Good day, everyone. Welcome to the TELUS 2025 Q4 Earnings Conference Call. I would like to introduce your speaker, Ian McMillan. Please go ahead.

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

Thanks, Igor, and hello, everyone. As you know, this morning, I announced that I'll be retiring from TELUS on the 30th of June 2026. It has, without a shadow of a doubt, been a tremendous privilege to be part of the TELUS team for the past 26 years and to have an opportunity to work alongside many of the people on this call. The success TELUS has realized belongs to the extraordinary team members who have built so passionately the amazing culture that sets this company apart and has led to our significant accomplishments over the years. This team shows up every single day to serve our customers, support our communities and build a company that Canadians and shareholders can trust. To be part of this extraordinary team and to support them has indeed been the greatest honor of my career. As a result of my retirement, I'm pleased to share that Victor Dodig, an exceedingly accomplished and talented leader, will become CEO effective the 1st of July. I'll remain part of the TELUS family as an adviser to Victor until May of 2027. The CEO progression was enabled through a robust succession planning process. Indeed, our Board of Directors have selected an outstanding successor in Victor, who is, of course, the former CEO of CIBC. Victor embodies TELUS' core values, embraces a commitment to putting customers first, demonstrates exceptional character and excellent business acumen and cares deeply about creating stronger communities. Victor's tremendous skills, CEO expertise, leadership values and his proven track record of value creation will effectively complement TELUS' strong leadership team and position him well and the company well to lead TELUS into this exciting new chapter. We'll have more time to speak about this leadership progression in the coming weeks. However, today, I'd like to focus…

Thank you, Darren, and congratulations on your retirement. Our fourth quarter and full year results demonstrated strong operational execution and financial discipline, closing out 2025 with strong momentum across all key metrics and continued significant progress on our deleveraging commitments. During the seasonal competitive fourth quarter, we executed in a highly tactical and disciplined manner that is evident in our financial results. We delivered positive network revenue growth, while ARPU continued to stabilize, declining 1.6% demonstrating an accelerated sequential quarterly improvement. Notably, this is the strongest sequential improvement amongst our peers, reflecting the -- sorry, reinforcing the effectiveness of our go-to-market strategy and the focus on economic loading. Furthermore, TTech adjusted EBITDA, including -- excluding lower mobile equipment margin from lower contracted volumes increased 2.7% and free cash flow increased 7%, supported by our positive free cash flow impact of lower contracted volumes on disciplined device financing in addition to our lower cash restructuring. To summarize, wireless, we had the largest network revenue growth, the largest improvement in ARPU and the lowest contracted volumes in subsidies in handsets. This is a trifecta in value generation. And the numbers, not talk, support the financial market discipline that we have showed. Fixed data services revenue in the fourth quarter increased approximately 2%, driven by continued Internet customer growth and higher Internet ARPU. Declines in business fixed data revenue continued to reflect revenue variability and customer contract changes and was partially offset by continued growth in small business and medium business. Overall, TTech adjusted EBITDA margin expanded 240 basis points to 40.9%, driven by our commitment to strong economic growth and persistent efforts to reduce costs, including our competitive advantage of TELUS Digital's AI enablement. In Health, operating revenues and adjusted EBITDA grew by 13% and 10%, respectively. The growth was attributed to…

Thank you, Doug. Carl, please proceed with questions from the queue.

The first question is from Stephanie Price from CIBC.

Darren, congratulations on your retirement.

Thanks, Stephanie.

I was hoping you could maybe talk a little bit about the current wireless environment. It seems like it's a little bit more promotional than we typically see in Q1. How does TELUS think about its strategy on the flanker versus fighter brand side here?

Thanks for the question, Stephanie. I'll hand it over to Zai to comment on that.

0 Stephanie, thanks for the question. So you're correct in observing that the industry is engaged in some irrational tactics, unfortunately, following a period of some additional sanguine behavior that you've seen flow through in our results, of course. When this activity is manifested both above and more recently below the line, our response has been pretty unequivocal. We believe maintaining healthy industry economics is contingent on driving the brand differentiation, as you highlighted, between premium flanker and prepaid segments. And when we see behavior of masking promotions to erode value at the premium level, that undermines the perception of premium brands and initiates a pretty detrimental race to the bottom in the mind of the consumer. So in that situation, flanker and prepaid brands serve as a really important function in catering to the value-focused demographic within the market. And we don't want to be criticized or really apologetic for how we respond to that competitive aggression. And our performance substantiates our position. We're the undisputed leader in establishing the optimal balance and quality loading to ensure superior economics. We've led in churn reduction in network revenue growth, in ARPU amelioration and most critically in cash flow growth year-over-year. And that's on the back of significant improvement year-over-year, not on the back of a poor performance in 1 year. So that sustained level of value creation is not as a result of destroying value on our part. We have accomplished it through a series of deliberate strategic moves ranging from redefining the premium segment and optimizing bundling economics to enhancing customer retention, achieving sustained year-over-year unit economics and really judicious device subsidy management, as you've seen in our cash flow improvement. So given the industry scrutiny regarding debt load and uncertainty that we've seen, cash flow is paramount and TELUS is unmatched in our capacity to demonstrate quality loading with a high payback. So if you observe a period of time boxed, high irrational market behavior, our track record should unequivocally indicate that, that's a reaction to aggression.

