Good day. Welcome to the TELUS 2024 Q3 Earnings Conference Call. I would like to introduce your speaker, Mr. Robert Mitchell. Please go ahead.

Hello, everyone. Thank you for joining us today. Our third quarter 2024 results, news release, MD&A and financial statements, and detailed supplemental investor information were posted to our website earlier this morning. On our call today, we will begin with remarks by Darren and Doug. For the Q&A portion, we will be joined by Zainal, Navin and Jason. We're just going to take a moment. Okay, just carrying on. On our call today, we'll begin with remarks by Darren and Doug. For the Q&A portion we'll be joined by Zainal, Navin and Jason. Briefly prepared remarks, slides and answers to questions contain forward-looking statements. Actual results could vary from these statements. The assumptions in which they're based -- could cause them to differ are outlined in our public filings with securities commissioning in our third quarter 2024 and annual 2023 MD&A. With that over to you Darren.

Thanks Rocky, and hello everyone. In the third quarter our team's dedication to operational excellence led to industry leading financial results and customer growth harnessing our premier asset portfolio and focused commitment to cost efficiency and operating effectiveness. Our results demonstrate our ability to deliver sustainable profitable growth anchored by our strategic emphasis on margin accretive customer expansion, globally leading broadband networks and of course our customer centric culture. This enabled industry best total net additions of 347,000 customers. Our team's passion for delivering customer service excellence once again contributed to industry leading loyalty across our key product lines. Notably, postpaid mobile phone churn was once again below 1%. Furthermore, churn for TELUS branded mobility and home bundled households nationally was also below 1%. This showcases the consistent potency of our unmatched bundled product offerings across mobile and home and our industry leading customer experience over our industry best pure fiber and wireless broadband networks. Looking at our financial results, we achieved solid and resilient third quarter TTech, EBITDA growth of 5.6%. This reflects the progression of our ongoing transformational efficiency programs which are clearly bearing fruit. Let's turn now and take a look at our TTech mobile results. TELUS realized industry leading third quarter customer growth of 289,000 net additions. This included robust mobile phone net additions of 130,000 driven alongside our continued focus unprofitable, margin accretive customer growth. Indeed, we are doubling down on our disciplined focus on profitability as we progress through the busy and highly competitive final quarter of the year and into 2025. By way of example, we strategically chose not to match dilutive offers that we saw in market during the back-to-school period. Our efforts will ensure our mobile customer growth drive sustainable EBITDA and cash flow accretion for our business and for our…

Thank you Darren and hello everyone. Mobile network revenue growth of 0.7% was driven by mobile phone and connected device subscriber additions, partially offset by lower mobile phone ARPU which declined by 3.4% consistent with Q2. Lower ARPU is a result of ongoing impact from the competitive pricing environment, including lower roaming from the adoption of unlimited roaming plans. This is partially offset by higher IoT revenue growth. Our strategy continues to focus on strong subscriber economics and profitable growth. Our ongoing focus for cost efficiency as demonstrated by the increase in our restructuring assumption to approximately 450 million will help offset industry pricing pressures and allow us to reinvest into the growth of our business and product development. These investments will support sustainable EBITDA growth, margin expansion and cash flow generation in the quarters and years ahead. Fixed data service revenue grew by 1.9% year-over-year, improving sequentially quarter-over-quarter. This growth was driven by strong customer net additions of 67,000 across our superior product portfolio of PureFibre, Internet, TV security and home automation as well as B2B growth. This was partially offset by lower TV revenue per customer as customers continue to revolve their entertainment packages along with technology substitution including the strong adoption of our national stream offering. At a segment level, TTech operating revenues were up 1.9% driven by mobile network, mobile equipment, fixed data services as well as health and agriculture services revenue. Notably other income of $54 million in the quarter increased by $36 million year-over-year largely due to gains from the active real estate projects that we have in front of us resulting from our PureFibre and associated copper decommissioning program. We anticipate these gains to continue in the quarters ahead as we execute against our multi-year real estate development strategy and decommissioning programs as…

Thanks, Doug. Carl, we're ready for questions, please.

[Operator Instructions] The first question is from Drew McReynolds from RBC. Please go ahead, Drew.

