Q2 2021 Telus Corp Earnings Call
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Right.
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The conference is now being recorded.
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Good morning, everyone and welcome to the Telus 2021 Q2 earnings conference call I would like to introduce Mr. Robert Mitchell. Please go ahead.
Hello, everyone and thank you for joining us today.
Our second quarter 2021 results.
Its news release, MD&A and financial statements and detailed supplemental information are posted on our website. This morning at Telus Dot com slash investors.
On our call today, we will have remarks by Darren Entwistle, President and CEO, Dan on now G. E V P on solutions, and Doug French EVP and CFO as well for the Q&A portion of our call we will be joined by Tony.
And EVP and Chief customer Officer, Francois Vitol, EVP and group, President and Telus Health, Telus, Agriculture, and Telus, Quebec, and Jim Senko, EVP and mobility solutions very.
Very briefly on slide 2 and its presentation and answers to questions contain forward looking statements that are subject to risks and uncertainties and made based on certain assumptions accordingly.
Actual performance could differ from statements made today. So we ask that you do not place undue reliance upon them, we disclaim any obligation to update forward looking statements, except as required by law and we refer you to the risks and assumptions as outlined in our public disclosures and creating a second quarter of 2021 MD&A are true.
And in 'twenty annual MD&A and filings with Securities.
Darren emissions from Canada, and the U S with that over to you Dr.
Thanks, Mitch and Hello, everyone and for the second quarter. Our team once again achieved strong operational and financial results at both Telus and Telus International.
This continued execution excellence realize the gains.
The backdrop of the ongoing global pandemic was truly characterized by the consistent combination of industry, leading and profitable customer growth, yielding strong financial results across the totality of our business.
Our continuing robust performance reinforces the effectiveness.
Security stuff for our globally, leading broadband networks and superior customer centric culture underpinned by our highly engaged team and their passion for delivering outstanding connected experiences.
This contributed to leading customer net additions of 223000 and.
This would be best client loyalty across T mobile and fixed product line.
Notably blend and mobile phone voice fiber internet and optic TV churn and we're all once again below 1% and the second quarter.
For over our results we're buttressed by.
Industry differentiated and potent access and asset mix geared towards high growth technology oriented verticals, which I'll discuss with you and just a moment.
Looking at our consolidated financial results for the second quarter, we achieved revenue and EBITDA growth of 10%.
Our Hyatt actively year over year.
This performance reflects continued resilience and execution excellence and bolsters, our unmatched capabilities and competitive position for the post pandemic recovery.
Let's take a look now at our mobile operating results.
Tell us.
Risks again achieved industry, leading customer growth there.
This included healthy mobile phone net additions of 89000, which were up close to 50% over this time last year.
For connected devices, we realized strong net additions of 84000.
51.
Once again, we're 2 and a half times over last year, reflecting increased demand for Iot solutions from new and existing customers.
Importantly, our team yet again delivered another quarter of best in class loyalty results.
Glenn and mobile phone churn.
And with zero debt 8.1% and was essentially flat over last year.
This performance is backed by strong digital capabilities and superior service offerings over our world leading broadband networks.
At a time and.
And with network connectivity.
<unk> is truly more important than ever Telus was once again recognized as having the fastest wireless network in Canada for the first half of 2021 by the independent U S based Fuklah organization.
This is the fifth year and a row Uccle has ranked Telus is mobile.
<unk>.
As number 1 in Canada.
This is a true demonstration of the incredible expertise and dedication of our entire team, including our engineers technologists and network innovators.
Against this backdrop and the recently concluded spectrum auction.
And tell US successfully acquired 25 megahertz of 3500 spectrum licenses and our broadband footprint.
Combined with the spectrum acquired privately previously tell US now holds on average 40 megahertz of 3500 megahertz spectrum and our.
And net market.
These licenses are going to enable telus to deliver and had mobile <unk> broadband connectivity to our customers on a national basis.
By securing the critical spectrum necessary to bring transformational next generation <unk> connectivity.
Team need to Canadians and <unk>.
And is able to continue to offer the globally, leading network reliability speed coverage and low latency, our fellow citizens need to realize improved outcomes and our digital world.
Importantly, having the fastest network on.
On a global basis matters as it drives the innovation that enables the diversity productivity and competitiveness of our country's private sector supporting economic growth and job creation for our nation.
It also matters because it helps us add sort of societies.
Most pressing social challenges and health and education.
Food security and environmental sustainability, while improving economic equality for the benefit of all Canadians and.
Thats why <unk> technology matters.
However, <unk> spectrum auctions.
Around the world confirm that international carriers pay much less for this resource than their Canadian counterparts.
Indeed candidates position as a global network leader is being undermined by burdensome regulations governing access to spectrum and it costs.
Going forward, if we are all to truly benefit in terms of Canadians.
If we are going to accelerate the government innovation and affordability agenda, and if we're going to transition successfully into a <unk> world we need responsible forward looking.
And predictable regulatory policy that insures expeditious fare and economical access to this national asset. So that Canadians can continue to benefit from networks that are the best on a global basis.
Our country and our society as needed.
Going back to our wireless results and having a look at the financials.
And the second quarter, <unk>, and <unk> increased by zero debt, 2%.
The positive impact of the continued successful adoption of our peace of mind endless data plans.
