Q4 2022 Telus Corp Earnings Call
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Speaker 4: The conference is now being recorded.
Speaker 5: Good day everyone. Welcome to the Tell us 2022 Q4 Earnings Conference call. I would like to introduce your speaker, Mr. Robert Mitchell. Please go ahead.
Speaker 6: Thanks, Carl. Hello, everyone. Thanks for joining us today. Our fourth quarter and year end 2022 results News release, MD&A financial statements and detailed self-medward information. We're posted on our website this morning at tellus.com slash investors.
Speaker 7: Our call today will begin with remarks by Dharan and Doug. The Q&A portion of our call will be joined by Zanel Malge, President Consumer Solutions, Navin Aurora, President Business Solutions, Jim Senkel, our Chief Product Officer, Tony Garan, our Chief Operating Officer, Jeff Curet, President, CEO of Tells International, John Reigns, President.
Speaker 8: of telephoto-agriculture and consumer goods and Michael Dangle chief operating officer, I tell it's help. Briefly, this discussion and answers questions contained for looking statements. Actual results could vary materially from those statements.
Speaker 9: The assumptions in which they're based and the material risks could cause such a different ROI to our public filings with security commissions in Canada and the US, including in our 2022 annual MGMAC.
Speaker 10: With that hold you there.
Speaker 11: Thanks Diego and hello everyone. Throughout 2022, tell us achieve strong operational and financial results across our business, leading our North American peer group with respect to 2022 operating revenue, adjusted EBITDA and free cash flow growth, along with most operating metrics.
Speaker 12: This is a trend the tele-steam is consistently demonstrated over the longer term.
Speaker 13: Our robot performance in the fourth quarter and for the full year reflects the chemistry of our globally reading broadband networks and customers' first culture, driving our hallmark combination of profitable customer growth alongside strong financial results.
Speaker 14: Industry meeting telecom net additions of 301,000 represented our best fourth quarter on record and concluded another year of industry meeting expansion of our customer base.
Speaker 15: Indeed, in 2022 we delivered all-time record customer growth, surpassing total annual net additions of more than 1 million for the first time.
Speaker 16: This included another best every year for fixed subscriber growth of 274,000 and the highest mobile phone net additions for our organization since 2010 with 401,000 net new customers.
Speaker 17: Our industry-leading growth reflects the consistent potency of our operational execution unmatched by the product offerings across mobile and home and team member culture focused on delivering exceptional customer experiences over our globally leading peer fiber and 5G networks.
Speaker 18: Our team's passion for delivering customer experience excellence once again contributed to strong client loyalty across our key product lines including blended mobile phone, peer fiber internet, object TV, security, and voice churn all below 1%.
Speaker 19: for the year. Also for the full year, operating revenue growth of 8.6% came in above our revised guidance of approximately 8% above EBITDAG growth of 9.5% led it comfortably in the midpoint of our revised guidance range.
Speaker 20: Moreover, we achieved strong free cash flow growth of 64% for the year, exceeding our original free cash flow target.
Speaker 21: In addition, CAPEX was in line with our target and reflected the final year of our Accelerated Broadband Build Program that has been considerably successful.
Speaker 22: Strength in our core telecom operations continues to be bolstered by continued strong operating momentum in our highly differentiated technology-oriented businesses, Telus International, Telus Health, and Telus Agriculture and Consumer Goods.
Speaker 23: Let's now turn and take a look at the fourth quarter.
Speaker 24: Tell us once again achieved industry leading operating revenues and EBITDAG growth of 12.6% and 11.3% respectively.
Speaker 25: Looking at mobile, tell us achieved strong customer growth of 218,000 net additions in the fourth quarter. It's included healthy mobile phone net additions of 112,000, which was similar to last year.
Speaker 26: Notably, this strength continues to be driven primarily by loading on our premium brand, reflecting our consistent focus on profitable customer growth.
Speaker 27: It also included leading and record fourth quarter connected device net additions of 106,000 up 31% on a year over year basis.
Speaker 28: Importantly, our team delivered another quarter of industry-fast loyalty results, which continues to be the hallmark of the Telus organization.
Speaker 29: Blended mobile phone churn was an industry low 1.22% in the fourth quarter, reflecting a year-over-year increase as a result of the intensely competitive Black Friday promotional environment.
Speaker 30: Looking at our industry leading post-paid mobile churn, this was once again below 1% in the quarter.
