Shaw Communications Inc  (NYSE: SJR) Q1 2020 Earnings Call Transcript

Shaw Communications Inc  (NYSE: SJR) Q1 2020 earnings call dated Jan. 13, 2020

Corporate Participants:

Bradley Shaw — Chief Executive Officer

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

Paul McAleese — President, Wireless

Jay Mehr — President, Shaw Communications

Analysts:

Vince Valentini — TD Securities Inc. — Analyst

Jeff Fan — Scotia Capital Inc. — Analyst

Maher Yaghi — Desjardins Securities Inc. — Analyst

Drew McReynolds — RBC Capital Markets — Analyst

David McFadgen — Cormark Securities Inc. — Analyst

Presentation:

Operator

Thank you for standing by. Welcome to Shaw Communications’ First Quarter 2020 Conference Call and Webcast. Today’s call will be hosted by Mr. Brad Shaw, CEO of Shaw Communications. At this time, all participants are in listen-only mode and the conference is being recorded. Following the presentation, there will be a question-and-answer session. [Operator Instructions]

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

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

Bradley Shaw — Chief Executive Officer

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

As we embark on another year, the execution of our overall strategy remains the focus. We have delivered another quarter of stable Wireline results and we continue to grow our Wireless and Shaw Business divisions. We have also commenced some of our previously announced capital return initiatives as our consolidated Q1 results are in line with our expectations, including significant free cash flow in the quarter.

In Wireless, we delivered both robust subscriber growth and strong financial results. We added almost 67,000 postpaid customers during a quarter when the pricing environment was extremely aggressive, as it has been since incumbents’ launch of the unlimited plans last summer. The intensity of this dynamic drove both our gross additions and churn up over the prior year, though, overall, we continue to be pleased with the quality and quantity of our subscriber growth, including increased ABPU and ARPU of both 4.1% — 4.5% and 1% year-over-year, respectively, driving wireless service revenue and EBITDA growth in the quarter.

In Q1, we also began successfully renewing subscribers from our initial December 2017 iPhone cohort. Despite these customers graduating during a period of intense promotional activity, we are pleased with the early results of our renewal programs. We continue to invest in improving our network for the benefit of our Wireless customers. The deployment of 700 megahertz spectrum is substantially complete in Western Canada, and we plan to be fully deployed in the East by the end of fiscal 2020.

Within our consumer operations, we are steadily growing broadband RGUs and we are delivering a better customer experience. In late October, we launched Shaw BlueCurve Total, which bundles our fastest Internet speeds and IP video with a straightforward approach to rich content at an all-in price point that is attractive to the traditional or family-orientated consumer segments. This clearly had an impact of our subscribers in the quarter as the pace of video losses slowed considerably to our best result in over two years.

As our IPTV availability continues to grow, now at close to 80%, so too does the number of customers choosing to self-install, which has increased to 48% in the quarter. Our premium Shaw BlueCurve services appeal to the family segment while our newly launched Freedom Home Internet targets the younger, city-living and heavy data users. With our dual brand approach, we have established distinct value propositions to meet the needs of different customer segments and we will continue to build upon this strategy in fiscal 2020.

Overall, Wireline results in the first quarter were solid and in line with our commitments, which reinforces our free cash flow growth profile in fiscal 2020 and beyond.

I’ll now turn over to Trevor to discuss the Q1 financial results in more detail.

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

Thank you, Brad, and good morning, everyone. With some changes to the way we present our reported results, including the adoption and implementation of IFRS 16, let me walk through the numbers in a bit more detail.

Consolidated revenue increased 2.1% to CAD1.38 billion and EBITDA increased over 8% to CAD588 million. This includes a CAD38 million impact from IFRS 16. Excluding this new accounting standard, EBITDA increased 1.1% over the previous year, and as Brad mentioned, this was in line with our expectations.

Wireline revenue in the first quarter declined by approximately 1.5%. The decline was due primarily to continued losses in the mature consumer wireline products, partially offset by growth in Consumer Internet and Business. Note that for Q1 business results, the comparable year includes revenue from our Calgary1 data center, which was sold effective August 1, 2019. And if we adjust for the disposition, business revenue was up approximately 5% in the quarter versus a year ago.

