Good day, everyone. And welcome to the TELUS 2025 Q3 Earnings Conference Call. I would like to introduce your speaker, Robert Mitchell. Please go ahead.

Good morning, everyone. Thank you for joining us today. Our third quarter 2025 results news release, MD&A, financial statements and detailed supplemental investor information were posted on our website earlier this morning. On our call today, we'll begin with remarks by Darren and Doug. For the Q&A portion, we will be joined by Zainul, Navin, Jason, Tobias, Hesham. 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 in our third quarter 2025 and our annual 2024 MD&A. With that, over to you, Darren.

Thank you, Robbie, and hello, everyone. In the third quarter of 2025, TELUS delivered another period of strong customer growth and financial performance, powered by our team's relentless focus on operational excellence. Our results showcase the compelling value of our comprehensive bundled services across mobile and home solutions, and we're doing that in a complementary fashion with the strategic rollout of TELUS PureFibre connectivity to homes and businesses nationwide. We're delivering far more than connectivity. We're empowering Canadians with transformative digital experiences, including AI-powered smart home energy solutions, including cutting-edge tech-enabled health care and well-being services and as well comprehensive security offerings at the dispositions of our client. These offerings are revolutionizing productivity and enhancing quality of life for our customers. Indeed, this quarter, we achieved an industry best 288,000 total mobile and fixed customer additions. Our close to 21 million customer connections reflects an industry-leading 5% growth as compared to the same period a year ago. Furthermore, our sustained focus on delivering exceptional client experiences continues to drive leading customer loyalty metrics. This was demonstrated by our industry best postpaid mobile phone churn of 0.91% this quarter as we progress through our 12th consecutive year below the 1% level, truly a hallmark of this organization and our culture. Looking at our financial results, we achieved solid and resilient TTech EBITDA growth of 3%. In mobile, we drove healthy phone net additions of 82,000 and leading connected device net additions of 169,000. These results were supported by our ongoing focus on profitable margin-accretive customer growth. This is once again evidenced by our consistent industry-leading customer lifetime revenue, underpinned by our industry best churn result, which remains clearly the hallmark of the TELUS organization and the financial results that we derive from it. Let's turn now and take a look at…

Thank you, Darren, and hello, everyone. Mobile network decreased slightly, consistent with the second quarter at 0.6%. This performance reflects mobile phone and connected device subscriber growth and 9% increase in IoT revenue, offset by lower mobile home revenue -- or ARPU, sorry. ARPU continues to improve, declining 2.8% in the quarter, a 50 basis point improvement sequentially. We continue to see improvements quarter-over-quarter across new activations, rate plan changes and customer renewals, reflecting our ongoing efforts to mitigate network revenue pressures. Fixed data revenue grew 1% year-over-year, making us the only provider to report positive growth and making our 19th quarter of that positive -- positivity. Within Consumer, data revenue increased by 4%, driven by a 6% increase in residential Internet revenue, reflecting continued customer growth and higher ARPU alongside higher security and automation revenue. In business, fixed data declined with variability from year-over-year events and customer contract changes. This was primarily offset -- this was partially offset by continued small -- growth in small and medium businesses, leveraging our differentiated and diversified portfolio of solutions. TTech adjusted EBITDA, excluding Health increased by 2% alongside a margin expansion of 210 basis points to 43.4%. These results were driven by our consistent emphasis on profitable growth alongside our ongoing focus on cost reduction and our increased adoption of TELUS Digital solutions, resulting in meaningful competitive benefits. In Telus Health, operating revenues and adjusted EBITDA grew by 18% and 24%. This growth was driven by global business acquisitions, including Workplace Options as well as organic growth in payer and provider solutions, reflecting strong performance in collaborative health records and recurring revenue in electronic medical records and virtual pharmacy solutions. TELUS Health adjusted EBITDA margin expanded 60 basis points to 17.1%, slightly lower than Q2 as we begin post-acquisition and integration work…

Thanks, Doug. Karl, we are ready for questions, please.

[Operator Instructions] The first question is from Maher Yaghi from Scotia.

Great. Maybe a first question on wireless and the second one on Terrion. So Doug, you mentioned in your prepared remarks how ARPU has improved a little bit sequentially. But can you give us maybe an overview of what you think will need to happen to return to growth on the ARPU front. And maybe just some views on the outlook for churn. You're running at a low churn, but it's starting to -- we saw a slight increase in the quarter. Maybe just what's driving that behavior just on the wireless. And the second question on Terrion is how should we think about the capital needs for the business going forward? Are you looking to transact and acquire towers. Or it's just going to be building new colocation towers in different parts in Canada. And maybe the accounting of how we'll see the cash flows from that business flowing into your free cash flow calculation?