Partially mitigated by ongoing industry wide pressure on roaming associated with pandemic related restrictions and of course reduce travel again and the quarter.
Despite this we drove a 3.7% year over year improvement and mobile network revenue.
This is reflective of the high quality customer growth and upgrades that we are achieving and the strong underlying <unk> improvements, resulting from this which will of course become increasingly evident as romijn eventually recovers.
Turning now to our wireline operating results.
Telus once again delivered another quarter of robust customer growth, which was industry, leading again across the board.
We achieved total fixed net additions of 50000, and the second quarter, driven by continued strong internet loading and strength and security and TV.
As well as continued moderate and stable residential voice losses.
Total wireline subscribers were up more than 5% on a year over year basis, while net net additions in the quarter were up more than 6%.
The increase and net loading.
In spite of the Covid related impact in the prior year period.
This included heightened demand for Internet services as initial Lockdowns took effect a year ago, and addition to a mark slowdown and market activity and client moves.
Ongoing robust.
With wireline customer loading comes on the back of our accelerated broadband expansion program, which is now well underway.
And a minute Zeno is going to have an opportunity to provide further commentary on our leading fixed results as well as our broadband expansion program.
This leading.
<unk> underscores the unique and highly attractive bundled offers available to customers across our superior product portfolio, coupled with our team's focus on leveraging the distinctive competitive differentiation inherent and our pure fiber network, which is becoming increasingly ubiquitous.
<unk>.
Notably independent U S based PC Mag recently ranked Telus is the fastest internet service provider in Canada for the second year in a row.
This recognition from PC Mag and from Uccle, both highly regarded third party organizations that are independent.
It comes at a time when the human connection is more important than ever with people continuing to work learn and access health services from the confines of their homes.
This best in class standing across both our wireless and our wireline networks has.
Has also been consistently recognized by other notable independent third party organizations, including U S. Based open our UK based open signal, Canada base to Tele and U S based J D power.
Telus once again delivered impressive fixed data revenue growth.
Growth of 14%. This comes through a combination of higher revenues from our diverse service and solution offerings, including robust growth and Internet and third wave data services.
Strong growth and home and business Smart technology solutions inclusive.
Our security solutions portfolio in and of itself.
It comes from resilient performance once again from our TV offering and finally it comes from uniquely increased revenues from our information technology centric growth businesses.
Looking at Telus health or.
Team drove 26% year over year growth and health services revenue with strong key operating metrics.
This included earning 1 million, new virtual health care customers over the last 12 months, representing 8 and 83% increase on a year over year basis.
We continue to leverage our leading position and healthcare technology solutions to deliver improved health outcomes for its citizens through access to better and highly accessible health information.
Moreover, we continue to grow and integrate our Telus agriculture business and expect it will also generate.
Generate double digit revenue growth and EBITDA growth prospectively, resulting now and increasing annual revenues in agriculture.
Proximately $400 million.
We're looking to achieve and 2021.
With more than 200 team members supporting clients and over.
The countries. We currently provide digital agriculture solutions, the 6 of the top 10 food suppliers globally and 9 of the top 10 agricultural customers in the world.
As we continue to progress this business and our agriculture related disclosure, we are confident that invest.
<unk> will gain meaningful insights into this highly valuable asset we are trading as a globally leading provider of agriculture technology.
Software and data centric solutions within our digital world.
Overall revenue for Telus technology solutions or <unk>.
Tech, which as a reminder includes both our mobile and our fixed products and services increased by 11% on a year over year basis, while EBITDA was up in excess of 7% and.
And 8% when you normalize on a organic basis.
Doug is going to have some more detail.
And on <unk> financials in just a moment.
Turning to our digitally led customer experiences or <unk> segment, which incorporates the results of Telus International's products and services.
Earlier, this morning, <unk> announced strong double digit operating revenue and EBITDA growth for.
Details and quarter.
Ti is clearly demonstrating its position as the partner of choice for Premier digital customer experiences as it continues to win more business from existing and new clients alike.
And did our passionate and talented team at GR powering differentiated.
This debt experiences for leading global brands through end to end next Gen digital solutions and services, including its unique mix of content moderation and leading artificial intelligence capabilities.
Doug will also provide further details on dlcs financials during.
Customer commentary, including the upward revision that they've undertaken to their 2021 guidance.
To conclude we remain extremely bullish with respect to the continued and consistent operational and financial prospects for our business.
This is underpinned by the ongoing smart investments.
<unk>, we are making and our leading broadband networks combined with our continued focus on customer experience leadership and digital transformation and the resulting significant growth trajectory and efficiency benefits that these are certainly yielding.
Our confidence and the robust.
Outlook for our business and expected, resulting free cash flow expansion amplified by significant value creation and our emerging growth businesses reinforces the long term sustainability of our industry, leading dividend growth program, which is now unbelievably.
And its 11th year.
Before handing off to Zeno I'd like to take a quick moment to acknowledge the wildfires there continued to ravage many provinces across the country.
Thoughts for the entire Telus team are with those impacted by the fires, including the families evacuated from their communities.
<unk> as well as the firefighters and first responders working so tirelessly to keep our communities and fellow citizens safe here.