As we previously disclosed in our F ’19 Annual Report, we have also made some minor reporting changes within our Wireline segment. Effective this quarter, revenue from our Broadcast Services and Wholesale TPIA that was previously reported under the Business segment is now included in Consumer revenue. However, the prior period has also been adjusted, so the figures are comparable, and we note that this change is only between segments, therefore there’s no change to overall Wireline revenue or EBITDA in F ’19. The combined impact on revenue is approximately CAD36 million in F ’19 that move to consumer, which was previously reported under business.

Wireline EBITDA increased 3.4% this quarter, which includes CAD21 million related to IFRS 16. Excluding the accounting impact, Wireline EBITDA was in line with the previous year and our margin remained strong at 46.5%. This reflects our continued focus on capturing operating efficiencies. First quarter wireless service revenue increased over 18% year-over-year to almost CAD200 million and EBITDA increased over 60% to CAD77 million, of which CAD21 million was related to IFRS 16. Excluding the accounting impact, Wireless EBITDA was up 23% and our Wireless margin improved over the prior year as we continue to scale the business.

In terms of free cash flow and as we have previously discussed, we have made some adjustments to management’s definition to account for lease payments that are no longer classified as operating expenses under IFRS 16, as well as interest on lease liabilities recorded in the quarter. By making these adjustments, our Q1 and ongoing free cash flow will be comparable to historical results. In the quarter, we delivered free cash flow growth of 12% year-over-year to CAD183 million.

As we near the end of VDP, approximately 370 employees exited in the quarter and the program is now 85% complete. We remain focused on the execution of our strategic priorities and we are on track to deliver both the VDP savings in the year and to achieve our stated fiscal 2020 commitment.

Subsequent to quarter end, we were active in the debt capital markets. On December 9, we raised CAD800 million of senior notes, comprised of CAD500 million 10-year notes at 3.3% and CAD300 million of 30-year notes at 4.25%. Following the successful offering, we completed the early redemption of a total of CAD800 million worth of bonds that were maturing in 2020 and 2021. Post our financing activities, our next significant maturity is not until November 2023.

Our balance sheet and liquidity position continues to be strong. However, due to the implementation of IFRS 16 effective September 1, we were required to recognize approximately CAD1.3 billion of lease liabilities on our balance sheet related to existing lease obligations. As a result, we updated our target net debt leverage range by half a turn to 2.5 times to 3 times. And as at the end of Q1, our leverage ratio was 2.5 times, which is at the low end of our revised target range.

We also continue to have a fully undrawn five year CAD1.5 billion committed credit facility. And as part of our capital return initiatives that were announced in conjunction with our Q4 results and F ’20 guidance, we’ve repurchased and canceled approximately CAD25 million worth of Class B shares during the quarter.

Brad, back over to you.

Bradley Shaw — Chief Executive Officer

Thank you, Trevor. In summary, we are pleased with our overall performance in the quarter. We continue to make investments in our networks, including preparation for the deployment of 600-megahertz spectrum and small cells for eventual 5G launch. We look forward to more clarity from the regulatory bodies as to how the future of the Canadian facilities-based wireless and wireline landscape will unfold. As our results continue to demonstrate, facilities-based operators provide the most effective, sustainable competition in the market and offer Canadians innovation and real choice for their connectivity services.

Operator, we will now take questions.

Questions and Answers:

Operator

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

Vince Valentini — TD Securities Inc. — Analyst

Yes, thanks very much. Can I ask two questions on Wireless and two on cable? The Wireless first. You don’t disclose COA, nobody does anymore, but can you directionally give us any sense as to how much it may have increased in Q1 versus Q4 or Q3 given all the competitive offers out there and given your Absolute Zero plans? I’d just like to get some sort of handle on how much equipment subsidies and other promotional costs are going up.

The second question would be, in December, you finally will be lapping two years of having the iPhone, which has lots of positives for ARPU in future quarters, but is there a negative in terms of churn? Where do you start churning up in Q1? Is that going to be a little bit tougher when those contracts expire in December? Given all the offers from competitors, should we expect churn to go even higher than 1.5% for December and for all of Q2?

