TU Q2 2025: TELUS plans tower sales to boost cash flow, cut leverage
- Asset Monetization & Deleveraging Strategy: TELUS is executing a robust asset monetization plan through initiatives such as the tower monetization with Terion and real estate rationalization, which are expected to drive free cash flow improvements and support deleveraging efforts.
- Resilient Pricing Discipline in Wireless: Management highlighted that the majority of the customer base has been repriced and expects that sustained pricing discipline should lead to an inflection in wireless service revenue recovery over the next three to four quarters.
- AI-Driven Operational Efficiency: TELUS is leveraging its advanced AI initiatives via TELUS Digital (for example, the launch of its asynchronous messaging platform and AI-enabled agent trainer) to enhance customer service metrics and reduce operational costs, positioning the company for improved productivity and profitability.
- Delayed pricing recovery and margin compression: Several analysts questioned the sustainability of recent improvements in wireless pricing and ARPU, suggesting that if pricing discipline does not recover as expected, it could prolong negative revenue trends and impact margins.
- Uncertainty in tower monetization contributions: There were questions about the lack of detailed financial disclosures for the towers, raising concerns about whether the anticipated cash flow benefits and deleveraging impact from the tower monetization strategy will materialize as planned.
- Rising churn and intensifying competitive pressures: Discussions on increased churn in the Internet business and higher affordability constraints indicate potential risks in customer retention and margin erosion, which, if not managed, could hamper future growth.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Operating revenues growth | FY 2025 | 2% to 4% | 2% to 4% | no change |
Adjusted EBITDA growth | FY 2025 | 3% to 5% | 3% to 5% | no change |
Consolidated capital expenditures | FY 2025 | $2.5 billion | CAD 2.5 billion | no change |
Consolidated free cash flow | FY 2025 | $2.15 billion | CAD 2.15 billion | no change |
Leverage ratio (exiting 2025) | FY 2025 | no prior guidance | 3.55 times | no prior guidance |
Net Debt-to-EBITDA Ratio target | FY 2025 | 3x by 2027 | 3x by 2027 | no change |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Asset Monetization & Deleveraging Strategy | Discussed real estate rationalization through releasing central offices for REIT opportunities, a tentative “maybe” approach to tower monetization, and an estimated $1 billion opportunity in copper recycling. | Presented a definitive tower monetization deal with Akeis, active real estate rationalization including cash-generating deals, and measurable copper recycling progress – supporting deleveraging with clear debt reduction metrics. | Strengthened execution and clarity in asset monetization initiatives, shifting from tentative exploration to concrete, cash flow–positive deals. |
Wireless Pricing Discipline & Recovery | Noted a 3.6% ARPU decline in a competitive, aggressive market environment with stable yet challenging performance, and conservative 2025 guidance that assumed continued headwinds. | Reported a slightly lower 3.3% ARPU decline with quarter-over-quarter improvements, backed by better pricing discipline and cautious optimism regarding recovery despite competitive pressures. | Slight recovery with improved pricing discipline amid ongoing competitive challenges, suggesting incremental improvements over previous concerns. |
AI-Driven Operational Efficiency & Digital Transformation | Only digital transformation was mentioned via cloudification and SaaS initiatives driven by TELUS Digital, with no explicit focus on AI-driven operational efficiency. | Emphasized a robust integration of AI across operations with examples like improved customer support and agent training, yielding significant operational cost efficiencies and productivity gains. | New strategic emphasis on leveraging AI for operational efficiency, marking a notable shift from a broader digital transformation focus. |
Competitive Pressures and Customer Churn | Highlighted ARPU pressure with a 3.6% decline amidst an aggressive market, while maintaining churn below 1% (e.g., 0.99%) but with expressed dissatisfaction, necessitating further improvements. | Noted a 3.3% ARPU decline with slight quarter-over-quarter recovery, alongside consistent low postpaid churn at 0.9%; mentioned affordability constraints and proactive measures such as leveraging AI for churn mitigation. | Ongoing competitive challenges with proactive steps leading to incremental improvements in ARPU recovery and churn management compared to previous results. |
