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    TELUS (TU)

    Q4 2024 Earnings Summary

    Reported on Mar 19, 2025 (Before Market Open)
    Pre-Earnings Price$14.59Last close (Feb 12, 2025)
    Post-Earnings Price$14.91Open (Feb 13, 2025)
    Price Change
    $0.32(+2.19%)
    • TELUS is aiming to reduce its net debt-to-EBITDA ratio to approximately 3x by 2027, leveraging EBITDA growth, cash flow expansion, reducing capital intensity, and asset monetization initiatives. This deleveraging plan includes potential monetization of $3 billion in real estate assets and up to $0.5 billion from copper recycling, alongside opportunities in its growth businesses such as TELUS Health and TELUS Agriculture & Consumer Goods, possibly through partnerships or IPOs.
    • TELUS's emerging growth businesses, TELUS Health and TELUS Agriculture & Consumer Goods, are achieving strong growth and increased profitability, contributing to TELUS's consolidated financial performance. For example, TELUS Agriculture & Consumer Goods achieved revenue growth of 16% in the fourth quarter. TELUS Health has reached a scale that allows for potential value realization through partnerships or IPOs, enhancing shareholder value.
    • TELUS anticipates continued EBITDA growth and strong free cash flow generation, supported by decreasing capital intensity, with a goal to reach a capital intensity of around 10%, down from 12% in 2024. This improved cash flow will support deleveraging and continued dividend growth, benefiting shareholders.
    • Declining Mobile ARPU and Competitive Pressures: In the fourth quarter of 2024, Telus reported that mobile phone ARPU declined by 3.6% year-over-year due to ongoing competitive pressures in the market. The company acknowledged that ARPU remained under pressure and does not anticipate a significant recovery in 2025.
    • High Leverage and Reliance on Asset Divestitures: Telus has a net debt-to-EBITDA ratio of 3.9x and aims to reduce it to approximately 3x by 2027. This deleveraging strategy relies on EBITDA growth and asset monetization programs, including potential divestitures of non-core assets and infrastructure. The success of these plans is uncertain and may impact the company's financial flexibility and future growth.
    • Regulatory Risks Impacting Growth Strategies: Telus's expansion into new markets, such as the Ontario Internet market, may be affected by regulatory decisions regarding third-party internet access (TPIA). Uncertainty around potential policy changes could hinder Telus's ability to profitably grow its fixed data services outside its traditional territories, impacting its long-term growth outlook.
    TopicPrevious MentionsCurrent PeriodTrend

    TELUS Health Growth

    Q1 and Q2 earnings calls emphasized strong revenue performance, robust synergy realizations (e.g. LifeWorks integration) and significant cross‐sell opportunities

    Q4 call reported accelerated revenue growth (10%), higher EBITDA contribution, and clear positioning for a medium-term IPO with detailed synergy targets

    Accelerating growth focus with clearer monetization potential

    Competitive Pressures / Declining ARPU

    Q1 and Q2 calls discussed intense competition, promotional activity and the resultant ARPU pressure with strategic focus on bundling and AMPU

    Q4 call reported a 3.6% decline in mobile ARPU amid ongoing competitive pressures and reiterated a focus on product intensity and churn improvement

    Consistent challenge with persistent competitive pressure and similar strategic responses

    EBITDA Growth, Margin Expansion & Free Cash Flow Generation

    Across Q1 and Q2, TELUS highlighted resilient EBITDA growth, margin expansion supported by cost efficiency programs and positive free cash flow forecasts

    Q4 call continued the narrative with 7% EBITDA growth, margin expansion by 110 basis points, and generation of nearly $2B free cash flow, albeit with slightly moderated growth expectations for 2025

    Sustained positive performance with modest adjustments to future growth targets

    Asset Monetization Strategies & Deleveraging Plans

    Q1 provided no details; Q2 introduced initiatives such as monetizing TELUS Health, copper decommissioning, and real estate opportunities

    Q4 deepened the narrative with specific plans involving central office releases, copper recycling, REIT strategies and clear deleveraging targets (net debt/EBITDA 3x by 2027)

    Emergent and expanded focus compared to earlier periods, indicating strategic prioritization

    Regulatory Risks impacting Market Expansion

    No discussion in Q1 and Q2 earnings calls [ – ]

    Q4 call raised regulatory considerations with confidence in CRTC decisions and government alignment to support market expansion

    New topic in Q4 with a more proactive stance on external regulatory factors

    Digital Transformation with AI/Gen AI Integration

    Q1 emphasized integration of AI and Gen AI in digital strategy while Q2 detailed Gen AI applications and growth in AI Data Solutions

    Q4 did not mention this topic specifically in the TELUS Digital narrative

    Topic is no longer mentioned in Q4 despite previous emphasis on digital transformation

    Emerging IoT and Connected Devices

    Q1 highlighted record connected device net additions and strategic IoT contributions; Q2 reinforced strong growth, strategic partnerships, and record additions

