Good day. Welcome to TELUS' 2024 Q4 Earnings Conference Call. I'd like to introduce your speaker, Mr. Robert Mitchell. Please go ahead.

Hello, everyone. Thank you for joining us today. Our fourth quarter 2024 results news release, MD&A, 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, the Q&A portion, we will be joined by Zainul, Navin, Jason and Tobias. Briefly, prepared remarks, slides and answers to questions contain forward-looking statements. Actual results could vary from these statements the assumptions on which they are based and the material risks that could cause them to differ are outlined in our public filings with Securities Commissions in Canada and the U.S., including fourth quarter and annual 2024 MD&A. With that, over to you, Darren.

Thanks, Robert. Hello, everyone. And in the fourth quarter and for 2024, our team's relentless pursuit of operational excellence continue to differentiate the TELUS organization, driving significant customer growth, and robust financial results. Through our premier asset portfolio and unwavering commitment to cost efficiency, we delivered strong profitable growth to close out 2024. A momentum that we intend to build upon in 2025 and beyond. Our focus is on margin accretive customer expansion, globally leading broadband networks, and a customer-centric culture culminated in our third consecutive year of surpassing 1 million mobility and fixed customer additions. Once again, TELUS led the industry with more than 1.2 million telecom net new customer additions in 2024. This performance is a testament to our unmatched bundled product offerings across mobile and home. Indeed, our team's passion for delivering customer service excellence again, contributed the continued strong loyalty across our key product lines. Notably, postpaid mobile phone churn of 0.99 per cent for the full year marks the 11th consecutive year at less than 1%. Despite a challenging competitive regulatory and macroeconomic landscape, TELUS drove 5.5% TTech EBITDA growth for 2024, meeting the target range that we set at the beginning of 2024. This included strong TTech EBITDA growth of 7% in the fourth quarter. Our team once again achieved industry best total customer telecom net additions of 328,000 for the quarter. In mobile, we drove leading total net additions of 264,000, including healthy mobile phone net additions of 70,000 and strong connected device net additions of 194,000. This was supported by our ongoing intense focus on economic margin accretive customer growth which is evidenced by our consistent industry-leading lifetime revenue, buttressed by our industry best churn and superior customer experience. Let's turn now and take a look at our wireline business, TELUS delivered…

Thank you, Darren, and hi, everyone. Mobile network revenue was flat as profitable mobile loading and connected device additions were offset by lower mobile phone ARPU, which declined 3.6%. The decline in ARPU, although reflective of the ongoing competitive pressures in the market, remained relatively stable as compared to the previous few quarters. Double-digit IoT revenue growth partially mitigated this impact. Fixed data services revenue grew 3.5% year-over-year, driven by strong customer growth across our leading product portfolio of PureFibre Internet, TV, security and home automation as well as B2B growth. At the segment level, TTech operating revenues were up 4.1%, driven primarily by mobile equipment, fixed data services as well as strong growth in health and agriculture, as Darren highlighted. Other income of $52 million in the quarter increased by $37 million over last year, largely due to gains recognized on our real estate and copper monetization programs. We anticipate these programs to continue in 2025 as we execute against these initiatives. Notably, TTech adjusted EBITDA increased by 7% in the fourth quarter and 5.5% for the full year, achieving the low end of our target range alongside margin expansion of 110 basis points to 38.2%, demonstrating an unparalleled track record of execution excellence in a highly dynamic operating environment. These results were driven by our consistent emphasis on profitable revenue growth or customer growth and the benefits from our ongoing focus on cost efficiency and effectiveness, gains from our real estate and copper monetization programs as well as increasing margin contribution from TELUS Health and TELUS Agriculture and Consumer Goods. Looking at our TELUS Digital segment. Operating revenues and adjusted EBITDA for the fourth quarter continued to reflect stabilization and performance, both improving on a sequential quarterly basis. The team continues to manage their cost structure while focusing…

Carl, we’re ready for questions, please.

[Operator Instructions] The first question is from Jerome Dubreuil from Desjardins. Please go ahead.

Thanks for taking my questions. A couple for me. First topic is on your target of 3x leverage in 2027. I think that was very interesting. How much asset divestiture does that include? And can we infer from this that you are happy with your current portfolio of assets going forward? And then the second topic for me, in light of the high dividend yield, if you can maybe elaborate on the merits of having a long-term dividend plan. In general, the competitive environment evolves, investment opportunities arise and interest rate changes in three years just seemed like a very long time so if you can talk about these things.