<unk> I would like to take a moment to thank our Telus team members, who have literally been working around the clock to support evacuees and local authorities across the impacted regions.
Leveraging on cell towers on wheels. In addition to deploying Telus is smart hubs and hundreds of satellite and cell phones to keep everyone connected and keep everyone. Safe and addition, we're providing care tics kits and waiving fees for those tragically displaced from their homes as a result of the wildfires.
My sincere. Thanks go out to the countless Telus team members, who continue did demonstrate day in and day out debt when things are at their worst our Telus team is that their very best.
Indeed, our Telus team passionate efforts to support our communities and our customers and our fellow citizens.
And it's and further exemplifies our leadership and social capitalism, and our longstanding commitment to give back to the communities, where we live work and serve our.
And I remain exceedingly proud of and grateful for the entire Telus team and the culture that we've created and that they exude inaction and deliver.
Liver outstanding results for all of our stakeholders.
On that note day.
Over to you.
Thank you Darren.
Our results have consistently demonstrated our customer first strategy is generating positive returns.
Customers continue to recognize.
Superior value of our bundled offerings and the significantly higher broadband capacity reliability privacy and speed symmetry that are unparalleled telus pure fiber internet services enable across homes and businesses.
As Darren mentioned, our World Class Network continues.
And this win international recognition.
On June Usb's PC Mag ranked Telus is the fastest internet service provider in Canada for the second year in a row.
Impressively PC Mag experienced peak download speeds on our pure fiber network of up to 969 Megabits per second.
And upload speeds more than 9 times faster than other widely available plans in western Canada, notably, we increased our lead relative to our peers.
In the quarter, we also launched pure fiber ex candidates fastest internet speed tier with upload and download.
Speeds of 2.5 gigabits per second and the capability to deliver up to 10 Gigabits per second.
This next generation fiber technology combined with the new Wi Fi 6 the fastest home Wi Fi connection will enable even better quality connectivity further advanced.
And loading the customer experience.
As we continue to rollout new capabilities, whether it's pure fiber or 5 G. It is with superiority and mind and the customer benefits at the forefront, resulting in strong take rates and healthy economics.
These innovations and strategic.
Dancing estimates are also reflected in our industry, leading mobility results led by Jim and his team and.
And we continue to enable strong customer growth and significant product intensification benefits across our home and mobility portfolio driving further brand affinity and loyalty.
As Darren outlined we delivered a record second quarter result, with respect to wireline customers with an industry, leading 50000 net additions up 3000 year over year.
Supporting this outstanding result is our whole home and bundle leading to solid growth across all of our key.
Check and blind.
Internet net additions totaled 30000, our best second quarter result, compared to all non pandemic period since 2002.
Despite being down slightly over the same period last year, which was flattered by certain pandemic related impacts. This strong result continue.
Product is to reflect the ongoing robust demand for our leading pure fiber service.
We continue to drive strong TV attach rates with TV net additions totaling 11000, notably we remain the only provider in North America to consistently deliver positive.
<unk> growth as customers recognize the unique value of our flexible packaging fully integrating premium over the top streaming.
Residential voice net losses of 10000 remained low and stable with prior periods as we successfully leverage our expanding fiber footprint bundled product.
<unk> offerings and strong retention efforts.
Finally, our industry, leading security and automation net additions of 19000 were up 7000 over last year, reflecting the strength of our digital capabilities and innovations in virtual and do it yourself installations.
We are continuing.
<unk> to expand our bundle of home and security automation and most recently with the successful launch of Telus online security, providing both physical and cyber security solutions.
The second quarter marked the first full quarter of our accelerated broadband build.
<unk> targeted investments across fiber <unk> and Digitization back.
Back in 2013, we had the foresight to embark on our pure fiber journey with grit and performance based community driven outcomes and we will continue to deliver on that investment with a committed supply chain and labor.
And with pick and place our team enabled nearly 60000 homes and businesses with fiber and the quarter enhancing the significant opportunity for us to drive strong profitable customer growth on a sustained basis.
Our copper to fiber migration program is actively underway.
For forcing momentum with over 30000 customers migrated to our pure fiber network during the quarter.
Our efforts towards decommissioning copper are ahead of our peers and we remain on track to complete the migrations by the end of 2020.3.
As we have shared previously moving our legacy.
Copper customers to pure fiber improves customer lifetime value on several dimensions.
Across our pure fiber base, we see 25% higher product intensity than copper supporting a 15% higher ARPA per home and a churn profile that is 20% lower as well.
And as significant efficiencies with our cost to serve for pure fiber that is 25% to 30% lower.
Shifting to consumer health in June our team successfully launched Livingwell companion on Apple Watch. This is a first in the Canadian market and revolutionize.
<unk> is the way aging Canadians experienced wearable personal emergency response services.
Demand for our consumer health services, including Telus Health My care have all continued to experience strong year over year growth and the second quarter and contributed to our total virtual care members, which now.
And now stands at $2.2 million members.
This increased demand reflects the growing adoption of digital tools by Canadians that enables safe efficient and effective access to health care.
As we look towards life on the other side of this pandemic, we remain committed to keeping our customers.
<unk> and communities connected safe and healthy educated and entertained.
We are incredibly grateful and deeply humbled by the innovation grit and passionate execution of our team and we firmly believe that our continued investments and superior networks product diversification.
