBC Capital Markets -- Analyst

Aravinda Galappatthige -- Canaccord Genuity -- Analyst

Sebastiano Petti -- JPMorgan -- Analyst

Batya Levi -- UBS -- Analyst

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