And then the two cable ones or there so. [Phonetic] Jay can think about them while Paul is answering. One is home phone. The decline here surprised me a little bit because it has already declined so much in recent years. Correct me if I’m wrong, but it looks like about 17% penetration of your total households now is the number of people who — on the consumer side who take home phone and it’s only like 39% of your broadband customers. Are we starting to reach a floor level here or do you expect the home phone to continue to fall at this kind of pace?

And then lastly just business, is 5% adjusted kind of what you expect now? Obviously, you’re adjusting for the data center divestiture or is 5% a bit on the low end of what your target range would be for future quarters? That’s it. Thanks.

Paul McAleese — President, Wireless

Vince, it’s Paul. Good morning. Thanks for those two questions. I’ll take them in order. On your first question about COA, yes, the short-term competitive dynamic that we’ve seen which has relented a little bit in the last week or so, but certainly was well in place through the course of the Black Friday through early January period probably put about 10% to 15% on the cost of acquisition during that period. I just can — I’d kind of classify that as a short-term inflationary dynamic that we expect to and hope to see move back to normalized levels over the course of the next few weeks.

On the iPhone cohort, yes, I mean, we are — as Brad said, we’re really, really pleased with how positively that initial class of iPhone customers have responded to our renewal efforts, which of course, as you can imagine, it’s been about two years in the making as we build out that team. The sheer scale and compressed timing of that renewal cohort was really unlike anything we’ve ever had to deal with before. So I want to — just before answering the question, I want to recognize the efforts of the fantastic work that the base management, the retail sales, and our customer care teams have done in building the infrastructure and the capability to make sure that we are ready for success here.

And I won’t get too deep into the math on competitive — for competitive reasons, but I will say that the cohort is largely tracking as expected. December, if you could dream, you certainly wouldn’t graduate your first ever iPhone cohort into the busiest competitive kind of quarter, really that I can recall, on the Canadian market. So we have seen, as Brad indicated, both increased gross adds as well as increased churn. And I would expect that as long as we’re seeing the pressure that we’re seeing in the marketplace today that the levels we saw in December will probably continue through January, a little bit early to call the Q2 number, but I would say it’s probably in and around that range again.

But I don’t want to confuse the renewal of the iPhone cohort with just the general competitive dynamic. I’m more concerned about the overall intensity of the market right now and the value that’s being put into that market than I am about the renewal. I think we’ve done just a great job on the renewal and we’ve learned a lot. We’ve industrialized our behavior behind that and this is something that we’re good at now. It’s really the overall market that’s driving churn.

Jay Mehr — President, Shaw Communications

Great, thanks, Vince. We’ll keep going. Your question on home phone, we’re happy with where we are in our home phone business. I think the — if you look at the calendar year, you’ll likely see maybe a slight decline in losses in Q2 and then a better result in Q3. The base is getting smaller. These are extremely high value customers. One of the things you see in Q1 is our snowbird customers overwhelmingly skew to home phone and come back up on in Q3. So there’s — just the base is small enough now and it’s enough within a sort of booming bundle segment that you see a slightly weaker result in Q1 than in subsequent quarters. I think, to be clear, though, we’re talking about very small changes. The trends that you’re seeing are the trends in the business.

Notably, as we continue to drive segments in the high value subs, our BlueCurve Total package, which is a super-rich video package with Internet at CAD169 and you can add home phone for CAD10. A decent portion of our customers are adding home phone for CAD10, but the CAD10 and the CAD169 is not really the strategic thing that we’re driving after. So we’re comfortable with where the business is, maybe just a slight improvement.

On Business, I think in the medium term, we’re right on top of 5% and I know there’s a bunch of noise with stuff moving around and then the sale of the datacenter and revenue comp, I think it’s important to note, the data center really wasn’t and doesn’t have any impact on EBITDA comp. So probably doesn’t have as much impact as you might think. I think in the medium term, we’re at the low end of what that possibility looks like.

I think, though, when you think through what’s happening in Business, we’ve got really stable SMB growth that we’re very happy with and its offset against price competition and we’ve got pockets where the economy is impacting our legacy service in large enterprise segments. So lots of moving pieces there. We think in the medium term an opportunity to tip up above 5%, but I think 5% is kind of in the general range for what we’re looking for, for the next couple of quarters.