And digital capabilities, coupled with our long standing culture of customers first positions us to succeed now and well into the future over to you Doug to provide additional insight into our financial results. Thank.
Thank you Daniel and Hello, everyone.
Consistent with our proven track record Q2 results.
To showcase our operational excellence and strong execution powered by an industry best customer service and leading asset mix.
For our mobile phone net additions were up 46% over last year and impressively.
9% over Q2.2019.
And prior to Covid.
Strong loading alongside a 23% increase and customer renewals supported mobile equipment revenue growth, which was up $143 million or 40% over last year.
Importantly, we sustained our focus on high quality customer growth.
Growth with 70% of our mobile rate plan changes either step ups or flat from a revenue perspective.
From 65% and Q1, and 60% and Q4 and.
In addition, our peace of mind unlimited data plans have continued to increase by at least 10%.
Per quarter throughout 2020, and continuing into 2021.
These attributes are driving strong network revenue and industry low churn.
Accordingly, our mobile network revenue improved for the fourth consecutive quarter and our mobile phone <unk> returned to growth for the first.
Time since Q1.2018.
This is an outstanding accomplishment against the backdrop for continued pandemic related roaming revenue pressure, which was <unk> <unk> dilutive on a year over year basis and flat on a year over year basis on an absolute dollar basis.
As we focused on the back half of the year, our roaming recovery would be linked to the easing of border restrictions, especially in the U S alongside trends around return to travel we.
We anticipate these factors will drive stronger ARPA growth in Q4, and certainly into 2022.
On the fixed side, our business impressively had 14% data service revenue growth that showcases our consistent execution of targeting profitable customer growth and success and drawing driving higher product intensity.
Total fixed net additions were up 6% over Q2.2000.
<unk> and 'twenty and up 16% over Q2.2019, a strong result, considering and a record levels of loading we considered throughout the pandemic and 2020, highlighting our leading pure fiber network, our customer friendly friendly sales and support and our strong digital capabilities.
In total <unk> revenue grew 11% and adjusted EBITDA was 7.3%, reflecting robust growth of all products strong cost containment efforts across the entire organization and the lapping of certain COVID-19 impacts and the prior year.
And <unk> operating revenue grew 26%.
<unk> for 36%, excluding the year over year change and U S dollar to Canadian dollar exchange rate.
This was backed by strong organic growth across key verticals, including tech and games as well as E Commerce and Fintech.
And the strong ongoing growth reflects the expansion of our services to existing customers.
Customers conduct combined with successful and new client wins.
Business acquisitions also contributed to the growth and.
Adjusted EBITDA increased by 37% for 55%, excluding the year over year foreign exchange impacts due primarily to the flow through of revenue growth and strong.
Strong cost containment.
Earlier today <unk> revised its annual U S dollar financial guidance, including its revenue range up by $20 million and EBITDA up by $7 million for 2021.
Please see the Telus International press release for further detail.
And as a reminder, while our D. C X segment is entirely represents Telus International operations.
Reporting differences compared to tea ice public disclosure.
To help reconcile these differences on revenue and adjusted EBITDA, We have provided a walk down reconciliation and the appendix of our posted investor.
For presentation.
Our consolidated result had revenue and adjusted EBITDA growth of 10% and the quarter.
As a result for fourth consecutive quarter of.
Sequential improvement and depth for demonstrates our ability to manage through the impacts of the pandemic undermine underpinned by our team's agility.
And <unk> and being able to adjust our operations to the ever changing environment.
Free cash flow of $210 million and was down from the prior year. The decrease was primarily due to $157 million of increased capex as we wrapped up.
Ramped up our accelerated broadband build.
Additionally.
Additionally, cash taxes were higher by 120 million as the prior year Covid related installment deferrals did not reoccur and 'twenty 'twenty 1.
The cash tax impact of a stronger than planned customer loading and renewals also impacted free cash flow and so.
We look for the remainder of 2021.
Today, we are reaffirming our annual consolidated financial targets, including revenue and adjusted EBITDA growth of up to 10 and 8% respectively.
And there may be some seasonality and the back half of 2021, we are confident and our outlook.
As the world continues to reopen and as we.
And we execute on our capital acceleration program, alongside our leading asset mix and premier customer experience.
Our balance sheet remains very healthy, including total liquidity of over $5.1 billion.
Even when factoring in our 3500 megahertz spectrum auction investment and the early redemption of.
For our 1 billion series D. T notes next month, our liquidity position will remain very strong at approximately $2.1 billion.
It's also worth highlighting excluding the 3500 megahertz auction or strategic investments and enquiring wireless spectrum and.
And strategic acquisitions over the past 12 months only has contributed to our leverage by zero dock by 7 basis points. When excluding these investments our leverage ratio would've been $2.5 4 times highlighting the strength of our underlying operations.
And best and long term assets, notably with the successful inauguration of our sustainably and linked bond offering in June our average cost of long term debt declined by 10 basis points to an all time low of 3.7% further enhancing the quality and strength of our balance sheet and underpinning.
Opinion, and our ability to make the necessary investments to continue to advance our growth strategy.
Remaining committed to our investment grade credit ratings and our social purpose.
Fortunately with our robust balance sheet and financial flexibility, coupled with an attractive cash flow outlook.