Okay. I’ll start. So on the assets going forward, so that question, we have a placeholder in our plan. We’ve been open on that of approximately $500 million, and that is included in our three-year plan going forward that we will continue to do appropriate divestitures as we seem appropriate – acquisitions as we seem appropriate. On the delevering side of assets, as highlighted, we’re obviously leveraging of our free cash flow and capital intensity reductions. We have a three-year plan that includes the divestiture of some of the non-core assets. We haven’t disclosed exactly the amount with that. But I think with the initiatives over the next little bit, you’ll see some coming to fruition within 2025. And we’ll continue to update on our progression on that, but I’m not going to give an exact number on those divestitures today. And on the growth plan, Darren, I’ll pass it back to you.

So I think over the past 15 years, the dividend growth model has served investors extremely well at this organization. Secondly, I think we’ve been pretty clear in respect of the pecking order for our capital allocation, party number one for the benefit of all securities holders is to drive improvements in our balance sheet. And you’ve heard us this morning come out with a public target in that regard and ancillary considerations around it, including ratcheting down and removing the DRIP along the way. We think we’ve got the latitude to continue invest prudently in the growth of the business. And then thirdly, to return cash to shareholders were the primary but not the exclusive vehicle has been our dividend growth model. When I look at the future prospects of this organization from EBITDA growth to operating efficiency to the emerging growth opportunities within health and TELUS Agriculture and consumer goods. When I look at a capital appetite that’s moderating with goal to get down to a CapEx intensity level of circa 10% I foresee a very strong and sustainable free cash flow story for this organization prospectively. And that strong free cash flow generation on a longitudinal basis with that parameter of sustainability supports the affordability of the dividend growth model, both in terms of magnitude and longevity. Having said that, as I have said over and over and over again, the dividend remains the quarterly providence of the Board to adjudicate upon factoring in multiple considerations. And if there is undue volatility of some sort, we always have that lever to be adjusted smartly appropriately according to those conditions. But when I normalize for anomalies of that nature, I think the growth trajectory of this organization at the cash flow level for the reasons that I just cited supports the type of continuity as it relates to returning cash to shareholders in a fashion that’s both meaningful and differentiated from our peer group.

Thank you.

Thanks, Jerome. Carl, next question please.

The next question is from Maher Yaghi from Scotiabank. Please go ahead.

Great. Thank you for taking my question, and good morning. First, I would like to ask you on your fixed data services and fixed service revenue in general. This is the second quarter that we see an acceleration in growth on both metrics. Quite a feat I see in the current environment. Can you discuss the underlying KPIs that is supporting this improvement and it seems to me it's coming from pricing and customer intensity. Can you confirm that? And is this – when you look at the pricing in general, can you comment a little bit about the pricing in your marketplace? Thank you.

Okay. I don't think it's quite a feat. I think it's a satisfactory achievement. And Zainul, why don't you speak to your satisfactory achievement.

Always striving for better. So I think it's a great question. I think that what you should see from our fixed data growth is that, first of all, it is based on a foundation of volume and significant quarter-over-quarter, year-over-year growth in our fixed customer base. The second thing that I would highlight is that we're always driving for profitable growth across our regions. And so while we have access to new markets and territories, we're always going to do that in a profitable way. So that's the volume side. The other piece that's very important is that we have a diversified and growing portfolio of services that are dependent and driven – and driving be fixed growth. And then I think it's really important to look at the characteristics that Darren alluded to on the fiber side. with respect to the percentage of customers that are taking higher speeds and continue to be pushed up the speed curve and want to take those higher levels of the portfolio that we offer as well as the product intensity that we offer in terms of the incremental products and services. So we have a significant opportunity to continue growing that market. And we are seeing a strong take rate of our services over time. And of course, we're going to be supporting the idea that as we grow and ensure that we provide better reliability, better capacity of our networks that the pricing dynamic keeps pace with us. So those are all the kinds of things that we will look to. I think over time as well, when you look at. There are some policy and other elements in terms of our pricing strategy that still have accretion opportunity for us, and we're going to continue to be mining those. So I think our overall strategy is going to be product diversification and growth, and we're always going to seek that profitably, and you see that in our results.

One of the areas where we've again delivered differentiated results on this exact front is within the B2B side of our business. Navin, would you please provide a short top-up to Zainul's excellent comments.