Speaker 31: Indeed, at 0.75% for the year and relatively flat over last year, 2022 represented our ninth consecutive year of industry-leading post-paid wireless churn below 1%.
Speaker 32: One key factor behind this consistent industry best performance is the superiority of our world-leading networks.
In this regard, in 2022, tell us once again, earn numerous accolades from independent third party organizations.
Notably, global analytics company OpenSignal out of the UK recognized Telus with five industry awards in the year for both our 4G and 5G networks.
Making tell us Canada's most awarded network by Open Signal for the 11th consecutive time.
Similarly, Tell us was honored with three awards from US-based U-Club in 2022, including being named North America's fastest mobile network according to results from their speed test.
Moreover, Canada-based Attela recognized our wireless network with four national awards for excellent, consistent quality, core, consistent quality, 5G, excellent, consistent quality, and 5G core, consistent quality.
Likewise, our wireline network also received praise, ranking it the fastest nationwide internet service provider in Canada amongst major carriers by PCMag for the third consecutive year.
These acknowledgments clearly illustrate tell us leadership in offering our customers the fastest, most expansive, and most reliable service in Canada across both our wireless and pure fiber networks.
Moreover, this recognition of TELUS' national broadband network leadership underscores the tremendous value of our generational investments in world-leading network technologies, including our now-concluded accelerated broadband expansion program undertaken over the past couple of years. I won't do it alone.
Importantly, these investments will continue to drive extensive socioeconomic benefits to Canadians in communities from coast to coast for decades to come.
The close on mobile, industry leaning fourth quarter, R-proof growth of 2.2% over last year, was supported by roaming improvements as a result of increased international travel.
It was also supported by strong performance on our premium brand.
Also supported by strength within our MRC and supported, of course, by our low churn rate keeping our premium customers.
Notably, mobile phone, lights are in turn, and the revenue that we generate continues to be up in terms of lights time revenue by 48 percent higher than our national peers reflective of the critical combination of our consistent focus on high-quality economic customer growth.
leading client loyalty and what a combination that is and what a huge differentiator that is versus our peers.
Now let's take a look at our VIX operating results. We'll tell us delivered another quarter of industry-based wireline customer growth.
Our team achieved strong fourth quarter internet net additions of 42,000 up 5% on a year over year basis.
We continue to drive strong growth in our TV product line with industry leading net editions of 17,000 relatively flat over the prior year despite modestly higher leg Brags clones installed
Furthermore, residential voice was again a very positive story this quarter with industry low line losses of only 4,000, which was down 60 percent on a year-over-year basis and represent our best fourth quarter result since 2002.
Notably, this reflects our momentum with respect to our product intensity or product bundling, if you will, and the inherent turn benefits associated with this strategy that are proving to be so successful for tell us.
Strong and leading Security Net editions of 28,000 further reflect our successful strategy of driving profitable customer growth and multi-product penetration.
Overall, our robust, industry-leading external fixed net additions of 83,000 represented our best quarterly wireline customer growth on record.
These performance attributes reflect the strength of our unique and highly attractive bundle offers across our unmatched portfolio of products and services.
products and services that are buttressed by our ever-expanding broadband networks.
our leading customer centric culture, as well as our strong and highly differentiated social capitalism attributes that truly do underpin the strength of the TELUS brand and culture.
Now let's take a look at our tell us health business.
In 2022, health services revenue increased by 75% nearing the $1 billion revenue milestone, including four months of contribution from the acquisition of life works at the beginning of September .
As we progress into 2023, we continue to focus intensely on integrating and scaling our global health operations to build the healthiest communities and workplaces on the planet.
Notably, we recently united light works with teletelps together under the teletelps name and one brand going forward with the aim of integrating the best of the global brand and culture from across both light works and telets.
The expanding scale of our healthcare programs within our Integrated Tele-Telps Health Organization includes covering 68 million lives and increase of more than 47 million over last year.
In addition, digital health transactions were up over 5% in 2022 to more than 580 million.
Furthermore, we welcomed 1.7 million new virtual care members in the last 12 months alone, increasing our membership to 4.5 million up 61 percent over the prior year.
For 2023, we anticipate strong growth at Tell us help, including solid organic growth, as we continue to integrate and expand this business into an asset of scale and significant global consequence.