Look we remain committed to our long term dividend growth program, while achieving our leverage target over the medium and medium term.
In conclusion, our Q2 results reflect the strength of our asset Miss the consistent execution and our commitment to sustainable long term value creation for all share.
Shareholders.
As we enter into the second half of the year, we look forward to continuing our strong operating momentum and further advancing our growth strategy Robert back to you for Q&A.
Thank you Doug and me.
Can we proceed with the questions. Please.
Yes of course.
First question comes from Jeffrey fan from Scotia Bank.
Please go ahead Jeff.
We thank you all for that.
And good morning, everyone.
Thanks for all the color on it.
The 1 thing that's on everyone's mind is the related to the spectrum auction.
I'm wondering if you can talk a little bit about given.
Given the higher than expected costs across the board.
For total specifically.
How you plan to the leverage.
Going forward what are some of the steps I guess you guys have talked about possible monetization will tell.
All of them all as vibrant culture can you provide it up a little bit of and update.
And not least thanks.
Doug why don't you take and Jeff through the Lytton litany of balance sheet parameters that are at our disposition.
<unk>, our potent and expensive.
Absolutely.
So we're continuing to plan to invest and our long term growth and we're investing in assets and have a very very long useful life.
So at the starting point to Delevering is obviously, our exceptional track record of <unk>.
Turning these investments into operational results as you saw today are leading EBITDA growth.
Is absolutely going to be 1 of the strategies and which we.
And obviously, we'll continue to delever over time and when you look at the impact on those the acquisition that we did have volume bridge.
During the T I P O, which obviously impacted our leverage at that time, but it unleashed over $6 billion of liquidity and a publicly traded subsidiary of T. I D.
And being 1 of the flexibility point.
With egg and and health as you suggested we're going to continue to build and.
<unk> for that asset and what the opportunity to bring in a third party when the term appropriate for timing is appropriate and the right Party is there with.
With a future IPO subsequent to that.
We also have a significant amount of real estate opportunities as Zane on its been talking about the copper to <unk>.
Labor and migrations and <unk>.
Talking about our.
Evolution 2.2 fiber it does free up some assets that are will be able to monetize over that timeframe.
And then we have significant cost containment initiatives internally.
And as we implement those youre going.
Gonna see continue digitization contingent continuous margin opportunity and even copper to fiber is going to drive that margin opportunity.
So those are some of the highlights.
Have flexibility and other areas if necessary, but our investment thesis and.
Dividend program.
Or are still very committed to and we do see delevering in the.
Medium term 2 to the levels that we had suggested.
And really thank you Doug.
Alright.
Are you ready for the next question.
And I hope so.
Next question comes from Jerome and debris from theirs off the day.
Please go ahead.
Yes, Thank you hope you're ready for the question.
And it still is still on the spectrum auction.
And.
Just in light of the results that were published last night are there any incremental details you can provide maybe on the on the wireless strategy a folding polling the results.
Okay.
Okay, well I think it's pretty straightforward.
For us.
We secured.
Critical.
But gee spectrum, given the importance of the mid band ecosystem to the <unk> deployment.
It's our job now to get on with Operationalized spectrum I think that's the most.
And important thing at the end of the day.
And our goal is to have a coverage footprint on for a G.
By 75 per cent of the population by the end of 2020, 1 and so.
It's 1 thing to go and participate in and an auction and get critical.
Spectrum on the.
The important thing is the deployment thereafter of that spectrum. So.
So that you get the right coverage footprint and we want to take that to 75 per cent and then you get the right attributes in terms of.
Speed coverage reliability and.
Low latency and that's what we're focused on and if we can do that right.
And we'll get great customer outcomes and will generate great economic returns, which is what this organization has done historically.
The spectrum that we procured was expensive.
Particularly if you look at it on a relative basis.
I don't think that there's and.
He surprised behind the win you artificially constrain supply and <unk>.
And you exacerbate that with our asymmetric set aside you know and.
And you are going to get a cost escalation of the spectrum, particularly when the.
And the spectrum is important to the <unk> ecosystem.
I do.
Do think that the cost of the spectrum for all players.
Within the open spectrum construct.
Was inconsistent with what I think our country's agenda should be and respect of our digital economy, Our digital society and.
And the government's own and affordability agenda.
<unk>, if you have a cost escalation and your factors of production that's inconsistent with a D escalation from a price perspective.
Notwithstanding all of that I can tell you.
<unk> will focus on doing what we do best as an organization.
And our track record on this front is without parallel.
So we're going to get on with deploying the spectrum and leading the world when it comes and network performance and we have consistently led not just the country, but lead the world. When it comes to wireless network performance or for Jeep performance proves that in and of itself as its output.
It performed a lot of <unk> networks on a global basis, and so we will lead on speed coverage reliability and latency, we will complement that with the global best performance and customer service. Thanks to our people our culture and our digital technology, we simply offer the best service and I can.
And tell you 1 thing with certainties.
Certainty the quality debt service at a humanistic and at a digital level will be better tomorrow than it is today and then the combination of network leadership technology leadership and service leadership, we will generate the best operational results as it relates to the loading across our business.
Wireless and wireline will generate the best financial results.
And we will generate the best economic results for our shareholders as it relates to our dividend growth model.