All right, Doug. Go ahead. Second on the last one, you're the Chair of Terrion. So we'll do Terrion on and then maybe pass to Zainul for ARPU. No, I think you should do it all. Go ahead.

All right. So on Terrion, I think the best way to describe it is, yes, we are looking at acquiring towers where appropriate to do so, and that could be either outright purchases and/or partnerships on bringing more partners into our overall partnership. We will continue to build, and we have a densification of our network and building our capacity, as even Darren highlighted, some of the new ones that we've already started. Cash flow out of the gate, any of the build costs are coming out of Terrion. And so any distributions that would be coming out of Terrion would be net of that CapEx. And so as we consolidate Terrion into our books, you will see 100% of the CapEx and then you'll see a lower distribution. And as we define our free cash flow definition into the future, we will make sure that, that is very clear on the ins and outs as you see that in both pieces. So I think that will be very clear and it will be transparent when you see anything of materiality. Terrion has only been in play for 2 months, so there has been a minimal impact this quarter. On ARPU growth, I think it's going to be the continued hard work that we see from the team on step-ups and the prices that we're seeing on new acquisitions as well. We've seen a little bit better on device subsidy as well. But as we get into the fourth quarter and you see Black Friday and back -- Christmas, specials that will come in, in any -- and say, aggressive specials could obviously slow that down. But I think it's momentum. Once it's through your base, it's going to be slow and steady back on the way out. And so, so far, good momentum, but I think it's to be determined that if that holds or not as we move into the fourth quarter. And so I think that would be my best assessment.

Just 2 top-ups on that. Given that we don't entirely control our own destiny on the ARPU front, I think it's important that we continue to improve our profile on unit cost to serve. So you've seen us make some good progress there getting into the double digits on the cost reduction front. I think we need to keep going down that particular path and lower our unit cost to serve. And that's one of the attractive aspects of having TELUS Digital now fully in the fold so that we can leverage AI technology to really drive down unit cost to serve within our consumer and our B2B wireless operations. And then the other thing that is a great antidote to ARPU pressure as we hope for better days ahead is product bundling. We've got the best product portfolio in the industry to the extent to which we can increase our product intensity in our customer relationships through progressive bundling, that's going to give us a holistic outcome with the client in terms of overall economics that's extremely appealing.

And just to be clear, Doug, on free cash flow, any distribution that Terrion is going to be making to its equity shareholders will be deducted from your free cash flow calculation?

We're going through that as we speak, but it will be transparent of where it is. But it will be how we assess the capital item because when you think through the capital item as well, we're not paying for 100% of the capital. We have to consolidate it. So I need to make sure that, that is very clear on both the capital that we're accountable for and then the distribution, but we'll make sure you see the net on both.

The next question is from Jerome Dubreuil from Desjardins.

The first one is on the partner build model. If you can please discuss the implications from a financial standpoint. Maybe I'm just throwing ideas out there, but maybe the margin profile is going more toward a wholesale model, but lower CapEx. Is this the right way to think about it. And if you can discuss the different return profile of owners' economics versus the partner build, please.

So just on the fiber side, I assume that's the partnership you're referring to. The economics are that we would end up either signing a lease for, call it, a dark fiber lease and/or we take a community as it's built, and it's our initiative to ramp up and scale it. And so the economics are based on I would say, similar to what you would see on any third-party fiber lease or fiber wholesale arrangement. And the third party is making their money just as we would if we were wholesaling our fiber to someone else. So it's a very similar structure. And we just have a couple of different scenarios out there of how we lease, but it would be a fair market value for what a lease arrangement would be on any kind of fiber transaction.

And overall, our goal is to ensure that when we're leasing or when we're renting fiber on a wholesale basis, the return, the total economic return is equal to or better than the economic return that we derived historically from our own fiber build in Western Canada. And the reason why we've set that Axiom and think that it's doable is clearly we have much greater scale today on the fiber front. So we should be better positioned to seize those economies of scale. We have better technology deployed than what we had historically during the fiber build time in the West from 2014 to 2020 that improves both operational efficiency and operational execution. And we have far more products. When we started to build fiber in the West, the revenue returns were very much around Internet and TV. Now our business still has the Internet and TV components, but we have the security component. We have smart home automation. We have smart home energy services, so on and so forth. So again, leveraging the limitless bandwidth of fiber. We're also looking to secure economies of scope by creating new services over that rented fiber and getting a better return than what we did originally on our own build activities.

Second one for me is, can you please provide clarity on the, I think you call it AI-enabled revenue going from $800 million to $2 billion. If you can discuss maybe what are those lines of business? Is this replacing other existing revenue? Or is there kind of a direct line of revenue here that's going to be going from $800 million to S2 billion.