This will be supported by our intent focus on crystallizing meaningful synergies of $200 million or more that we expect to drive over the next three to five years, inclusive of revenue synergies from cross-delling and $60 million in near-term cost synergies.
And of course, KELOLAND's International has a critical role to play to help us achieve these results and beat the targets that we've set for ourselves.
Before we close on health, I'm pleased to share the appointment of Sid Costa Raju as our president of Tella Tella.
With more than 20 years of global experience leading organizations with a focus on innovative healthcare technology and services, CID is exceedingly well positioned to lead the ongoing transformation and scale growth of TeleTel.
Indeed, leveraging his tremendous expertise, Sidwell Drive, Product Innovation.
distribution strength, and an engaged culture that puts customers first across our healthcare business.
Myself and the executive leadership team look forward to supporting CID and our telehealth team as we accelerate our transformational strategy of leveraging data analytics and dynamic insights to revolutionize access to advanced healthcare services.
including preventative health and wellness optimization solutions.
driving remarkable health experiences for the benefit of the clients and individuals that we serve in Canada and worldwide.
The economic growth that stems from that will put us on the IPO trajectory that we all find so exciting.
Turning to tell us agriculture and consumer goods.
Annual revenues of $354 million were up 24% in 2022 over the prior year.
through a combination of organic growth and the impact of business acquisition in 2021 as our team continues to integrate and grow this compelling global business.
We are creating significant value as the leading provider of agriculture and consumer goods technology solutions around the world as we advance the sector's efficiency and effectiveness including food quality production, waste reduction.
Food and recalapticution
trade promotion optimization and doing it all through advanced data analytics and dynamic insights that help our customers from agribusiness to food retailing.
In 2023, we look forward to strong progress and double-digit revenue growth in this business.
Now let's take a look.
Tell us international.
Despite a challenging macroeconomic environment, this morning, telecentral national announced strong 2022 results, including double-digit revenue growth, leading profitability, and robust cash flow for the full year.
Indeed, TI's strong results and strong outlook also reflect the important relationship with Teleth as an anchor customer, enabling Teleth with superior customer service excellence and powering our digitization strategy.
A unique relationship that significantly benefits both organizations and one that is expected to kitchen you growing and we will realize the success of that mutualism.
TI's continued focus on profitable growth, powered by an attractive end-to-end set of digital capabilities, positioned it as a trusted advisor for premier digital customer experiences and IT services for its over 650 global clients.
Earlier in January , TI consummated the acquisition of full service digital provider, Willowtree, significantly bolstering TI's front-end development and design competencies, and importantly, unlocking, unprecedented and deeply attractive.
cross-selling opportunities for both organizations. The transaction resulted in the addition of new marquee customers that further diversified T.I.'s enviable list of client partners.
Importantly, Telus International and Willow Tree also support the acceleration of Telus' ongoing digital transformation and key product development across the totality of our business, but in particular in health and agriculture and consumer goods.
Doug's going to have an opportunity to provide further commentary on both T-CHECs and Telecentral International Sports Quarter results in just a moment.
In closing, the telecomability to consistently drive profitable growth over the longer term on the back of a differentiated asset base, best-in-class customer experiences, world-leading networks, and our unique growth businesses provide us with our confidence.
in the robust outlook for our business and our ability to deliver on the ambitious annual targets that we announced today.
For the year, we are targeting industry-leading operating revenue and adjusted EBITDA increases of up to 14 percent and 11 percent, respectively.
As previously announced, we expect a very meaningful drop in core capital expenditures to approximately 2.6 billion following the successful completion of our accelerated broadband investment program.
This will represent a cat-backed intensity ratio of circa 13%.
which represents a historic low for TELUS and is amongst the lowest globally within our peer group.
As a result, we expect free cash flow of approximately $2 billion up close to 60%, supported by strong EBITDA growth and the material capital expenditures stepped down.
Our targets will be supported by the Healthy Guidance for 2023, announced this morning by Tell us International. Once again, targeting double-digit revenue and EBITDA growth alongside leading margins as they continue to drive solid and profitable operating momentum.
TI's financial objectives will be back by their end-to-end design capabilities as they build and deliver these capabilities, capping in to the accelerated need for premium digital customer experiences, digital transformation, content moderation, and AI data solutions across its strategic industry verticals.
on a global basis. Importantly, the unparalleled skill, innovation, grit and execution excellence of our team in progressing our consistent and winning strategy underpins our leading multi-year dividend growth program now unbelievably in its 13th year and extended.
that particular ambition for annual growth of 7 to 10% through to the end of the 2025 financial year. Finally, I'd like to take this opportunity to recognize our team for the way they continue to exemplify our social purpose in action.