And we will do that in terms of returning capital and the way that also respect the needs of our balance sheet and the future strength.
And investment profile that we want to pursue as an organization and I think the other factor here is the resiliency of Telus.
We have a very unique asset mix.
So we have a level of unparalleled performance not just from our core business and you can see debt.
And Q2 and respect of our wireline on wireline.
Wireline and wireless operations has clearly highlighted in Q2, the the absolute and relative performance of our business at a core level, but it is complimented.
With a unique mix of emerging growth assets, you saw that and <unk> Q.
Results and.
And what they're intending to do and the back 6 months of the year and thereafter prospectively I think it's a tremendous growth story and that growth story is indicative of what's to come on health and AG and when I look around globally within our sector I don't see another company.
And that has debt level of growth and resiliency and combination and but.
I think it makes us and exciting investment story.
Great. Thanks, and then a second 1 if I may maybe for for <unk>.
Can you expand a bit on the tell us agriculture strategy, maybe in terms of.
Q2, we are in terms of business maturity and.
And are we selling and at the time of integration or deployment of new products and then if you can share what part of the growth.
At this point thanks.
Thanks, John for the question.
I think we're at a very exciting.
A portion of our <unk>.
Here within Telus value for Altera, and as you know the mission and we just.
Scott for ourselves is to allow and enable for better access to food and the future and food that we can trace the quality safety and security.
Between the time Theres, a seed that it's put into the soil and time we have.
And on our plate and.
And we have gone about to do that and to achieve this is to put the collection of assets over the last 24 months that really are second to none on a global basis and when you look at the 3 verticals and agriculture, whether it would be.
1 of them and.
Spectrum with input manner.
And there are factors, what we call the agribusiness side of things or the other end of the spectrum with the retail food and retail side of things.
For the farmers themselves and the middle we are actually able to offer now with our suite of assets and capabilities to enable a more efficient.
And operations along the way.
And where we're going in the future and where we're growing interestingly, we wanted to do what we did and health and our past which is to breakdown the silos and enabled better exchange of information across the entire spectrum and across the entire food value chain.
<unk>.
In terms of growth capabilities, you've seen are increasing disclosure this quarter and and I'm very excited to say that we're shooting for and the $400 million Mark at the end of 2021.
Which represents double digit growth.
And 2 thirds of which will be digital and protection.
Tech solutions and a third of which is on the telecom side and in terms of future growth I think you can see and gauge from my excitement on this and the excitement of our team and and the fact that we are bringing together something that really doesn't exist today, but has a lot of demand for you.
You have to think about total.
The second crusher that will continue to be a meaningful and growing contributor to the top line, we're going to do so profitably and.
And increasing cash flow is along the way and.
You should expect it to continue to scale quickly given again the opportunity that we have in front of us.
Thank you that's helpful.
And next question please.
Our next question comes from Vince Valentini from TD Securities and just to remind everyone.
If you want to queue up for a question. Please press star 1 now. Thank you go ahead Vince.
Yeah. Thanks first on that real estate comment Doug.
And I hadn't heard that before anyway, and ballpark quantify for that and that for US is it like at north of $1 billion opportunity second low question. The 26% healthcare revenue growth looks very impressive are you willing to give us any sense of what the organic portion of that was and then maybe the bigger.
Bigger 1 needs to stay with agriculture for a SEC I sense from your comments and from giving US this $400 million figure that you'd like to see us start to strip that out and and the comps in that space trade at much higher multiples than the non core telecom businesses.
If we're going to do that we kind of have to have some idea of how much EBITDA you take out if we take out the revenue.
And you're willing to give us any ballpark on what goes with the 400 million as it is a 10 million of EBITDA at 50 years and 100, I really have no idea. So I suspect others don't and it's difficult to break it out if we can't take up both revenue and EBITDA.
Thank you and take that 1.
And I'm sorry, Darren.
Why don't you kick it off.
And maybe on the land line, yes, we have a site.
Thank you.
And a multi year program that could be in excess of $1 billion.
So it will be multi year, obviously and.
And it can be and strategy of development to development sales partnership et cetera. So.
And that's definitely the magnitude that we're looking at over the multiyear product on a multiyear program.
And Vince.
On the AG front first of all you to go ahead.
I'll close on the guidance parameters.
Yes, so so.
We're not disclosing and disappoint.
EBITDA contribution on although it is positive and growing and so we.
The increased disclosure and.
And the future.
Some aspects of our business that are on.
Healthy in terms of margins other that are and Nathan and more of a day for investment to it.
On the health side of things.
We've talked about the strong 26% revenue growth you have to think about that growth and the context.
<unk>.
Covid and.
And how does it reflects really the strength and diversity of our assets.
And the context of Covid, you've got pieces of our business like the health benefits management orthopedics.
And impacted by the Lockdown measures.
On the National business, but you also have various.
Very strong growth on.
Areas like virtual care, and an example, and the metrics we've been disclosing and.
And now for 2 quarters kind of exemplify that from a virtual care and member perspective, you've seen and 83% year over year growth in terms of number of members and you've seen our health.
Lives covered also grow on most of the 17% click over and over the last year and same thing on the digital transaction. If you think of quarter over quarter from 2020 to 21 at 10, 5%.