Yes, for sure, Darren. And yes, just as a top-up to Zainul's comments, we're seeing very strong volume growth and growth of share on the fixed data services side. And quite frankly, in B2B and specifically SMB, we had room to grow share in our ILEC territory. And obviously, the opportunity in our non-ILEC Eastern territories. So that is an area that we've been very focused on and have seen good success in terms of driving good volume and market share penetration. We've also have a good opportunity that we've made progress on, but still have lots more to go in terms of product intensity, especially in the SMB space, and we'll continue to focus on that. And then lastly, we continue to look at our product depth and breadth and look to drive product expansion that then also drives improved revenue. So back to you, Darren.

Thanks.

Thanks, Maher. Next question please.

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

Good morning. On the DRIP removal, can you talk a little bit about how you're thinking about the payout ratio by 2027, excluding the DRIP? And then maybe you can talk more broadly about kind of that term ratcheting down the DRIP in 2026 and what that implies in terms of magnitude?

Yes. So we expect our ratio to be within our payout ratio that we have actually put out. So the up to 75% – 50% to 75% – sorry, 60% to 75%. That ratio is one we'd expect to be in, in 2027, even with all the moving parts that we've just talked about.

And in terms of the 2026 ratchet down component, we've not provided that specificity. We will do so in May. But I think a good operating assumption would be that we would make half a step in the ultimate direction that we want to achieve in 2027. So a move halfway there, I think, is a good modeling assumption.

Perfect. And then, Zainul, you mentioned on the answer to the last question about moving into new territories and fixed data in a profitable way. Just curious if you can expand a little bit on the move into the Ontario Internet market, what the strategy is there and what you're seeing so far in terms of uptake?

Sure, Stephanie. So I think the key thing is that it's not a new move, right? So we have been acquiring assets and making sure that we look at the market in terms of what the customer behavior and customer desires are we've had Koodo Internet in market for a period of time, and we're seeing good bifurcation in terms of product intensity from a Koodo Internet perspective in terms of the take rate for that demographic of the market. And when we bundle in elements like Stream+ and other offers, that's – there's a really great value proposition for our customers there. And I think that as it relates to pure fiber internet, this is a marathon. It's not a sprint. We've always talked about smart economics and leveraging new products. And so we have areas where we have consumers that are taking our security services that want our view and our responsibility and reliability on their Wi-Fi and their internet. And so those are the kind of areas that we're going to grow in profitably where we can provide a value-added service and an end-to-end opportunity for our customers to experience both our wireless wireline and our value-added product. So when we look at this, we have to look at it from that lens. And we're not running to the market and doing dilutive offers, but we're really finding the niches where our customers want those bundles and products and growing profitably from that perspective.

Thank you for the color.

Thanks, Stephanie. Next question.

The next question is from Drew McReynolds from RBC. Please go ahead.

Yes. Thanks very much. A couple for me. Just first on – I guess, the revenue growth guidance. We've heard from some of your competitors just in terms of population growth assumptions or more broadly, wireless market expansion assumptions. Just wondering what you're thinking on the volume side for wireless in 2025? And then secondly, just back to the earlier question on TPIA and whether there will or won't be a big three band out of footprint? Just wondering from a TELUS perspective, again, with reference to perhaps the 2025 guidance, if you're unable to tap TPIA in the East. Just wondering what other kind of growth opportunities you would have or whether that materially change the growth outlook here for TELUS short and medium term? Thank you.

You want to take the first part of that question, Zainul?

Sure. On the volume side, so I will say that Darren reminds me daily of the comments that he's made for several consecutive quarters on the fact that our EBITDA growth could be at its – at the high end of guidance on the back of leveraging our existing customers and ensuring that we provide – continue to provide great service, continue to drive product intensity and continue to improve on our churn and other economics. So I think that we're really focused on what we can do with the capabilities that we have. We have a breadth of a product portfolio that is unmatched domestically, and we have the opportunity to continue to leverage that differentiation to grow our business. And we're going to be focused regardless of the macroeconomics and the macro environment on driving that level of product intensity. So we are absolutely seeing some shifts, and we're seeing some areas of decline. I think that we're all managing through that. And our approach is to be as disciplined as we possibly can and continue to grow profitably off this opportunity size that we already have that we can continue to mature.

Again, given that the differentiated success on the B2B front, particularly as it relates to national expansion and the growth opportunities within the small, medium business side are considerable. Navin, would you top up on Zainul's response as well, please, and then I'll close it out for Drew.