In 2022 alone, our team members and retirees donated $125 million and volunteered close to 1.5 billion hours in support of charitable and community organizations.
This is more than any other company in Canada.
Indeed, since 2000, we've demonstrated our global leadership in social capitalism by getting one and a half billion dollars, including two million days of global volunteerism.
myself and the leadership team continue to be inspired by the uncomparalleled compassion of our talents family and their dedication to making the future friendly for all of our stakeholders. They are indeed the best and exemplification of our brand values in action.
Yeah.
Before I came to tell us...
I spent
10 years.
In Global Tower Town. In Global Tower Town.
in global telecoms, hunting for value.
In most places
on the planet.
So it is with some degree of familiarity.
that I say
The growth profile that we have.
is truly unmatched.
unmatched on a global basis.
I don't know of a global peer that can match the strength and critically the sustainability of our revenue growth.
peer that can match the strength and critically the sustainability of our revenue growth, our EBITDA growth. youtube.com.
Our cash flow grows.
and our dividend growth. And that's not just the story for 2023. It's the story for 2024, 2025.
beyond and that truly makes us unique.
And on that note, I'll have the call over to Uncle Doug.
Thank you, Darren, and hello everyone. Our fourth quarter results extend our track record of delivering leading operational and financial results, supported by our high growth and diversified asset mix. In the quarter, we continue to see strong growth across all areas of our business.
In mobility, we deliver network revenue growth of 6.5% driven by strong customer growth and higher RPOOD. Furthermore, as compared to the pre-pandemic Q4 2019 period, mobile network revenue is 11% higher, showcasing our strong, consistent growth in customer service excellence.
We continue to see a steady improvement in roaming revenue with a huge four-amount reproximate 122 percent as compared to pre-handemic levels.
Remain focused on driving sustainable RQ growth by maintaining our consistent focus on high-quality customer growth, executing on our 5G monetization strategy, excellent base management, diligent cash management on handsets, and leveraging our leading churn portfolio within a competitive.
Residential Internet revenue grew 8.4% year-to-year as we continue to drive market share alongside higher our food.
Customers are continuing to move to our ice feed tiers, recognizing the superior customer excellence on our pure fiber network, while the compelling value of symmetrical speeds and reliability lead in this product set.
Health services revenue of $411,000 increased by $270,000,000 over the prior period, reflecting the contribution from LifeWorks as well as continued organic growth.
As we progress into 2023, we remain very focused on the light-works integration and executing on the significant synergies and health outcomes our combined organizations can unlock together.
Early in January 20, we announced the successful acquisition of Willow Tree, as highlighted by Darren.
Together, these trends, actions represent important steps we are taking to scale our high-growth technology oriented business, further setting us apart from our global peer group while at adding capacity for value creation and diversification of our overall business.
At the segment level, TTAC operating revenues were up 13% year over year.
As a reminder, in the fourth quarter of 2021, we recognize a $410 million gain from the sale of our financial services business to flow through other income.
T-Tuck adjusted EBITDA grew 10% for the quarter, and capital expenditure is declined by 28% reflecting the conclusion of our accelerated capital program.
DLCX operating revenues from external customers were higher by 9% year-over-year, primarily for growth in our tech and gain clients, arriving from additional services provided to existing customers, and the addition of new customers.
DLCX adjusted EVTA was up 23% or margins improved 200 basis points or approximately 25%. Consolidated operating revenues increased by 13% year-to-year and adjusted EVTA growth by over 11.
Furthermore, our annual EBAGA growth in each of 2020, 2021 and 2022, our cumulative EBAGA growth was over 1.3 billion since the pandemic started, while most of our industry peers are still humanly negative, we did not go negative in any year.
Consolidated income was down 60% year-to-year. While EPS was down 64% due to the disposition of the financial services business I highlighted earlier.
Excluding the impacts of our virtual power purchase agreements, financing costs and Q4 were primarily higher due to higher indebtedness over the past 12 months, along with higher interest rate environment.