That's good color. And maybe just a follow-up on ARPU. I think both Doug and Darren highlighted the rate of decline has improved pretty significantly sequentially. Just curious about the puts and takes there and how you think about TELUS working towards ARPU growth.

Yes. I think that's great. I would say that the other element of that is that we participated as well more significantly in the value segment through that ARPU growth. And so what you're really seeing is a reestablishment, as I highlighted, of premium and giving customers a reason to step up -- and our value props in terms of true Unlimited, price lock for value step-up and offering some roaming plans in that value proposition for premium have really redefined the premium. And so with that, we've seen a renewal step-up that has -- that we haven't seen in the last several years actually. And that's manifested itself. And then finally, it gives us the ability to differentiate the promotional subsidy and attach a higher level of subsidy to where the higher value for what customers are willing to pay for premium plans is. And that's what's really created that differentiation.

The next question is from Drew McReynolds from RBC.

And just would echo congratulations on retirement, Darren, I certainly wish you all the best going forward.

Thanks, Drew.

Two for me, if I may. I think first, in terms of the guidance range, and I think we could probably just stick to revenue growth, but maybe EBITDA growth. Just the usual question of what gets you closer to 4% versus 2% and some of the moving parts and assumptions there? And then secondly, just with TELUS Digital now in the guidance and underneath the hood, just wondering if you could provide us with an update on kind of growth and outlook expectations there. And then specifically, just what its role is here in 2026 and helping to drive that $150 million in synergies and the broader TELUS strategy?

Thanks, Drew. In terms of what gets us closer to the high end of either revenue or EBITDA, I think it's pretty simple at TELUS. We've got 3 significant areas that we need to execute on. One is telecom, where the key growth drivers within that are within consumer and small business. Second is TELUS Digital; and third is TELUS Health. As it relates to both TELUS Digital and TELUS Health, we're looking in 2026 to realize double-digit EBITDA growth from both of those assets and a significant step-up in nominal EBITDA and cash flow generation. And I think that's -- it's a laudable and an exciting story. Within the telecom business, it's pretty clear to us. We want to see growth coming from 4 areas. Number one, and this is common to both consumer and SMB. We want to do well at new product development and new product scaling. We have a number of products within our portfolio that are highly differentiated from our competition and pretty meaningful and exciting to our consumers and getting them into our bundles and scaling that, I think, will be not just a growth opportunity in and of itself, but also a halo effect, protecting our traditional telecom services from areas like price aggression because we are differentiated within our overall product suite. Second area of growth for us is improving churn. We have a significant opportunity to lower our churn rate at TELUS on both wireless and wireline, both consumer and business and get back into a churn ZIP code that is emblematic of the type of churn rates that we posted in 2022 and 2023. So that's a specific goal for this organization. And again, the economics go beyond the obvious on that. So not only do we get a better…

And on the second question on the efficiencies of TELUS Digital, we split them out into 4 categories. We have below the line, which is interest and capital, which is probably 1/3 of the savings. The other 2/3 is split between TELUS Digital and TELUS from efficiency and effectiveness. And those are all being executed in a lot of what Darren highlighted as we speak.

[Operator Instructions] The next question is from Vince Valentini from TD Securities.

Let me start trying to clarify just a couple of things. Your last comment there, Doug. First off, did I hear Darren correctly that double-digit EBITDA growth is expected for both TELUS Digital and Health in 2026?

That is correct.

Okay. So assuming I got that right, TELUS Digital has double-digit growth even though some of the $150 million of synergies, it sounds like it's allocated to the telecom division as opposed to being allocated to digital?

That's correct.

Okay. And do we know yet if the reporting segments are going to stay the same? Will we still get revenue and EBITDA for TELUS Digital going forward?

