TELUS Corporation Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Customer Growth: Surpassed 1 million telecom net new customer additions for the third consecutive year, with 1.2 million net additions in 2024. Postpaid mobile phone churn was 0.99% for the full year, 11th consecutive year below 1%.
• Financial Performance: TTech EBITDA grew 5.5% in 2024, 7% in Q4. Fixed data services revenue grew 3.5%. TELUS Health had 10% revenue growth and 20% EBITDA contribution growth. TELUS Agriculture & Consumer Goods had 16% revenue growth.
• Cost Efficiency: Achieved $355 million in combined annualized synergies from LifeWorks acquisition, with $294 million cost synergies and $61 million cross-selling.
• Network and Infrastructure: Leading broadband networks and focus on customer-centric culture. Target to reduce capital intensity to circa 10%.

Segment Performance

• Mobile: In 2024, mobile had leading total net additions of 264,000, including 70,000 mobile phone net additions and 194,000 connected device net additions. Mobile network revenue was flat due to lower mobile phone ARPU offset by double-digit IoT revenue growth.
• Wireline: TELUS delivered industry-leading total wireline customer growth, with 37,000 fourth quarter internet net additions, driving fixed data services revenue growth of 3.5%.
• TELUS Health: Achieved 10% revenue growth and 20% EBITDA contribution growth in Q4 2024, with combined annualized synergies from LifeWorks acquisition at $355 million.
• TELUS Agriculture & Consumer Goods: Had 16% revenue growth over the year, with eight consecutive quarters of record sales.
• TTech: TTech EBITDA grew 5.5% in 2024, 7% in Q4, with operating revenues up 4.1%, driven by mobile equipment, fixed data services, health, and agriculture. Other income was $52 million, up $37 million from the prior year.
• TELUS Digital: Operating revenues and adjusted EBITDA stabilized in Q4, with focus on cost management and revenue generation.

Guidance

• 2025 Targets: TTech operating revenue growth 2%-4%, adjusted EBITDA growth 3%-5%. Consolidated capital expenditures (excluding real estate) targeted at $2.5 billion. Free cash flow forecasted at approximately $2.15 billion.
• Debt Target: Aim to achieve net debt-to-EBITDA ratio of approximately 3x by 2027, with plans to reduce the discount dividend reinvestment plan, removing it in 2027.

Risks

• Competitive and Macro Environment: Challenging regulatory, competitive, and macroeconomic landscape affecting ARPU and market dynamics.
• Debt and Leverage: Ensuring deleveraging plan is executed successfully, including asset divestitures and managing capital intensity.
• ARPU Pressure: Continued pressure on mobile phone ARPU due to competitive market.

Question and Answer

Q: Jerome Dubreuil from Desjardins asked about the 3x leverage target and asset divestiture, and the merits of the long-term dividend plan.

A: Doug French and Darren Entwistle responded on asset divestiture plans, deleveraging, and the sustainability of the dividend growth model.

Q: Maher Yaghi from Scotiabank asked about fixed data services growth and pricing.

A: Zainul Mawji and Navin Arora discussed volume growth, product diversification, and B2B opportunities.

Q: Stephanie Price from CIBC asked about the DRIP removal and Ontario Internet market strategy.

A: Doug French and Zainul Mawji provided insights on the DRIP plan and Ontario market growth.

Q: Drew McReynolds from RBC asked about revenue growth guidance and TPIA.

A: Darren Entwistle, Zainul Mawji, and Navin Arora discussed revenue growth, B2B opportunities, and TPIA implications.

Q: Sebastiano Petti from JPMorgan asked about asset monetization and leverage target.

A: Darren Entwistle and Doug French detailed real estate, copper recycling, and divestiture plans for deleveraging.

Q: Benjamin Swinburne from Morgan Stanley asked about wireless marketplace and ARPU trends.

A: Zainul Mawji, Navin Arora, and Darren Entwistle discussed ARPU pressures, B2B growth, and guidance alignment.