Okay. Let me tackle that. And then if you want to have a follow-up for additional detail, we can go there. Looking at the base right now at the $800 million level. That base in terms of the question that you're asking is comprised of a variety of revenue sources. They include SaaS solutions that we're providing. They include our cloud solutions. They include the myriad of Gen AI applications that we have developed both within TELUS proper as well as within TELUS Digital. They include our data annotation business, and they will include -- it's very minor right now, but it will grow to be major prospectively our sovereign AI GPU compute solutions. We like the position that we're in here because we are extremely unique in that TELUS controls the entirety of the AI compute ecosystem. And that is significantly differentiated from our North American peer group. So it's all in-house at TELUS, whether you're talking about AI inferences, whether you're talking about AI models or whether you're talking about AI training. And we would believe in terms of what supports our revenue going forward that our holistic in-house solution aided and embedded by our partnership with NVIDIA creates a series of superior attributes that's going to drive the revenue model progressively in terms of getting from that $800 million to $2 billion. And so when you look at these components, number one, I think we are fairly unique in that we explicitly qualify in terms of a desired Made in Canada sovereign AI solution consistent with the white paper that the federal government has just published. And I got to believe that, that is deeply relevant. I also believe it's important in terms of revenue generation as to where the government is going to place their business…

The next question is from Vince Valentini from TD Cowen.

Darren, great answer. And you're right, you would have predicted that the next question may have been margins, but close after that would be CapEx to achieve the $2 billion, especially when it comes to the sovereign AI factories. Can you talk a little bit about how much you have to invest and clarify to us that this definitely still fits within the 10% CI target that you have?

So yes, it would still fit into our bucket. Based on the module approach that we talked about, we see this as a very digestible but strategic and well laid out plan over the next few years. And I think because we already have the land, we already have the data center infrastructure set up in both the East and the West, it will allow us for that easier transition.

And I think the other attractive aspect of the modular build approach as it relates, Vince, to your question on cash flow, we'll be able to recycle the attractive margins that we make on GPU utilization and recycle that back into the funding of the next module and bringing new GPUs online. And so it's a philosophy or a mentality that we will eat what we kill, leveraging off the progress that we're making and the inventories that we're building.

Okay. Sorry, did you say earlier that there's potentially partners involved with the build as well too, though, so it may not be all on your balance sheet. Maybe I misheard you in your opening remarks.

We're looking at partnerships as well as our own data centers. So looking at opportunities that would allow for even further expansion as required. And so I would say, yes, we are looking at partnerships where applicable, and it would go well beyond our just our Kamloops and our Rimouski data centers.

Okay. And if I can ask one other follow-up, just to clarify something. Your lease costs -- or lease principal payments came down 20% year-over-year. It's nice to see. But can you explain, Doug, like how that happened? And is there any way that that's related to Terrion and leases for towers moving to a different subsidiary or something?

No. It was just -- and we can get more detail after, but it's -- we've restructured some of the leases, and it's actually under the benefit of free cash flow. So we're trying to manage our cash flow more effectively, and that was the whole move.

The next question is from Drew McReynolds from RBC.

Maybe one question on sovereign AI from my perspective. Are we going to see this ramp-up in revenue here through the fixed data services line? Does it kind of spread out through other lines just in your financials, just so we can kind of understand the moving parts there? And then secondly and separately, can you just speak to some of your success you're getting on Internet and the broader kind of product portfolio in Eastern Canada. Do you see any differences in terms of what you're able to do in the West versus what you can in the East. And just maybe an update on where you're getting more success on the product intensity portfolio and where there's more wood to chop in terms of commercialization?

Maybe I'll kick it off and hand over to you, Doug. Where you can look for the manifestation of the revenue created on our sovereign AI factories is twofold. You'll see it within our TELUS Business Solutions organization, and you'll also see it within TELUS Digital. And we would intend in February to give additional guidance on how we'll report TELUS Digital as a business segment. On top of that, we will provide additional ad hoc disclosure, so you'll be able to assess the process that we are following and the yield that we're getting off the sovereign AI factory and the GPU investment. So we'll give you clarity into that specifically.

And within some of the product reporting between fixed data and others, you'll get even more insights as well of where that's showing up. On East-West, on loading. We've seen good loading across the board, and it's both East, both West and then business within the small business area is contributing to those Internet loads. And on a bundled basis, we are seeing obviously a little bit more bundling still in the West, but gaining momentum in the East.

The next question is from Stephanie Price from CIBC World Markets.

I was hoping you could talk a little bit about your strategy on device financing and how that's flowing through to the TTech service revenue? And maybe more broadly, how you think about TELUS' positioning in the wireless market at this point?

I couldn't hear the first part, what was it.

Device financing.