Vince Valentini — TD Securities Inc. — Analyst

Sounds good. Thank you.

Operator

Our next question comes from Jeff Fan of Scotiabank.

Jeff Fan — Scotia Capital Inc. — Analyst

Thanks. Good morning, guys. I’ve got a couple on wireless and a quick one hopefully for cable as well. Just on wireless, Paul, can you maybe help us kind of dissect the specific competitive behaviors that were in the market during your quarter or through December that may have caused the higher gross adds and higher churn? I know Vince alluded to subsidies, but there was probably some on pricing as well. So maybe you can just help us dissect what was happening and whether you’ve seen any kind of led-up since the holiday period has ended into January.

The second part on Wireless is just on your comment regarding the two-year cohort that it’s somewhat in line with your expectations. Wondering if you can give a little bit of color regarding maybe what those expectations are, regarding those I would hang onto the device versus upgrading versus perhaps incumbent win-back activities. And then as we look out the rest of the year, that’s kind of the third question, whether you continue to believe that 2020 ARPU growth for this fiscal year will be greater than 2019.

And then the question on cable for Jay is, it sounds like that the BlueCurve Total really had an impact on video adds. I’m curious why Internet adds didn’t quite see the same kind of lift as video either sequentially or year-over-year. Maybe talk a little bit about the drivers that caused the video adds to improve so much better than last year and last quarter. Thanks a lot.

Paul McAleese — President, Wireless

Great. Jeff, thank you, it’s Paul. I’ll take the first three in quick order. On the competitive dynamic over the course of the last, I’ll kind of characterize it from Black Friday through to last week, I think many of you already noted that the incumbents haven’t exactly been paragons of pricing discipline during this period. Really since the launch of unlimited plans last summer, they’ve been fairly erratic. And that Black Friday through Christmas period was really no different than that. It’s important to kind of observe here, we’ve seen a significant break with convention from the incumbents in the last sort of while, and in the last number of months, it’s been down — kind of led the market down with pretty significant first-mover and very expensive spending programs. And it’s a long list.

So, you asked for some specifics, I’ll just call out a few things that I think are notable. During this time, we’ve seen much larger handset subsidies, we’ve seen massively discounted second lines as low as sort of CAD50 for 10 gig for unlimited. Many of you will have seen over holidays some pretty expensive gift — purchase bonuses like Sonos speakers and Apple Watches and AirPods. Gift cards and national retail got up as high as CAD400 for some relatively modest MRC plans. We saw CAD400 air time credits of again similarly kind of mid-market plans.

On prepay, which is an area that we didn’t spend a lot of energy on in the last quarter, primarily because we saw pretty significant promotions like first month free, we chose to pursue quality rather than quantity on that front. And the incumbents even did things operationally that I was frankly a little disappointed in like turning a blind eye to whether a customer was really a business or not, and giving them sort of business pricing to consumer level subscribers. There were — I guess at the end, the thing that was maybe most compelling was the very, I’d call them, fairly desperate win-back programs that we saw with some really extraordinarily discounted offers over the course of the holiday period. You put all that into the kettle and I think the sheer scale of that spending in recent months suggest that some of the calculus involved in moving to unlimited so aggressively might have been miscalculated, if it certainly wasn’t at least mistimed. It is as competitively intense right now and has been for the last two months as I’ve ever seen it.

And only really in the last week, Jeff, to the second part of your question, have we seen any relief at all, some more discipline coming into the market, but I’d still characterize it as early. Throughout that, our strategy hasn’t changed. We are continuing to balance growth and profitability. We are not moving off our expectations for this year in terms of 0.25 million net adds. And in response to the last part of your question, we do anticipate that our F ’20 ARPU will exceed F ’19 ARPU. We’re still confident on that front.

So, overall, we have a very confident view of this. We love where the market is, from our standpoint. Certainly it has been a sort of tricky 60, 90 days, it’s inflated GAs, it’s inflated churn, but we’re still executing exactly as we hope to.

Jay Mehr — President, Shaw Communications

Also, and, Jeff, on your cable BlueCurve question just sort of level-setting because you probably don’t see in Western Canada all of the marketing that exists. At its highest level, BlueCurve enables customer control of the modern smart home and we’re with our customers every step of the way as that smart home evolves. Great start and a bump in our brand after re-positioning Shaw as a technology leader, so happy with where we are.