On growth, so you get through that and idea of where.
Where are we off in terms of Orion and make growth and where we aim to be in the future and small.
For Francois and all of those customer and sort of operating metrics organic.
These are.
The growth, yes year over year.
And a mix of organic and acquisition.
Okay.
Thank you for what Theyre not flattered by.
The acquisitions in terms of the profitability profile and given the nascent nature of the J curve profile and.
And the developing profitability prospectively.
And on the AG front Vince.
You will get health like disclosure.
Publicly on let's say top 3 key parameters for.
And for the 2022 financial year, so sit tight for a couple of quarters.
Focus on the great results on our Q2 front the very encouraging results on the help upfront.
On inaugural disclosure on on AG on the $400 million and the digital competition and software composition of that and.
And then you'll get a <unk>.
Level of heightened specificity.
And that you can measure us against and draw imprints from as it relates to valuations for.
For the 22 financial.
And beyond and you.
You are indeed quite right and debt.
The multiples on the AG side.
Are significantly higher than what we see and telecoms.
Thank you.
Yeah.
And my next question please.
Of course, our next question.
Full year from Simon Flannery from Morgan Stanley. Please go ahead Simon.
Great. Thank you very much following up on the spectrum auction could.
Could you give us some sense of how fast you expect to build out. The 3500 spectrum is is that that part of your 75% this year or will that take a little bit longer and.
Comes from given the.
Higher spectrum band does that require more did great and densification around that and it is.
And this already included in your Capex plans. Thanks.
Yes, it requires densification or cell splitting and.
Simon Yes, it's included.
Capex plans and our Capex.
Acceleration plans yet 3500 is included as a piece part within.
The 75% coverage footprint number that I gave you by the end of 2021, but the preponderance of Operationalize Inc.
And our spectrum will be in 2022, just because of share timing considerations and alike.
And does that then drive the <unk> speeds higher and any sense of how much more you were able to achieve with <unk>.
40, megahertz and the key markets.
Yes, so right now we.
And that's at a situation of <unk>.
$1.7 gigabit per second I would be seeing tell us exit the year at 2 gigabit per second.
And that specific enough.
That's great. Thank you.
Okay.
Next question please.
Of course and.
This is the last question, we have and the queue. So if you do want to ask a question. Please press star 1 now but the next question comes from Arab and go up but to get from Canaccord Genuity. Please go ahead.
Thanks for taking my question 2 from me I wanted to focus on the T Tac margin.
And obviously good results and Q2 and when I look at it from a service.
<unk> it looks like the margins actually expanded in Q2 I was wondering if you can help frame the upside to the <unk> margins from here. When you look at the components wireline, obviously has upside as we have discussed.
And over the years.
March is health and AG tech ramps up and actually there should be some or there could be some upside there.
And then given that we now look at day deck Holistically and I was wondering if you can talk to the.
Instead of debt the upside to margins and secondly, really quickly Darren I was wondering if you can just talk to <unk> trends.
And particularly as we start to emerge from the pandemic and.
And if any what while takeaways to discuss day. Thank you.
Okay, Doug why don't you kick it off.
Zeno and Jim I think you should kick in on that front and maybe as it relates to margins and economies of scope. You can also talk about the success.
The mobile and home bundling, but you can give this.
Specificity of the individual product lines as well as it relates to growing profitability Doug.
Doug over to you.
Alright, Thank you Darren.
So maybe within the product set obviously wireless.
Margins were impacted.
And on from bromine and anything else and as you can see roaming recovery.
On happen you will see that impact on on the T tack on margins.
From the wireless perspective, we also both and and all of our product debt.
Continued on a on the Digitization.
Which does drive efficiency and effectiveness to helping on the margin front right from.
Team member perspective, and labor to commissioning and et cetera.
Driving efficiency and effectiveness on on that side.
And we still had pressures on health.
And and AG tech for that matter with Covid.
And.
And margins from that perspective were pressured.
And the top line pressure that happen and so as we look forward as we get the recovery and health care as more preventative health.
Is.
And being put back through the system.
Our margins will improve on the healthcare side and AG Tech as Darren highlighted some of that J curve.
Organic growth will also be driving that margin front and.
We also then and back to the bigger conversation of copper to fiber.
Zane I'll highlighted a lot of the copper to fiber benefits.
And the traction we're getting on the migration of those customers, which is also margin accretive.
So those are the main driving factors I'll leave the B to B then.
Which is also a driving factor.
But I'll leave that for 1 of my other team.
Members.
Dan and Jim.
Yeah, So I'll touch on maybe thanks, Doug So I think you covered.
A number of the main highlights in terms of where our margin accretion opportunities can be incurred maybe I'll pop up with a few other parameters.
When we took on our capital acceleration program.
With respect to our investments, obviously net broadband components, including the acceleration of fiber and <unk> at the forefront while we've also undertaken and even expanded journey from a digitization perspective, and we see significant margin opportunity in.
Of our drive to self serve capabilities, our drive to ensure that we and advance our platforms on which we deliver services to more margin accretive platforms and our ability to extract cost for.
And our initiatives like copper to fiber migrations by moving our customers to more digital experiences.
Term booth are certainly margin accretive opportunities on the <unk> side, we have seen we have.