Yes, thanks very much and good afternoon or good morning. I'm going to keep my question to just a big picture one. 2024 obviously has been a tough year for the industry and the tide's kind of gone out a little bit here if you step back and Darren kind of watched the evolution of TELUS on fiber bundling, product intensity, AMPU, public mobile digitization, customer experience, I think everyone can agree you've been ahead of the curve here. So when you describe what's next, it's kind of interesting to see what that playbook looks like. So my question is, and it's a question that all investors are asking right now is just what is really the revenue growth potential here for the industry? So I'm just wondering from TELUS perspective what that outlook looks like and if you could kind of cut it into two buckets, one would be the outlook for the traditional core telecom business of, let's say just core wireline and wireless. And then, can you give us a sense of, then the second bucket, which is all of the new revenue streams and initiatives you've put in place. Thank you.

Okay, thank you for that fastball down the middle of the plate, Drew, to get things kicked off here. I'll do my best. Firstly, in terms of investing and getting returns from investing, we really are focused on a pecking order trifecta of harvesting the fruits of our labor to improve our balance sheet prospectively. We think that's a super smart thing to do because the intent economics aren't just good for debt holders, they'll also be good for equity holders. Secondly, for us, we think there are still very attractive areas to invest in our business. And I'll speak about those in just a moment and I think they will hit your question head on. And then thirdly, as has been a long-term hallmark of our organization, when we execute on our investments and we derive our returns, we make sure that our investors participate in those returns. And so returning the fruits of our labor to our shareholders via the continuation of our dividend growth model is something that is near and dear to our hearts. In terms of growth across the two buckets that you've articulated, we still see significant opportunities with what we're doing on fiber and 5G at both the revenue growth level, but also at the cost efficiency level as well. We have a ton of opportunity in terms of revenue growth just on product intensity and cross selling alone. I frequently chive the team at TELUS that we should be able to grow EBITDA 5% without bringing on a single new customer, such as the opportunity for cross product pollination within our existing customer base. So that opportunity is material if not voluminous. I think one of the things that massively differentiates our organization is what we're doing on new product and platform…

That's great. Thank you Darren for all that.

Thanks, Drew. Carl, next question please.

The next question is from Vince Valentini from TD Securities. Please go ahead, Vince.

Hey, thanks very much. I have a different question, but I just wanted, given everything you just said there, Darren. Can I wrap that up with one final point? If you have so much opportunity in front of you and you're getting CapEx down to 10%, is there any reason you shouldn't keep growing your dividend 7%? I mean you grew it for 7% for years when you were spending a lot more CapEx than that and had to borrow a bit. So if you can level set us up on that final piece of the puzzle you just said. And then more technical question for Doug, if I could, the $36 million for real estate, can you just remind us exactly how that works? This is just you've sold some of the initial chunks of real estate and every time you do a sale, it's going to count as revenue. Is that 100% flowing to EBITDA? Is there any cost associated with that? That would be great. Thanks.

So a direct answer to your question, Vince, no reason. Doug, over to you.

Yes. On the real estate side, what you're seeing is really 50% of the gain of those properties. So we are moving them into partnerships where our partner is bringing in cash. So we're selling 50% of the property upfront. And then once developed and put into commercial, we would recognize the other 50% of the gain and then any income that comes from it concurrently. So you're building an asset a consequence and it's accumulating across the board as we speak. So a strong building of a portfolio, it would be no incremental cash to us to develop it and to complete that cycle. And we continue to see the benefits of this for many years to come.

Long-term recurring with another shoe to fall on a positive basis. Absolutely.

Sorry, Doug. But -- so when you book the 50% sale as revenue. Is there any cost associated with it? Or is it 36 EBITDA.

Whatever the cost base of the land was at the time. Most of the land we've owned for many, many years. So the cost base is relatively low.

Okay. Thank you.

Thanks, Vince. Carl, next question, please.

The next question is from Stephanie Price from CIBC. Please go ahead, Stephanie.

Hi, good morning. Peers have been engaging in divestitures and some structured transactions as they take a look at their balance sheet. Is that just something tell us is thinking about or how do you think about non-core assets here?