What has driven in terms of video losses is mitigation of BlueCurve Total losses since our — mitigation of video losses since October 22. It surpassed our expectations a bit, and it’s really combining our abundant content, fast Internet, all IP experience, and our customers love to self-install. So we’ve got a — we’ve hit a little seam here and we have some more momentum. We love the outcome that we’re getting on video subs, but that’s actually not really what we’re chasing. We’re chasing our segmentation strategy and adding high customer lifetime value subs. And by doing so and changing all of our sales and churn channels, the high value segments, you can see a pretty material shift in mix in our consumer business today. So subscribers matter a lot, but anchoring them in segmentation and customer lifetime value is really what winning looks like in our modern Shaw.

Jeff Fan — Scotia Capital Inc. — Analyst

Maybe just a couple of very quick follow-ups. One on Wireless. Paul, on the ARPU greater than ’20 versus ’19, are you referring to the actual dollar or the ARPU growth being higher than 2019?

Paul McAleese — President, Wireless

The ARPU growth percentage being higher than 2019.

Jeff Fan — Scotia Capital Inc. — Analyst

Okay. And just one follow-up for Jay. So is it fair to say then the — whether it’s gross adds improvement or lower churn, you’re seeing that video base that you’re keeping, I guess, higher quality than you would have seen pre-BlueCurve Total launch?

Jay Mehr — President, Shaw Communications

Yes, for sure, and entirely in different segments. You’ve seen a shift away from sort of within the Shaw brand away from simply driving kind of mobile millennials and really BlueCurve is focused on families. It’s focused on booming bundles. So Internet and video churn are both down, which is of course what we would expect and we continue to drive value plan to 57% of Internet customers, all that works. What you can see is, video ARPU is up and it’s up over budget as well. So we’re ahead of our plans, and that’s really because what we’ve done is, we’ve put the scale of our video business, quite frankly, leveraging the scale we get also from satellite.

We have scale on our video business to negotiate better programming agreements that have allowed us to a high content, rich TV package for our customers and that’s enabled us to compete more effectively in segments. You’ll see, as we move forward, we’ve fairly dramatically changed all of our sales and churn strategy around those segments, and you’ll continue to see those results in families and booming bundles and other segments that drive customer lifetime value significantly lower churn than some of the spaces our gross adds were coming from in the past.

Jeff Fan — Scotia Capital Inc. — Analyst

Great. Thanks for the color, Jay.

Operator

Our next question comes from Maher Yaghi of Desjardins.

Maher Yaghi — Desjardins Securities Inc. — Analyst

Thanks for taking my question. I’ll start with a question for Jay. Just on the BlueCurve plans. I noticed some more aggressive, I would say, pricing structure for these plans with prices around CAD90 versus a run rate price of CAD189, CAD190. Just trying to figure out, we’ve had, in the past, some periods where these plans — these kind of significant first year prices below the second year price helped on the subscriber front, but later on caused some issues on the profitability or the revenue that flows into the second year. Are you finding that you need to offer these significant discounts to get the adoption for BlueCurve or what’s the strategy behind those significant discounts?

And the second question is more related to the overall guidance for the year. With the first quarter at 1% approximately growth in EBITDA corrected for IFRS and your guidance for the year, can you maybe just talk through how we should look at the rest of the year, improvements in EBITDA, where they are going to come from, and just kind of splitting this between Wireless and Wireline? Thank you.

Jay Mehr — President, Shaw Communications

Great. I’ll start with your questions and thanks for that. I think I understand you’re thinking and — how you’re thinking about our pricing and packaging and the challenge with the thinking is, it’s not with a lens that you can think across the board. We’re clearly targeting BlueCurve Total and it’s working at completely different segments than we’re, for example, targeting Freedom Home Internet. And so our dual brand strategy allows us to focus on those segments.

Our two-year value plan customers have a significant reduction in churn over our month-to-month customers and so the customer lifetime value of customers that are being added on the current model is significantly higher than the customer lifetime value we are adding this time last year. Recognize, if you compare what our standalone month-to-month Internet pricing looks like and what our offer is for Canadians to sign up on a two-year value plan, it looks like it’s a deep discount, the math on it, it absolutely works.