    Q4 maintained focus with double-digit IoT revenue growth, 194,000 connected device net additions and new private network agreements

    Consistently strong momentum with sustained and growing integration in strategy

    Revenue Growth Challenges despite Subscriber Additions

    Q1 and Q2 noted disconnect between strong subscriber growth and muted revenue growth due to ARPU pressures and competitive pricing

    Q4 reiterated challenges with declining mobile ARPU, competitive dynamics, and the need to boost product intensity, despite robust subscriber additions

    Persistent issue across periods requiring ongoing strategic adjustments

    Operational Execution Challenges in Digital Segments

    Q1 mentioned headwinds in TELUS International with declining operating revenues and cost pressures; Q2 noted broader challenges but underscored plans to reinvest cash flow into digital segments

    Q4 reported stabilization and sequential improvements in operating performance within TELUS Digital, suggesting a turnaround in execution challenges

    Improving performance in Q4 compared to earlier operational execution challenges

    Cost Efficiency Programs and Capital Expenditure Management

    Q1 reported early benefits from cost efficiency (e.g. 4% benefit reduction) and CapEx management strategies; Q2 provided detailed initiatives on employee expense reductions and CapEx cuts aiming for lower capital intensity

    Q4 continued focus with aggressive cost efficiency programs (e.g. EBITDA growth supported by digitization) and further reduction in CapEx intensity, supported by strong capital discipline

    Consistent and progressively effective cost management and CapEx discipline across periods

    1. Leverage Target and Asset Divestitures
      Q: How does asset divestiture factor into reaching 3x leverage by 2027?
      A: Doug French explained they have a placeholder of approximately $500 million in asset divestitures included in their three-year plan to reach the 3x leverage target by 2027. They will continue to divest non-core assets as appropriate but haven't disclosed the exact amount.

    2. Dividend Outlook
      Q: Can you elaborate on the merits of your long-term dividend plan?
      A: Darren Entwistle highlighted that their dividend growth model has served investors well over the past 15 years. They foresee strong and sustainable free cash flow due to EBITDA growth, operating efficiency, and a goal to reduce CapEx intensity to around 10%. This supports the affordability and longevity of their dividend growth model, but the dividend remains subject to quarterly Board review.

    3. Monetization of Assets
      Q: What assets are you considering for monetization to reach leverage goals?
      A: Darren Entwistle outlined plans to monetize real estate, aiming for a $3 billion opportunity through releasing former central offices for development. They also see potential in recycling copper infrastructure, estimating a net opportunity of about $0.5 billion. While fiber assets are not for sale, they may consider monetizing towers if the economics are favorable.

    4. ARPU Trends and Pricing Environment
      Q: What's your outlook on ARPU trends in 2025?
      A: Management anticipates continued competitive pressure on ARPU but sees opportunities to improve through increased product intensity and targeting different market segments. They are not basing guidance on a significant ARPU recovery but remain focused on diversifying growth outside of wireless ARPU.

    5. Fixed Data Services Growth
      Q: What is driving growth in fixed data services revenue?
      A: Growth is driven by significant increases in the fixed customer base and a diversified portfolio of services. They are focusing on profitable growth, leveraging higher-speed offerings, and increasing product intensity with incremental products and services. The B2B segment, especially SMBs, is also contributing strong volume growth.

    6. DRIP Removal and Payout Ratio
      Q: How will the payout ratio look by 2027 without the DRIP?
      A: Doug French stated they expect to be within their payout ratio target of 60% to 75% in 2027, even after removing the DRIP. They plan to ratchet down the DRIP in 2026, potentially making a half-step towards their ultimate goal.

    7. Expansion into Ontario Internet Market
      Q: Can you expand on your strategy in the Ontario Internet market?
      A: Zainul Mawji explained they have been acquiring assets and offering services like Apkudo Internet, seeing good product uptake. They focus on profitable growth by providing value-added services and bundles, targeting niches where customers want their wireless, wireline, and value-added products.

    8. Wireless Volume Growth in 2025
      Q: What are your wireless volume growth expectations for 2025?
      A: They are focusing on leveraging existing customers, enhancing service, and driving product intensity to grow profitably. Despite some shifts and areas of decline, they see significant opportunities within their existing client base and in the SMB segment.

    9. Real Estate Monetization Run Rate
      Q: Can you achieve the $3 billion real estate goal at current run rates?
      A: Doug French indicated they expect similar run rates to 2024 for the next year or so, with potential for a lump sum monetization when they have a substantial pool of assets, possibly within the next 2 years.

    10. TPIA Impact on Growth Outlook
      Q: How would TPIA access issues affect your growth outlook?
      A: Darren Entwistle expects regulatory decisions on third-party access to stand and is planning accordingly. They believe their go-to-market activities, focusing on existing growth opportunities, will not be materially affected.

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