So we will -- we've obviously looked at non-core assets from the perspective of the gift that keeps on giving with fiber on real estate and copper, as Darren highlighted. We've also done small divestitures of business lines that aren't in our long-term strategic view. And with our fiduciary responsibility, we'll continue to look at other monetization opportunities as we delever over time. But in addition to just the cash flow generation and CapEx reductions, all of those will contribute to a stronger balance sheet, and we'll continue to monitor what is best for our organization moving forward.

Okay. And then just on the restructuring, it looks like you brought the cost up a little bit. I think the restructuring is supposed to be completed this quarter. Just curious how we should think about the margin cadence for the remainder of the year and if you see any additional opportunities for efficiency?

The restructuring overall, I'd argue in Darren's point on digitization and opportunities to continue to rationalize our cost structure will probably won't be over for a very long time. So what we've identified is more opportunity that as we found more digital, found more automation, we're continuing to reduce our cost structure concurrently, and so I would say that's what we're seeing. The cash from that is primarily going to hit us next year on a way, very little within a year. And the benefits from that will most likely be Q1 is where you'll see them start.

Think it's notable how proactive and preemptive we've been with our cost efficiency programs that TELUS dating back to 2023 and seeing those Stephanie continue into 2024. So that we're trying to get ahead of market conditions on an anticipatory basis, which is why we've taken our workforce restructuring charge up to about $450 million for the 2024 year. We are continuing to be aggressive in leveraging our digital transformation leadership, which is a real hard mark of our success, and we've got a market leadership there, so we need to lean into it. And TELUS Digital has been a huge asset for us and a unique asset. This is not something that our peers have and the skills and development capabilities that they are bringing to support the digital transformation of TELUS and the AI tool set that we're using to improve the efficiency of our CX and go-to-market operations is material in nature. And then you can see these activities to give you some examples in terms of what's happening within the guts of our organization. We talk about fiber and 3.2 plus products per fiber household and that's great. And we talked about it in terms of bandwidth differentiation and symmetry differentiation. But one of the most important aspects of our pervasive fiber network is that the unit cost to serve is 30% lower than what it was under copper. And so to get the economics of copper decommissioning and then get an exposure to a 30% unit cost to serve improvement with fiber is a pretty potent combination. Look at what we're doing now at the AMPU level with our digital pure-play offering with public mobile, I think it's indicative of the orientation of our cost efficiency. It doesn't get talked about a lot because it's very much focused back to Drew's question on revenue and growth. But the platforms that we're building at TELUS on a proprietary basis, give us substantial improvements in our cost structure. So when you think about what we're doing on our proprietary TV platform, a significant improvement in our cost structure, what we're doing on smart home security on our platform, significant improvement in our cost structure. What we're doing with Amazon on smart home automation, significant improvement in our cost structure. And then finally, back to the comments I made earlier, the evolution to more of a SaaS product construct provides not just significant profit efficiencies in terms of cost, but cash efficiencies because of the lower capital rent associated with them and also our ability not just to deploy them domestically, but to export them internationally on a licensing basis. And so I think that's -- and I could go deeper on the cost story, but hopefully, that's indicative for you.

That’s great. Thank you for the color.

Thank you, Stephanie. Next question please, Carl.

Next question is from Maher Yaghi from Scotiabank. Please go ahead.

Great. Thank you for taking my question. Listening to your prepared remarks, Darren, we get a clear sign that you still see or expect top line and bottom line growth in your telecom business into the future. But how are you approaching your asset portfolio as a whole? Do you see a need to change our capital allocation or amplify investments in any of your non-telecom businesses to offset pressures on your telecom business? And second question, I was hoping if you can provide some visibility on your wireless loading. We have seen a significant increase in prepaid loading at your peers. Was it also as visible in your operations this quarter? And how do you approach this trend from a long-term lifetime customer value or lifetime customer profitability point of view? Thank you.

Okay. Why don't we -- just to take a break from me droning on. I'll answer the first part of your question, last, Zainul, why don't I give you an opportunity here to lean in on the prepaid front, and then I'll close off with capital allocation within our non-telecom businesses, although I would call them telecom extension businesses, but I'll get back to that in a second. Zainul, over to you.