Device financing. So device financing is really the flow-through on the balance sheet. So you'll see it build up over that 2-year period. Where the -- how it hits your P&L will be depending on how much of a handset subsidy you give. And the handset subsidy then is prorated between upfront hit and an impact on your ARPU based on an allocation from the accounting rules. So it takes the fair market value of the handset, the fair market value of the monthly recurring revenue and allocates it to both. And so you'll see from a cash flow perspective, lower handset financing, obviously, is impacting positively on cash flow. And then what goes through your P&L is really only impacted by whether you give a subsidy or whether you make a margin. And that's what you would see in our financials on any quarterly basis.

Okay. And then just as a follow-up, TELUS has announced they're an MVNO partner for Cogeco's wireless launch and BC recently announced a fiber expansion into Alberta and BC. I understand financial details aren't disclosed, but hoping you can give some color on the financial profile versus the TTech segment? And what kind of impact we can expect to see from this over time.

Take it away.

Yes. So on the Cogeco one, it's all going to be based on roaming. So we will get that through roaming revenue, and it will build as their volume grows, and it'd be at a wholesale rate, a commercially driven wholesale rate. I think on the Bell side of reselling in the West, I think the -- as we've highlighted, we are obviously supportive of competition. And the wholesale revenue that you get comes at a higher margin, and you don't have the success-based capital, but you don't get the product intensity. So you would have a fast payback, you'd be earning margin and really good margin right upfront. And then you would not have that success-based capital, so it would take pressure off the capital number concurrently. And there's a good chance these are customers that we would not have gotten, so it is a net benefit to us. So over time, you could build up a base just like wholesale and wireless, and it is high margin, and it's contributing, obviously, to our P&L. But from a customer experience perspective, we still want to obviously win in retail and our bundling and our product superiority will continue to compete well there.

Thanks, Stephanie. Karl, we have time for 1 more question, please.

The final question is from Matthew Griffiths from Bank of America.

I was wondering if you could maybe just talk a little bit about the outlook for health. I know the growth has been strong this past quarter, partially helped by the acquisition. But just if you could make some comments on like the underlying performance that we could assume going forward, just help on the modeling front. And then on the comments about -- you gave a lot of information on the AI topic. So I don't really want to open that up too much. But you made the comment about government versus enterprise and that government seem well positioned given their position paper that they would be buyers. I mean is your starting assumption in that $2 billion revenue target sort of heavily weighted towards government adoption of these services with maybe a lag to enterprise? Or are you assuming sort of just an equal adoption across the kind of those main buckets of customers?

Yes. So the answer is the latter, a wider distribution, not anchored on the government front. It would include government, but equally or even more broadly, enterprises would include start-up organizations that would want to be able to leverage the compute access that we can provide. You could think about research opportunities. It really is a broadly distributed portfolio of customers that we would be going after. And there's aspects of exploration as well. We've got the capability. Let's see how it develops related to market need along the way. And because we've done it on a modular basis, we can be agile and responsive. But the answer is no, it's not anchored on government. Navin, do you want to maybe speak a little bit about the view on health prospectively from a growth point of view?

Yes, I'd be happy to. Thanks, Darren, and thanks for the question, Matthew. I would say we're seeing good acceleration in the health business in terms of operating revenue. So we saw that improve to 18% in Q3, and that obviously was helped by a full quarter of Workplace Options this quarter. And when I look ahead, I see some strong organic growth in the business, both in the employer and Payvider business, and we're seeing that because of strong churn performance and as well as really strong sales bookings. So as an example, the employer business, sales bookings are up 72%. Clinics are also up 44% and the Payvider business is up 18% all year-over-year. And so that bodes well for that revenue coming online in the future. And when we think about the WPO integration, not only are we seeing good organic revenue growth from that part of the business, what we're also seeing is their really strong operating model is driving EBITDA margin expansion as we migrate more and more of our former TELUS Health operations onto the WPO case management system. And so we're expecting even further improved churn, improved stickiness through customer experience, the opportunity to really drive improved product intensity tied to that improved experience. And then as I said, improved margin contribution from that business. And then also prospectively, we really like the global footprint that we've developed and the markets that we're playing in have very strong growth opportunity. And as products like EAP, employer well-being services, employer well-being platform, capabilities and the gamification of well-being, mental health capabilities, as those capabilities continue to improve in terms of importance in those markets, we're going to ride that market growth wave tied to that. So feeling very good about that. And then maybe the last thing I'll close with is on the Payvider side, we've seen some very good organic growth coming from deals tied to Platform as a Service, our data capabilities and our ability to monetize the analytics coming from the data, and we're starting to see strong growth there. We also sold our largest pharmacy management system deal recently. So feeling very good about the prospects of continued growth in the health space. So with that, I'll pass it back to you, Darren.

Okay, Robert.

Okay. Thank you, Matt, 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, back to you, Karl.

This concludes the TELUS 2025 Q3 Earnings Conference Call. Thank you for your participation. Have a nice day.