So we will be resegmenting in Q1 and the segmentation at the moment, I'm still doing some refinements is what will be external customers will be the TELUS Digital segment. So the internal TELUS business for customer experience will be put back into telecom. We will restate, so you'll get the year-over-year comparative. And then it will be the digital AI and external CX that will be left in that number.

Okay. And I also try to clarify what Zainul said earlier on the ARPU. It doesn't sound like there's anything unusual this quarter in terms of the material improvement in the ARPU trend, no like roaming contracts or any other unusual items. So keying off of that, given the good improvement you're seeing in renewal upsell and gradual improvement in pricing discipline in the market. Is there any reason to think that we should take a step backwards from minus 1.6% in Q1 or Q2 or it continues to get better from that level?

Certainly not from us. So I would say that you have the readout right. It's organic improvement, and we're continuing to see that progress.

Zainul can do better.

Good point.

I appreciate that.

Last one, apologies, but I mean, we're just -- I'm in dated with this question all day. I assume some of the other analysts on the line are as well. But is the change in CEO meaning that we should be thinking about any sort of change in capital allocation or dividend policy? And if so, do these questions start to get addressed in the next couple of months? Or do we wait until after Darren takes his well-deserved retirement?

I think it's important to focus on the facts, Vince. It was only 2 months ago that the Board unanimously approved our 3-year strat plan and all that, that entails. So I would expect strong continuity in terms of what this organization is doing and more specifically, strong continuity in respect of our growth initiatives, strong continuity in respect of our capital allocation initiatives and strong continuity as it relates to our deleveraging program. And we have a portfolio of activities underway to achieve that, that we have well communicated to the Street. And I think this organization is intent on following through and delivering on those, whether it's the current administration or the prospective one. And we are excited by the catalysts that the delivering against these initiatives will entail in terms of value creation at the TELUS organization.

The next question is from Maher Yaghi from Scotiabank.

Great. Darren, I recognize you're going to be around for a while still, but I wanted to say it was a privilege to interact with you, and I wish you all the best in the next stage of your life.

That's very kind.

Of course, you mentioned that more will be shared in the transition process in the coming weeks. But could you provide just for us an understanding of what the Board was making sure to lock in by hiring Victor?

I think the Board was looking to lock in a great leader with a proven track record, a leader that's familiar with driving a complex organization, dealing with all sorts of exciting opportunities, but working through some of the challenges that come with that, whether it's technological or regulatory. I think they're looking for a leader that had a set of leadership values that reflected the culture that has served the TELUS organization so well. And so when I look at the excellent business acumen and strong leadership values that Victor exhibits, I think his propensity for customer service excellence our nomenclature is customers first will fit very well with the TELUS organization, supporting the type of world-leading churn rates that we have posted for decades. I think the focus on growth through strength. So growth in combination with a robust balance sheet is going to be something that he'll continue to focus on and delivering against those initiatives. And then you heard in my comments, the link that I made to social purpose and leading the way in that regard, driving higher employee engagement, which leads to better business execution. And I think if we're known for one thing at TELUS, it's execution. We have done it well forever. And I think the grist for the mill there has been our culture. And I think Victor's affinity with social purpose and the importance that he places on people and culture is going to serve him tremendously well within the fold of the TELUS organization going forward. And then I think down to them also to find their own future ideation and genesis. I'm excited to see what the new administration, and it's Victor and Victor's leadership team on their growth thoughts prospectively and new ideas and new opportunities and new things for the company to sink their teeth into. So they make their mark on the organization in a positive way. but make their mark on the organization in a positive way where it always comes back to putting customers first and doing right by the customer because we know if we do that well, we do it better than the competition, then all of our stakeholders, including our investors, are going to benefit from the value creation that, that delivers. And so I think that would have been kind of the hallmark that they would be looking for within a CEO.

Okay. Just a follow-up on the discussion about the pricing environment early this year and how it has evolved compared to Q4. I think one of the frustration that TELUS team has had was, as you mentioned, below-the-line discounting, especially on EPPs and stuff like that. You tried to correct the situation with some of your discounts on Public and Koodo. But I did notice that this week, you did some changes on your EPP plans, and we have seen them drop. The $15 below what the TELUS branded price is on BYOD and possibly even more if you go to the store. So I was wondering that change, is that also a reflection of your frustration? And could we see that be removed coming back to traditional pricing or the environment remains frustrating for you up until now?

Zainul, why don't you answer that, and maybe I'll make a closing comment.