Thanks for the question. I would say that we have seen a pretty significant shift across our peer group, as you mentioned, from a prepaid mix perspective. What I wanted to highlight, though, is that our mix has been really consistent quarter-over-quarter and into 2024. So we don't disclose the exact mix, but I can tell you that in Q3, it was quite consistent. I think the other thing that, as we've highlighted is that we have seen really great AMPU characteristics with respect to our public mobile platform and continue to see that as a great lever with respect to the -- managing the new dynamics in the industry. And then I think it's also important to highlight that the opportunity is to really focus on the life cycle management of the customer from a pre to post perspective. And that's something that you can see in our retention behavior and continue to see in terms of why we're continuing to gain share in those prepaid segments of the market. And I think that fundamentally, what we are going to be focused on is the absolute and most optimal mix from both a revenue growth perspective as well as an AMPU and household ARPA perspective. So that, I think, is relatively consistent with respect to our execution in terms of what you've seen on bundling, what you've seen on retention and what you've seen on the overall EBITDA performance of the organization.

Okay. Let me try and go from general, be specific here. I think, again, it's important to highlight the trifecta pecking order in terms of capital allocation to specifically address the question, that pecking order is to use proceeds to bolster the balance sheet. We really do think that, that would be synergistic for both debt and equity holders and position as well prospectively. You've heard me talk about the next step in the pecking order, which we are continuing to be excited by the investment opportunities in the business, both telecom and non-telecom. And thirdly, we remain committed to returning the money that we achieved through the successful execution of our investments via the sustainability materiality of our dividend growth model. Second point here is the telecom, non-telecom delineation is an erroneous way to look at portfolio management at TELUS. What we're doing in TELUS Health and TELUS Agriculture & Consumer Goods, indeed even TELUS Digital. These are all data strategies. The strategy for our telecom business prospectively is a data strategy from data analytics to data insights to data monetization aided and embedded by voluminous data coming off the back of our wideband fiber and 5G networks. Our Health play is a data play. Our Ag play is a data play. Our Consumer Goods play is a data play. It's the extensibility of that orientation from telecom in terms of where we're taking data across that analytics, insights and monetization continuum into areas that we think are exciting for growth on Health, Agriculture & Consumer Goods. And if you look at the intersection point, it goes beyond data. You can see the section points on network and connectivity. These are areas on health, agriculture and consumer goods that we think are ripe for digital transformation and the profits…

That’s very clear. Thank you Darren.

Thanks, Maher. Next question please, Carl.

The next question is from Jerome Dubreuil from Desjardin. Please go ahead.

Hi, thanks for taking my questions. Just a clarification, Darren, on your answer to Drew's question. Maybe I didn't understand right, but I think you said you think the business should be able to generate EBITDA growth of 5% before having a single new customer on board. I think we can all agree that you are going to have additional customers in the future. So are you guiding for more than 5% EBITDA growth in the future annually?

So we can watch for that when we go live in February, that's number one. Number two, the specifics of what I said is I frequently shied the team that we should be able to generate 5% EBITDA growth just cross-selling our products, what I call cross-product pollination within our existing client base such is the materiality or magnitude of that opportunity on the consumer basis, and on B2B as well. I think the entire team would say there is a hell of a lot of opportunity here for profitable revenue growth in that regard. That is not indeed not go out and get new customers. We will be looking to do both. I'm just making a point that the opportunity on the product intensity front is salivating and as a responsible management team, we should go out and do that. And the reason why I push hard on that is that I think our first responsibility is to sweat the assets on the money that we've already spent which is why I made the comment about getting better economies of scope on fiber and 5G, sweat those assets. We've already deployed the infrastructure. We already have the customer relationship. It's a warm relationship. It's easier to sell a new product to an existing customer than a new product to a new customer. And so let's leverage those more attractive economics along the way. And then not only do we get more revenue from that customer, but the relationship gets stickier. So it lowers the churn, which improves the overall lifetime value. But we are going to do that and yes, at the same time, go out and hunt for new relationships that can embellish the client portfolio that we already have. So it's the duality of both, and you can stay tuned for what the future holds when we give our 2025 guidance when the time comes, but thanks for the question.

Yes, looking forward to it. Thank you.

Thanks, Jerome. Carl, we have time for one more question please.

The question is from Aravinda Galappatthige from Canaccord Genuity. Please go ahead.