Yes. Thanks, Darren. So just as an example, we saw 6% revenue growth in our SMB segment in the fourth quarter, and we continue to see double-digit growth in our 5G IoT portfolio, which all continue to contribute positively to the B2B growth story. And so when we look at 2025, wireless specifically, yes, there are some headwinds that will continue, but we feel very confident in our ability to drive the volume growth, the new product growth, the opportunity to monetize data is nascent at this point and a very good opportunity for us to continue to grow on that front as well. So the SMB opportunity on a national basis continues to be an area of strong growth for us.

Finally, Drew, I could reiterate the comment that I made last time, which I still feel strongly about, which is the significant growth opportunity that exists within our existing client base in terms of the upside of product intensity that would give us volume loading growth and extremely attractive economics associated with that because it would be economic quality loading that we would be affecting. And to be quite clear about that, that's really a four-point game because not only do we get economically accretive loading, but we improve the product intensity, which lowers the churn rate, which gives us a better overall lifetime value. So that's at the backbone of everything that we're doing right now. But when you think about the question you're asking on third-party access in whatever guys, I guess the best way I could answer it is we're going to make the bold assumption that regulatory decisions pronounced by the CRTC after a comprehensive and rigorous and exhaustive process where the diversity of voices was consulted in terms of all stakeholder constituency groups, where the documentation of the decision was highly exacting, where the decision was confirmed twice over from interim to final, where the decision was twice vetted and approved by the Competition Bureau. And also a decision that's, I think, consistent on a contemporary basis with Canada wanting to remove, not increase international trade barriers given some of the challenges that may confront us prospectively at the international level. We will expect that particular decision to stand. And we will adjudicate accordingly in terms of our go-to-market activities. I think that decision and our response from a go-to-market perspective is in the best interest conclusively of Canadian consumers and Canadian businesses, particularly small businesses in that regard. And I would expect that the government at this particular point in time, would want to be making moves that are accretive to the welfare of consumers or the productivity of businesses.

Understood. Thank you both.

Thanks, Drew. Next question please. Carl.

[Operator Instructions] The next question is from Sebastiano Petti from JPMorgan. Please go ahead.

Thank you for taking the question. Just maybe following up on Jerome's question and just about the leverage target. Darren, you did mention surfacing value in your infrastructure assets and a comment reiterated or echoed by your telco peer there. Any examples of perhaps what you're exploring? Obviously, Rogers is going down a path with some unclear on how that will result. But you have obviously telecom infrastructure assets related to your towers, other fiber. I mean, what is or is not on the table? And then just any other help as we kind of think about getting to that the three turns of leverage over time? You did say EBITDA and free cash flow growth, but I think just commentary we're hearing folks perhaps struggling a little bit trying to see how the glide path gets there without perhaps meaningful asset monetization. So just maybe double-clicking on that would be lovely. Thank you.

Okay. Given you ask for examples, I'll give you the recipe that we're pursuing with a requisite degree of specificity with some degree of insights needing to be assumed along the way. First and foremost, we're going to keep pushing on EBITDA growth. We think we've got attractive opportunities for cash expansion through EBITDA growth. And I think 7% EBITDA growth to exit Q4 is an excellent example in that regard. We've been very proactive and aggressive in terms of our cost efficiency programs. And that has been a key underpinning to our go-to-market activities to deliver the nominal results that we are on the EBITDA side of the business. On the capital investment side, I've been quite explicit saying that the goal of this organization is to get down to 10% CapEx intensity. And it's not a fanciful goal. It's a goal that recognizes that the heavy CapEx lifts that have really characterized the decade between 2013 and 2023 are more behind us now than ahead of us because of the pervasive fiber build that we've affected and the spectrum gauntlet that we have survived through along the way. And I think those are positive things. The other aspects that are buttressing our ability to get down to that 10% CapEx intensity level is the digital transformation of the TELUS organization aided and embedded by TELUS Digital the cloudification of our support infrastructure and the fact that increasingly, Zainul and Navin's portfolio is characterized by SaaS solutions. So I think all of those things cumulatively are quite supportive in that regard. And we're not a one-trick pony in terms of where our sources of growth are coming from. We're getting it from consumer. We're getting it from business, and we're getting it from our emerging growth areas, including TELUS…

And if I could quickly follow up, that's a very thorough answer. I appreciate that Darren. But as you think about the real estate monetization opportunity, you marked another $100 million this year towards that program. Is that – can you achieve your $3 billion monetization goal in real estate at that kind of run rate level on an annual basis as we kind of think about maybe the medium term? Thank you.

