Q2 2024 Earnings Summary
- TELUS Health is delivering strong EBITDA growth, with an over 33% year-over-year increase in adjusted EBITDA contribution in Q2 2024, driven by both cost synergies and a return to mid-single-digit revenue growth. The company has realized $297 million in annualized synergies since acquiring LifeWorks, with $130 million in synergies still to come, indicating significant value creation potential. Furthermore, management envisions a future monetization event for TELUS Health, such as an IPO or partnership, highlighting confidence in the long-term growth prospects of the business. ,
- TELUS Digital (formerly TELUS International) is focusing on returning to revenue and profit growth, leveraging its strong assets in digital, AI, and Gen AI capabilities. Despite current challenges, management expresses strong confidence in the business and has implemented leadership changes to drive the recovery and growth program. The company continues to generate strong cash flow, with a 15% year-over-year increase in cash flow yield year-to-date, allowing for reinvestment in growth initiatives. ,
- TELUS is emphasizing profitable growth through product and brand differentiation, focusing on driving customer lifetime value and household economics. The company is exploring opportunities in underpenetrated segments and leveraging its differentiated suite of brands. Additionally, TELUS sees significant growth opportunities in the Internet of Things (IoT) and connected devices, which are expected to increasingly contribute to network revenue and average revenue per user (ARPU), supporting future revenue growth. ,
- Revenue growth is lagging despite record subscriber additions, indicating challenges in translating customer growth into revenue. The company acknowledged dissatisfaction with this performance, stating, "we are not satisfied with the level of performance we've seen in this very competitive environment."
- Declining ARPU (Average Revenue Per User) reflects intense competitive pressures and a challenging pricing environment. Mobile ARPU decreased by 3.4%, with management expressing concern: "we're not satisfied with the ARPU results, and we remain focused on driving a better outcome." , Additionally, fixed data revenue growth has slowed, with growth declining from 3% in Q1 to 1% in Q2.
- TELUS Digital is facing macroeconomic challenges, leading to a downward revision of its outlook. Management admitted execution issues, stating, "we have not executed as well as we should have or could have." The challenges at TELUS Digital impact the overall financial performance and may affect free cash flow, as indicated by the updated free cash flow guidance.
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Monetization of TELUS Health
Q: Do you still plan to monetize TELUS Health in the near to mid-term?
A: Yes, we still envision a monetization opportunity for TELUS Health in the medium term, possibly through an IPO or partnerships. We believe in strong organic performance to support premium valuation, and we're encouraged by TELUS Health's improved performance, with a return to mid-single-digit revenue growth and an EBITDA contribution of over 30%. -
Fixed Data Revenue Growth
Q: Are you satisfied with fixed data revenue performance despite record subscriber adds?
A: No, we are not satisfied with the performance in this competitive environment. While mobile and home additions have increased significantly year-over-year, fixed data revenue was down $1 million in Q2 despite net subs being up 70,000. We're focusing on driving new revenue streams, improving ARPU through product differentiation, and enhancing overall retention outcomes. -
TELUS Digital Strategy
Q: Is privatizing TELUS Digital a consideration given recent developments?
A: It is not our intention to privatize TELUS Digital. We believe in the assets' potential and are focusing on driving a recovery and growth program over the next 18 months with the current structure, which provides focus on digital AI advancements and transformation in customer experience. -
Wireless ARPU and Network Revenue
Q: How are you addressing declines in wireless ARPU and network revenue growth?
A: We recognize pressure on wireless ARPU, which was down 3.4%. We're leveraging premium capabilities and bundled offerings across our brands to drive ARPU improvement. We're also focusing on economic loading and transitioning to household ARPU over time. -
TELUS Health EBITDA Growth
Q: Can you clarify the 30% EBITDA contribution from TELUS Health?
A: The 30% refers to TELUS Health's year-over-year EBITDA growth, not margin. From an 11% EBITDA contribution in Q2 2023, we've increased to over 30% growth due to both cost synergies and profitable revenue growth. -
Copper Retirement Benefits
Q: What are the financial benefits of your copper retirement initiative?
A: We expect to decommission 0.25 million copper lines and have 36 central offices decommissioned by year-end. The gross opportunity is upwards of $1 billion, with net benefits between $400 million and $500 million. Benefits include 25%-30% cost reductions, 20%-25% churn improvement, and enhanced product offerings. -
Competitive Pressures and Repricing
Q: How much repricing pressure remains in fixed data and security services?
A: We can't predict the competitive environment, but we're leaning into product differentiation to counteract cord-shaving behaviors. We've seen strong step-ups in internet services even in a competitive climate, and we're focusing on delivering differentiated value to customers. -
Public Mobile 5G Pricing Strategy
Q: Is there an opportunity to price 5G services at a premium with Public Mobile?
A: Yes, there's an opportunity to price 5G services at a premium. We're not satisfied with the current roadmap of Public Mobile and plan to drive ARPU improvement through unique channel strategies, including premium pricing for 5G.