I think one of the things our competitors are probably struggling with as well is, we’ve got a cost structure now around all of our programming agreements that enables this and I think on big packages, gives us a definitive cost advantage vis-a-vis our competitor and we’re clearly going after that as well. So what may look like discounting to you, we’re making great money on BlueCurve Total and it’s a great product for us. Again video ARPU is up, Internet churn and video churn are down. I think you’d like the dynamics of what’s happening with this space.

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

And just on guidance, Maher, I think we spent quite a bit of time on last quarter’s call talking about how we’re running the business and it really is about delivery stability within the Wireline side of things, and frankly I think Brad’s comments and my comments here in Q1 was right on track. We’re sort of targeting that CAD490 million to CAD500 million of EBITDA on a quarterly basis within Wireline and we feel confident on delivering on that.

On Wireless, we continue to see us being able to scale the business and deliver the operating leverage and I think we talked about it last quarter again. That will continue to scale during the year. It really is more in Q3, Q4, where you’ll see some — if you look at sort of sequential quarter-over-quarter growth rates within Wireless EBITDA, that’s where we start to see the operating leverage within the business really kick in and it has to do with some of those ARPU and ABPU growth metrics that Paul mentioned earlier in his remarks.

So we feel like we’re right on track in terms of the quarterly splits in the delivery of Q1. And again, I would reinforce just the free cash flow, really excited about the delivery of the cash flow this quarter and continue to have a strong conviction in the free cash flow profile of the Company going forward, including the approximately CAD700 million that we’re targeting for this year.

Maher Yaghi — Desjardins Securities Inc. — Analyst

Okay, and sorry, thanks for this. And my last question on the Wireless. I’m trying to figure out, it’s very hard to understand who is beginning or who is continuing to be the aggressor in the market in the whole scheme of things. When you look at the market in Q4 and how it evolved, some could say it was a reaction to your significant subsidies in the market for iPhones. You say it’s the incumbents who are being overly aggressive on the subsidy model.

I guess the question is, now that we have seen first move by some of the incumbents to remove those subsidies on iPhone, is that a positive for you to remove some subsidies or your plans and your subsidy model is continuing as is and that’s the plan that you’re committed to or you hope to remove some subsidies to improve the profitability of the market — of the business that you’re running?

Paul McAleese — President, Wireless

Maher, it’s Paul. You won’t be surprised to know that I don’t think it’s us that’s agitating the market right now . If you go back to June 12 of last year, I think you’ll get a pretty clear signal on where the markets catalyst was. On the EIP announcement that was made in recent days, we’re going to watch that closely over the coming weeks as it’s anticipated to roll out and see what the competition do there, but I think we’re probably a few weeks early on it for a comment on that.

Maher Yaghi — Desjardins Securities Inc. — Analyst

Okay, thank you.

Paul McAleese — President, Wireless

Thank you.

Operator

Our next question comes from Drew McReynolds of RBC Capital Markets.

Drew McReynolds — RBC Capital Markets — Analyst

Yes, thanks very much. Two from me. First, Paul, on the Wireless side, could you comment on what you see maybe over the next year or so in terms of your retail distribution footprint? And can you comment at all, with your footprint expansion, I guess looking back let’s say last three or four quarters, how much of your kind of incremental loading is attributed to expansion? Are you certainly satisfied with where you’re getting that loading across your total footprint?

And then second question, I guess maybe for you, Jay. On the base management side, it certainly looks to me when you drill into your Wireline results versus maybe a year or two years ago, the base management is certainly improving, the execution is improving. Where are you from your perspective in terms of that improvement where you ultimately want to be? Thank you.

Paul McAleese — President, Wireless

Hey, Drew, it’s Paul. On retail footprint over the course of the next year, we’ve been really, really pleased with the growth over the course of the last two years. There is probably one or two more name retailers that we’ll look to bring on over the course of the next six months or so, and I think they are a nice positive complement to what we’re doing. So you will continue to see growth on that front.