Sounds good. Thank you, Darren. So I think we have seen some better economics in the industry. And I think when you look at plans like EPP or other plans that are a function of the premium segment, but catered towards a specific target market, whether it's EPP or SMB, there's a couple of elements. One is the eligibility. And so you do ensure that if you have very strict and tight eligibility of those plans that they play a meaningful role in the overall portfolio. So what I would say is you will see that we will be more reactionary you will see that we will ensure that where we are losing some ground in value, we will want to participate effectively, whether that's in the value segment or in the premium segment. And you will see that we will drive the discussion around keeping certain promotions tightly managed so that they play their requisite role in the portfolio.

I think, Maher, from our point of view, if the mean time to emulate an irrational price move is measured in seconds, it instantly commoditizes any benefit associated with the aggressive pricing on a land grab move. And so if that emulation, speed of emulation drives instantaneous commoditization, then what was the point of it in the first place. And that's the type of discipline that Zainul is looking to instill in the marketplace, which hopefully should then drive a shift to differentiated value propositions that are more sustainable, that create value and at the end of the day, provide more benefits to customers over the long term and more benefits to investors. And I just think that's the hallmark of an organization at TELUS trying to do the right thing.

The next question is from Jerome Dubreuil from Desjardins.

First of all, congratulations, Darren, on an outstanding career. I wanted to ask about severing AI coming back to that conversation. I think last quarter, you discussed the strategy of chips ownership for your several AI initiatives. Owning the chips can be expensive depending on the model. So the question is whether the chip strategy is still the right one, if this investment is included in the guidance? And if it is, would the assets be on the balance sheet?

So yes, it's included in the guidance, and I'll comment a little bit more on that front. Yes, on the balance sheet as well. But why don't I pass it over to Tobias to make some comments. And then if there's any cleanup, I'll do it at that juncture. Tobias, over to you.

Yes. Thank you, and thank you for the question. And Darren, congratulations on your retirement, and thank you for all the unwavering support of TELUS Digital and our alignment throughout the TELUS ecosystem. So maybe I'll take a little bit of a step back in answering the question, Jerome. The -- when you think about TELUS Digital, what we accomplished in the fourth quarter and is part and parcel to our growing momentum that you see in the numbers is we've unified all our capabilities across web, app development, Salesforce, Google Cloud, data and AI and specifically our CX AI capabilities. around this positioning of winning the moments that matter. As Darren said, serving the customer is everything. And for us, it's serving our clients across their entire customer journey. And every piece of that is now underpinned by AI. And so when we look at where we are -- where we have permission to be successful and what advantages we have versus other competitors, it falls into a couple of different categories. One is with TELUS, right? TELUS is a fertile testing ground for us. It's a real-life lab. It's where we show real capabilities in motion, in practice, things like reducing meaningfully first call resolution and save rates and where we partner on the full stack of sovereign AI capabilities that include the chips, as you mentioned. The second area that we can differentiate ourselves in is CX AI. AI obviously impacts enterprises across the entire ecosystem. But an area where we are winning, should win is this concept of CX AI, where we have hundreds of existing clients, tens of thousands of seats we provide those clients, and we can partner with those clients to really deploy CX AI at scale and really focus on complex workflows…

I think, Jerome, the other thing that is key is fortuitously, I think maybe here a bit lucky as well as smart, we had legacy data centers in Rimouski and Kamloops that unlike others, we did not sell. So we're leveraging that sunk cost. And down to the team, the architectural qualities of those data centers were such that we could make them fungible and turn them into sovereign AI factories with a minimum amount of capital investment to accomplish that outcome, which is exactly what we have done and why we can get it done within the CapEx envelope that's seen our CapEx intensity drift from 12 towards 10%. Even at the OpEx level, these sovereign AI factories will be run because of the technology prowess that we have by a skeleton crew. And so we're extremely cost efficient here at both the CapEx level and at the OpEx level. The other thing that Tobias and Hisham have done is that we're balancing growth so that supply equals demand. So the rollout of these data centers, the enablement of the data centers, the investment in the chip construct within it is being bridled according to the pace of demand. And I think that, again, is a very smart way to drive this overall strategy. Fortunately, we cut a great strategic partnership with NVIDIA that gives us an advantageous and strategic position, both as it relates to new chips, but also in terms of cost economics and volumes that really play into our favor at the TELUS organization. And then within our positioning back to what is truly sovereign about it, we are unique because every element of the sovereign AI thesis is controlled by TELUS, which is a real differentiating factor for us. So whether it's inference, whether it's…

Thanks, Jerome. Carl, I'm recognizing that we're through the hour, so we'll pause the call there. Thank you, everyone, for joining the call today, and please reach out to the IR team with any follow-ups.

This concludes the TELUS 2025 Q4 Earnings Conference Call. Thank you for your participation, and have a nice day.