We are projecting improvement through the latter half of the year in terms of margin improvement as well as take rates on customer value for the services, we provide and we are leveraging opportunities.
And so they'll move to cloud based services for our customers and leveraging agile capabilities for business to business in terms of providing IP based services over our portfolio. So maybe Jim wants to top up with for their comments.
For sure so.
On the wireless side.
2 we've talked about our 2 quite a bit but we are seeing a nice steady quarter over quarter underlying ARPA improvement this quarter actually represented for the fourth straight quarter of sequential improvement to our <unk>.
Roaming.
Our roaming result.
This quarter was 23 percentage 2019, but flat.
Flat year over year, we would expect to start to see recovery.
And kind of starting in the Q4 timeframe.
And.
Worse.
Really really liked the acceleration that we're seeing in terms of the step up to unlimited.
I think theres a couple of other things that are important to note 1 is.
We've worked really hard to diversify our channels.
Direct to consumer Omnichannel physical channels are delivering really strong.
High quality subscriber growth and and most importantly flexibility so stronger.
And whether we're in Covid lockdowns or if we're open and physical retail and this quarter. We were very pleased with the resiliency of our subscriber growth.
As we open and we're seeing strong results and Ontario, and Thats carrying right on through to July so.
Really nice a nice result, there.
On growth I think 1 tie in to business on the wireless side is the.
At the same dynamics that we're seeing on <unk> and consumer we're seeing and small and medium business, which is really great to see and we're seeing tremendous growth and connected devices. So.
This quarter at 84000 was the 154%.
Year over year growth and.
And that's good high margin revenue, that's contributing and then I'd say the last thing.
And to point out is that <unk>.
Really seeing healthy cost management as we are seeing nice efficiencies and.
Our direct to consumer channels, and then more productivity and our corporate stores.
Percentage of our direct to consumer channels or reducing our commission costs.
Sure.
And our investments in omni channel are helping us optimize our inventory, while providing our customers the ability to process transactions online and pick up and store and giving them the ultimate flexibility. So.
Some really really nice.
So fiber is beneath.
And the need for business and those are going to carry forward.
Yeah.
On the <unk> side Devine and the team are doing a fantastic job within our B to B operations as it relates to re vectoring and the profitability of that business clearly it's Ben.
And as strong as a result of the pandemic the economic impact other circumstances as well.
It's an upside opportunity for Telus, that's material in terms of the BW recovery.
Right now, it's dilutive to our profitability prospectively in 2022, it's going.
<unk> and accretive to our profitability so that when you look at the strength of our Q2 results.
That's not reflective of the contribution that we're going to see prospectively on the <unk> front, that's absorbing the dilution of profitability on <unk> and still generating terrific Q2 results I think as we go.
And it be dilutive to accretive on the B to B upfront and 2022. It has a very bright story for this organization prospectively.
And it's not 1 that is too difficult to understand and the post pandemic world.
And we'll benefit from the recovery.
Low for benefit from the great work.
Debt and Devine and the team have been doing and the development of that business from the growth agenda, 2 very very important cost efficiency measures that they've undertaken.
<unk> conversation.
And that we've been having on this call is most pertinent to.
Our <unk> operations.
And in particular, a number of verticals that are intimate the tablet. So you don't have to have much of a and imagination to understand what <unk> can do on the health, Brian and what it can do on the AG front, what it can do to our Iot businesses and you saw.
2 of the level of outperformance on connected devices that we delivered within Q2, what it can do to our security strategy, whether it's commercial.
Or whether it's cyber related.
And the opportunity there is significant prospectively on.
On the fiber front.
And that's not been and area.
And that historically has been benefiting our <unk> operations and I think it's the mandate of this management team to make sure that fiber does for business, what it's done for our consumer operations and we intend to drive that to fruition.
Extremely aggressively in that regard and.
1 of the key areas that we are pursuing from a growth perspective is on the small and medium business side.
That is a current bright news story for us on <unk>, which I think will be aided and abetted by the fiber thesis for <unk> thesis.
And the digital capability set.
1 of the big areas, that's growing for us on <unk> is helping clients.
Clients from US cloud collaboration point of view cloud transformation point of view digital transition point of view dynamic data insights point of view.
A lot of upside opportunity there.
It could be secured.
So I would expect this developing story for us.
To be increasingly accretive to the EBITDA of the.
The organization over the 2022 time frame and then thereafter.
And a nice complement to the success that we've been driving on.
Still tumor wireless and consumer wireline.
And it's interesting to note and <unk>.
<unk> early foreshadowing so we've had a terrific wireless performance out of our B to B operations, which is buttressed, our corporate results and continuing to build on that component of the momentum and.
And on consignment that with excellence on the wireline front leveraging what we what we can do on fiber and digital particularly within key verticals.
Certainly a good news story on the come.
Yeah.
Thank you very much I'll pass the line.
I mean, how do we have any other.
And comments and also on the queue.
No we don't at this point.
Okay. Thank you and me Hi, and thank you everyone for taking the time to join us today.
Please feel free to reach out to the IR team with any follow ups take care, everyone and for those of you and candidate we wish you a wonderful long weekend.
Okay.
Everyone. This concludes the total is 2021 Q2 earnings conference call. Thank you for your participation and have a nice day.
Okay.
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