- Total Customer Net Additions: 332,000, up 13% year-over-year.
- EBITDA Growth: 5.6%.
- EBITDA Margin Expansion: 170 basis points.
- Mobile Net Additions: 101,000.
- Connected Device Net Additions: 161,000, up 30% year-over-year.
- Blended Mobile Phone Churn: 1.07%.
- Postpaid Mobile Phone Churn: 0.89%.
- Mobile ARPU: $58.49, down year-over-year.
- Internet Net Additions: 33,000.
- TV Net Additions: 25,000, up 47% year-over-year.
- Security Net Additions: 20,000, up 33% year-over-year.
- Fixed Net Additions: 70,000.
- TBS Cash Flow Growth: 8% year-over-year.
- TELUS Health Revenue Growth: 4%.
- TELUS Health Adjusted EBITDA Growth: 33%.
- TELUS Agriculture and Consumer Goods Revenue Growth: 15%.
- TELUS Digital Experience Revenue Decline: 7.9% year-over-year.
- Consolidated Operating Revenues: Decreased by 0.7% year-over-year.
- Adjusted EBITDA: Increased by 5.6%.
- Net Income: Increased by 13% year-over-year.
- Basic EPS: Higher by 7.1%.
- Adjusted Net Income and EPS: Higher by 34% and 32%, respectively.
- Free Cash Flow: $478 million, higher by $199 million.
- Capital Expenditures: Declined by $116 million or 14%.
- Capital Intensity: 13%, down 300 basis points year-over-year.
- Available Liquidity: Approximately $2.5 billion.
- Average Cost of Long-Term Debt: 4.42%.
- Net Debt to EBITDA Ratio: 3.85 times.
Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TELUS Corp (TU, Financial) achieved a record second quarter with total customer net additions of 332,000, up 13% year-over-year.
- Resilient EBITDA growth of 5.6% and margin expansion of 170 basis points were reported.
- TELUS Corp (TU) saw strong mobile subscriber growth, including record second quarter connected device net additions of 161,000, a 30% increase year-over-year.
- TELUS Health returned to positive top-line growth of 4% and delivered over 33% adjusted EBITDA contribution growth.
- TELUS Corp (TU) is making significant progress in its copper decommissioning program, with 36 central offices expected to be decommissioned by the end of the year, leading to substantial cost savings and operational efficiencies.
Negative Points
- Wireless ARPU declined by 3.4% year-over-year due to intense promotional market activity and heightened competition.
- TELUS Digital (formerly TELUS International) faced a challenging macroeconomic environment, leading to a 7.9% decline in external operating revenues year-over-year.
- Fixed data services revenue grew by only 1% year-over-year, indicating slower growth in this segment.
- TELUS Corp (TU) is experiencing ongoing competitive pricing pressures, impacting network revenue growth.
- The company is not satisfied with its current ARPU performance and is facing challenges in improving it amidst a highly competitive environment.
Q & A Highlights
Q: You talked about record sub adds, and it just isn't translating into much revenue growth. Are you happy with this? Do there need to be a bit more of a balance between pricing and volume in your mind? Are you looking to try to take advantage of higher pricing in any areas in the next few months to try to get that revenue growth up?
A: (Zainul Mawji, EVP, President - Consumer Solutions) We are not satisfied with the level of performance we've seen in this very competitive environment. We have and will always be focused on economic and profitable loading at the household level. We are leaning into our product road map to continue driving intensity and new revenue streams that our competitors are differentiated from. We are going to continue to find levers to improve our AMPU performance and drive better overall retention outcomes.
Q: Given what we've seen at TELUS International or TELUS Digital today, does this make it more likely that you need to consider privatizing that company?
A: (Darren Entwistle, President, CEO, Director) While we have a fiduciary obligation to keep all options open, it is not our intention to privatize TELUS Digital. We still believe in the assets and their potential value. The current structure is not long-term but is right for driving the recovery and growth program over the next 18 months.
Q: On wireless ARPU, you're down 3.4%, but you've restated last year's. Can you confirm that this is the right way to look at it in terms of how you're reporting?
A: (Doug French, CFO, EVP) Absolutely, that's the right way to look at it.
Q: Can you help us understand the relative size or contribution of IoT revenues?
A: (Doug French, CFO, EVP) Our Internet ARPU was flat quarter-over-quarter. We are leveraging all tools, including efficiency, effectiveness, and growth engines like health and agriculture, to drive growth rates above 6% for the next six months.
Q: The release from TELUS Digital is saying that the company is pivoting its focus to revenue growth. How are you reconciling telecom and tech objectives?
A: (Jeffrey Puritt, EVP, President and CEO - TELUS International) We believe the revenue growth potential of TELUS Digital is significant. We need to do a better job of leveraging our assets to achieve high single-digit revenue growth. Along the way, we are focusing on profitable growth and cash flow yield, which has enabled us to reinvest in the business.
Q: Do you still envision a monetization event for TELUS Health in the near to midterm?
A: (Darren Entwistle, President, CEO, Director) Yes, we still envision a monetization opportunity for TELUS Health, likely in the medium term. The manifestation of that monetization may include going public or partnership opportunities. We need to earn our way to that event through strong organic performance.
Q: Can you clarify Darren's comments with respect to an EBITDA contribution of 30% from TELUS Health?
A: (Darren Entwistle, President, CEO, Director) It's not a margin number; it's a growth number. The 33% EBITDA contribution reflects year-over-year growth in TELUS Health profitability.
Q: Can you discuss how much of the repricing we've seen already and how much is left before we reprice the base on the security, video components, and broadband side?
A: (Zainul Mawji, EVP, President - Consumer Solutions) We can't predict the competitive environment, but we are leaning into product superiority and differentiation. We are countering cord-shaving behavior with differentiated products and services and continuing to drive positive momentum in fixed data.
Q: Can you expand on the copper retirement opportunity and its financial benefits?
A: (Darren Entwistle, President, CEO, Director) We see a gross opportunity of upwards of $1 billion and a net level of $400 million to $500 million. The real estate opportunity is significant, and we expect cost reductions in the range of 25% to 30%, churn improvement of 20% to 25%, and ARPU increase of roughly 15%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