Thanks for squeezing me in. Two for me. First of all, on wireline, obviously starting to see a little bit of a rebound there in the fixed data services number growing up to 2%. And obviously, the broadband sub-loading has been positive as well. How should we think about this line item going forward, particularly in the backdrop of competitive conditions in the West and maybe just an update on those conditions and those pricing promotions there? And secondly, maybe a little bit more of a specific question on wireless ARPU. When you think about the ARPU pressure, we obviously focus on the single ARPU number, but there's naturally a number of cohorts there. There could be a chunk of customers at $70, $80, $90. When you think about the degradation in ARPU, what's the construct of that? Is it sort of the -- maybe the cohort that's below the average going even lower? Or are you seeing chunks of the upper tiers perhaps also revising. I realize that's a bit of a specific question. So maybe just a general answer that would help. Thank you.

Okay. I think what I'll do on this one is Zainul I'll ask you to speak to fixed data growth and what we're doing there prospectively at the revenue and profitability line as well as on the wireless ARPU front, But Navin, I would like you because it frequently gets forgotten to supplement Zainul's answer on both questions with the B2B view, including within the SMB area. Zainul, over to you.

Thanks, Darren. Thanks for the question. I think you've definitely seen from us overall a level of consistency. So you've seen consistency with respect to our growth on subscribers on the wireline side. You've seen consistency with respect to our revenue growth. And our goal is to continue driving that consistency as well as continuing to drive growth. Darren talked a lot about our product intensity thesis and some of the new exciting product capabilities that we're bringing to market. To answer your question specifically on the competitive side, we're absolutely continuing to see the competitive pressure. It was more intense and bleeding from wireless into wireline, and we continue to see that. But we've seen our retention capabilities stay strong, and our product intensity continue to grow. And I think we've also seen pretty strong uptake both in our mobile and home subscriber growth, as Darren highlighted, but as well in our ability to drive step-ups and get customers higher speeds and higher capabilities. And of course, that superiority that is very unique to us. Maybe the final point I'll make, though, on the wireline side is that with the opportunity to drive scale economics with the continuation of growth in our fiber footprint and growth in our fiber loading, and with our product intensity, there's also a significant AMPU economic thesis there that we're continuing to pursue. I think that customers are looking really for more simplification and a more seamless experience in terms of how they interact with us and other providers. And we want to be on the leading edge of providing those capabilities from a digitization and customer-first experience perspective. And so I think there's some material growth opportunity ahead on both that cost thesis, but on a customer experience improvement thesis. With respect to…

Yes. Thanks, Zainul. I think a number of things that you said on the consumer side apply on the business side. So a few top-ups. I think just to hit the wireline revenue and profitability improvements, we're actually quite happy with the steady progress we're making on the B2B side in this regard. I think a couple of points to be made there. First and foremost, we have a volume play. We have a market share play that allows us to outrun some of the pricing challenges in the market that we're taking advantage of. And in the process driving good revenue, good cash growth as a result. I think secondly, on the cost side, as you've heard a couple of times on this call, we continue to push extremely hard in terms of our digital automation and GenAI investments, a lot of that driven by our TELUS Digital experience team. So not only are we growing revenue through good market share expansion, but doing that with good cost structure and good cost reductions as a result. I think the -- on the fixed space, as you asked specifically, when you think about the cross-sell opportunity within Canada and the linkage across all of our B2B assets that bodes really well. And we know that every -- for example, every business in Canada needs employer-based health care services and to be able to link the two is a big part of our cross-sell opportunity and on a global basis, we're seeing that cross-sell funnel grow significantly, and we've got over $300 million in that funnel right now. So I think that also is an important part of how we're going to grow revenue, how we're going to improve product intensity and as a result, improve ARPU and AMPU. And the last thing I'll say is just back to your point around wireless ARPU, one of the other components, as you said, the different constructs of ARPU, we're seeing good IoT and Industry solutions growth in that number, private wireless network implementations, IoT industry solutions and just core connectivity as that continues to grow, that's helpful on the wireless ARPU side. So I'll pause there.

Thank you, Aravinda, and thank you, everyone, for joining us today. Please feel free to reach out to the IR team with any follow-ups. And with that, Carl, back to you.

Everyone, this concludes the TELUS 2024 Q3 Earnings Conference Call. Thank you for your participation, and have a nice day.