Regulatory Risks Impacting Growth and Market Expansion | Detailed regulatory challenges around TPIA and emphasized confidence in the CRTC’s rigorous, thoroughly vetted decisions that support market expansion, aligning with national consumer and business interests. | Merely alluded indirectly to regulatory dynamics via the CRTC’s wholesale fiber decision; less emphasis placed on regulatory risks, suggesting a more settled view on regulatory impact relative to prior discussions. | Reduced emphasis on regulatory risks indicates increased confidence and a lower perceived threat from regulatory challenges compared to the previous period. |
Emerging Growth Businesses | Described TELUS Health with modest revenue and EBITDA growth (10% revenue and 20% EBITDA contribution) and TELUS Agriculture & Consumer Goods showing 16% revenue growth, positioning them as attractive diversification plays. | TELUS Health reported dramatic adjusted EBITDA growth (1629%) with strong synergy realization, while TELUS Agriculture & Consumer Goods continued to contribute resilient growth, underscoring their strategic importance. | Marked acceleration and strategic prioritization of emerging growth businesses, especially in TELUS Health, elevating their impact on overall long-term growth prospects. |
EBITDA/Free Cash Flow and Margin Dynamics | Reported solid TTech adjusted EBITDA growth (7% in Q4 2024 and 5.5% full-year) with margin expansion of 110 basis points to 38.2% and 2024 free cash flow around $2 billion, supported by ongoing monetization initiatives. | Achieved steady quarterly EBITDA growth (4%), improved free cash flow (CAD 535 million in Q2 2025), and continued margin expansion aided by asset monetization efforts (e.g., Terion deal), with clear progress toward deleveraging targets. | Continued emphasis on margin improvement and free cash flow generation with added focus on deleveraging via new asset monetization deals, reinforcing financial discipline. |
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Tower Monetization
Q: What are tower EBITDA and cash flow impacts?
A: Management noted that tower EBITDA details remain undisclosed, but emphasized that towers are built at fair market rent through Terion, are consolidated on TELUS’ books, and are designed to deliver positive free cash flow to aid deleveraging. -
Wireless Pricing
Q: When will ARPU recover positively?
A: Management explained that the bulk of the customer base has been repriced and if current trends continue, an inflection point could be seen in 3–4 quarters, suggesting a recovery in wireless ARPU. -
Real Estate Monetization
Q: What are your real estate asset plans?
A: Management outlined efforts to rationalize approximately 200 properties, aiming for a $2–3B portfolio that could evolve into a REIT, with key assets coming online by early 2026 to bolster deleveraging. -
Working Capital
Q: Is the $223M working capital outflow recurring?
A: Management clarified that the observed outflow is due to seasonal timing differences between payables and receivables and is expected to be net neutral over the full year. -
Fixed Data & Churn
Q: Will fixed data growth persist despite rising churn?
A: Management believes that diversified fixed data services and bundled offerings will sustain the 3% growth while they are using AI to detect and mitigate a slight increase in churn, ensuring profitability remains intact. -
Capital Efficiency – AI/Data Centers
Q: How is Telus using AI and data centers?
A: Management is repurposing its world-class data centers into a sovereign AI factory in partnership with NVIDIA, leveraging existing assets to drive efficiency with minimal new capital spending. -
Bundle Tiering & Leverage
Q: Will tiering affect leverage targets?
A: Management maintains a dynamic approach to pricing and bundle differentiation, stating that their 3× net debt to EBITDA target is a science-based figure aimed at optimizing the company’s weighted average cost of capital. -
AI Ecosystem Role
Q: What role does Telus play in Canadian AI?
A: Management sees Telus as a key enabler in Canada’s AI ecosystem, leveraging its telecom infrastructure and the TELUS Digital Solutions platform to pilot and scale AI services nationally. -
Fiber Partnership
Q: What are the plans for fiber build partnerships?
A: TELUS confirmed that third-party partners will help deploy fiber networks—initially in the Eastern market—allowing for capital efficiency and expanded network coverage. -
TIAXT Privatization
Q: Is there a change in the TIAXT privatization strategy?
A: Management clarified that the move is solely to support deleveraging objectives and should not be seen as a shift in the broader monetization strategy for adjacent tech ventures.
Research analysts covering TELUS.