Yes, there's going to be more of a run rate similar to 2024 for the next year or so. And then there'll be a, call it, a lump-sum monetization when you have a pool of assets that carry a magnitude of substance. So that could be two years out, give or take or it could be sooner if we continue down the path on development, we're on. But I would assume for 2025 is similar to 2024 but there could be a lump sum within the three-year planning period.

Thank you.

Thanks, Sebastiano. Karl, we have time for one more question, please.

The final question is from Benjamin Swinburne from Morgan Stanley. Please go ahead.

Thank you. Good morning to you guys. I wanted to ask about the wireless marketplace and particularly around pricing environment and ARPU. I see ARPU, I think mobile ARPU was down about 3.5% year-on-year in Q4. I think you've put in a price increase on public mobile in the first quarter. Just wondering what you're thinking around ARPU trends in 2025 and what's sort of underpinning the guidance if you want to talk about it? And just generally, the environment you think you're operating in today versus what we saw over the course of the past year. Thank you so much.

Okay. I'll ask Zainul and Navin to kick it off. And then Doug and I can close as it relates to guidance round up.

Thank you. So, I think I would say that you've seen similar ARPU performance from us from a stabilization perspective. And it is no doubt a competitive and aggressive market out there. and it's a disruptive market. So, I think that we are continuing to assume that we see some of the same challenging competitive dynamics. I don't think that there's going to be a material swing if there is to the upside, and then that will be accretive. Our guidance is based on much of the same. And I think that as we spoke earlier, we see good opportunity to continue increasing product intensity into our base. I would tell you that I'm not satisfied or happy with the ARPU performance or, quite frankly, with our churn performance. And I think both of those levers could be improved with respect to how we attract different demographics of the right market. I also think there's some mix evolution. So as you highlighted with areas like public. We are – we do have offerings that are attractive to different segments of the market that impact the mix. But I think the key thing here is that our guidance assumes that we're aligned to the same sort of performance dynamic that we've seen on the lower side. And on the upper side, there might be accretion opportunity from that point. Over to you, Navin.

Yes. Thanks, Zainul. Just a few top-up. So as both a and I have said, we still see opportunity to grow share in B2B. We still see the opportunity to drive product intensity, and that has a positive impact on churn as well, of course. I think on the B2B side, we have some really strong growth assets. So the IoT business is growing nicely double digit. You may have seen the press release that we just signed a private wireless network agreement with the Calgary Airport. And that's the first of its kind with potentially more to come. And so those are examples of great growth assets that are helping to offset some of the competitive intensity we're seeing. The other thing I would say is – and Darren alluded to this on our cost focus, but there's a lot of digital and digitization opportunities that we're working with TELUS Digital and our internal CIO team around how we improve our AMPU. So wave in with ARPU pressures, how we're maintaining and expanding our margin profile. And I think the fact that in the B2B space for a good part of the decade, the last decade, we've had the best loyalty results in the space, and that continues to always be an important contributor to our ARPU as well as to our churn. So we expect a lot of that and all of that to continue in 2025. Back to you, Darren.

Doug, do you want to top up at all?

Yes. Maybe just some of our thoughts as well that when you think through the uncertainty in the macroeconomic backdrop on interest rates, inflation and cost of borrowing You'd also – we've also made some assumptions on rationality to pricing to help support some of those higher costs. And so it's not unreasonable, but it's definitely more reflective of the situation we're in. And some of the debt that's currently being issued is at higher rates. And so I think the alignment of the market to price accordingly on that is probably aligned.

And finally, our guidance isn't predicated on a miraculous ARPU recovery. So I think it's important to be understood. We would hope to see some elements of moderation. It would be great to see a miraculous ARPU recovery. But our guidance is not predicated on that. We think that would be an erroneous planning assumption. And the only point that wasn't at it is we have a lot of diversity of growth taking place at TELUS that's outside the Dominion of wireless ARPU.

Thanks, Darren.

Thanks, Ben, and thank you, everyone, for joining us today. Please feel free to reach out to the IR team with any follow-ups you may have. Karl, over to you.

This concludes the TELUS 2024 Q4 Earnings Conference Call. Thank you for your participation, and have a nice day.