Of course, we continue to focus much of our effort in the major malls in Canada. So you’ll have seen us building a number of new corporate stores and renovating those that we had over the course of last year and the team has done a great job of really just improving the quality and delivery of our retail experience over the last year. So, I’m pleased with where we are there, it’s a good positive outcome.

On geography, yes, we’re starting to see the early contributions from those new markets that we opened over the course of F ’19. We saw something like 1% or 2% increase in terms of our gross adds sliding principally to the West and I indicated I think in the last couple of calls that we’d start to see a subtle shift over time as we add markets like Victoria into the mix. So we are starting to see a stronger contribution from the West, which we’re pleased to see those have been great markets for us as we start them up.

Jay Mehr — President, Shaw Communications

And, Drew, you’re correct. Everything’s about base management and consumer. I’m so proud of the work that the team is doing both on revenue and through MR, and also two-year ValuePlan now at 57% of Internet subs and continuing to grow, and continuing to also lower churn in our key categories. Where we are in terms of the industry is, we’re certainly with Internet churn beneath a number of our North American peers, but within the Canadian context and as we continue to drive, we’ve got some room for improvement here. I think the F ’20 story is largely about churn improvement in consumer. And there is room in F ’21 and maybe opportunities with new products in the future as you can well imagine. So this is our total focus. I love the work the team is doing. We’ve made good headway, but lots ahead — lots of upside still ahead here.

Drew McReynolds — RBC Capital Markets — Analyst

Okay, thanks very much.

Operator

Our next question comes from David McFadgen of Cormark Securities.

David McFadgen — Cormark Securities Inc. — Analyst

Hi. Two questions. First of all, just on the video cable subs. Obviously, you made some big improvements there on the losses this quarter sequentially. And I was just wondering if you think you can continue to make improvements like that, or you’ve done a good job and is probably going to continue to track at this level?

And then secondly, given that you’ve finished deploying the 700-megahertz spectrum in Western Canada, if we were to think just hypothetically if you wanted to launch Shaw mobile in DC and Alberta, like how much would be required in terms of your systems to be able to do that like billing systems and other systems? Is it quite a bit to do, or it’s not really that much and you could go pretty quickly if you decided to do that?

Bradley Shaw — Chief Executive Officer

Great. We will certainly start with video cable. We continue to be very pleased with how the BlueCurve targeting, which is our focus this year, is working. It’s clear to us that video losses will improve over F ’19. You’re seeing extremely strong marketing campaign that balance results through pretty solid launch, repositioning Shaw as the technology leader in the consumer space. So whether or not you’ll see numbers that look exactly like Q1 numbers, it’s really not about it’s driving a lower video loss, it’s about focusing churn in all of our sales channel on our higher value segments and our higher value connected high value family customers, our booming bundles. They maximize their lifetime value, bring remarkably low customer churn when you bundle fast home Internet with a rich video package. So we’re just going to keep doing that and we’re confident we’re going to see cable video improvements over F ’19, but this also probably got to result in Q1 that reflects the strength of the marketing campaign around our launch and some of the excitement around the packaging.

Paul McAleese — President, Wireless

David, it’s Paul, thanks for the question on 700 and deployment in the West. You’re right to point out we’ve been thrilled with the work the engineering and IT teams have done in order to get that up and running. So we are in great shape as that is largely complete now in the West. In terms of system requirements and the potential launch of a second brand, nothing to really report on that today. You’re going to see us briefly talk about that and we’re getting some customer-facing things in the next number of quarters, but nothing of significance to report today.

David McFadgen — Cormark Securities Inc. — Analyst

Okay. But, I mean, would there be a big upgrade required in the systems at Shaw to be able to launch Shaw mobile using Freedom’s assets?

Paul McAleese — President, Wireless

Well, to sort of — at the hypothetical level, your — if you launch any additional brand on our platform, I think our systems are well capable of dealing with that, just as the incumbents have multiple brands hanging off similar systems. So I don’t think that’s a huge lift. Bigger question is, as and when the market might be ready for that and we’re not really going to get into that too much today.

David McFadgen — Cormark Securities Inc. — Analyst

Okay. All right, thank you.

Operator

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

Bradley Shaw — Chief Executive Officer

Great. Thank you, operator, and thanks to everyone. Have a great day and we’ll be talking to you in April.

Operator

[Operator Closing Remarks]