On an adjusted basis, then income was slightly higher while ETS remained unchanged to 23 cents. Freed cash flow of 323 million in Q4 increased by 280 million, driven by decline in capital expenditures and higher EBDA, partially offset by higher mobile contracted volumes during a highly competitive Black Friday period.
and higher cash interest in the period. Looking ahead, we have set leading annual financial targets while advancing our leading growth profile and building on the momentum of strong and consistent operating momentum.
In 2023, our operating revenue growth of 11 to 14% in the adjusted E.V.A. growth of 9.5 to 11. Our financial outlook.
Our reflects continued healthy growth within our telecom business, including profitable customer growth, and continued demand for superior bundle products over our broadband networks.
In 2023, we anticipate growing contributions from our unique IN businesses, including Tel's International, which is highlighted by Darren released their targets today, as well as Tel's Health and Agriculture and Consumer Goods.
Not included in our formal CAPEX target of her core capital is 75 million earmarked for real estate development as we progress through our property commissioning program and work to delivering on our strategy of delivering certain surplus real estate assets within the footprint, which we will monetize in the future.
Our portfolio in real estate holdings will continue to increase over time with commercial, residential and industrial sites.
Lastly, free cash flow for 2023 is forecasted to increase by over 700 million or 60% over 2022 to approximately 2 billion. The increase is industry leading and materially higher than our peers driven by EBITDA and lower CapEx. To access past content and get started, you can phone and downloaddius Minnow. If you are interested in Bahá'ís Salvation Bible here, check the area of your phone to look for free
This is partially offset by a couple of non-off rating items such as higher cash flow or in cash interest as highlighted an increase in cash restructuring to drive margin accretion. Higher hand that investments from me.
continued loading of our high-value customers and higher taxes with our higher operating income.
A list of these details are detailed in our 9.3 of our mDNA.
We are confident in our ability to continue generating strong pre-cash flow for years to come, benefiting from an industry-leading growth profile and consistently showcasing our superior fascist disorder electricswearily see a grand impact on their potential to document some powerful
Our continued strong operation of financial performance supports our robust balance sheet and liquidity position. We have a strong debt maturity schedule with average debt to maturity over 12 years and only 500 million of debt maturity in 2023. The average cost of long term debt remains at a low 4%.
while 86% of the debt is fixed. Additionally, our balance sheet strength will further be enhanced by the strong cash flow as highlighted.
The strong position further supports our dividend growth will now be in place for 2025 along with the delivery of our balance sheet and supporting strategic investments.
Robert O'Reary. Thank you, Doug. Carl, please proceed with questions. As a reminder for people on the phone,
is from Larry Yagge from Social Bank. Please go ahead. Thank you for taking my questions.
Maybe I'll start with a question on the health.
By my calculation, I'm getting around 5% organic growth on the business, on the revenue side and 2% on life work. You discussed in your MD&A that demand for health and wellbeing services has never been higher than it is right now. So I'm trying to...
figure out, is it a pricing issue that you guys are having that is the pressuring the top line from growing faster? And when you talk about your expectation for 2023 with the integration with light up light works, can you talk a little bit on what you expect the business to look like in 2023? Thank you.
Okay, Doug will kick it off and then Michael will do the follow-up. As you can see in our KPIs, yes, there is significant demand for our products. As you can see, our KPIs continue to grow. There was a re-rate in one of our more material customers as we renewed for a long period of time.
that is generating significant long-term value. And I think the opportunity in front of us, as Michael will highlight, will be the integration and cross-selling that is in its infancy with LifeWorks at the moment. So Michael, maybe I can have you talk about that. Thank you, Doug, and thank you for the question. That's right. While Q4 did see a slight...
of our post-acquisition immigration activities with respect to LifeWorks.
In addition to our post acquisition integration efforts, the Tellus Health team has been hard at work partnering across Tellus.
to seize opportunities for collaboration as highlighted by our substantial partnership with Telest International, which is focused on customer experience and digital transformation, including bringing AI to Telest Health's market leading digital health solutions.
In Q4, we deepened our partnership with TI by partnering on over $100 million in business, which affords us the opportunity to deliver increased customer value through increased customer service levels across our business units.
And we're ahead of our integration plans, which sets us up very well for 23 and beyond. As Darren shared earlier, 2023 sees us going to market under one brand, Tell us Health, underpin by our strategic intent to be the most trusted well-being company in the world. Expect strong contributions from Tell us Health in 2023 and beyond.
as evidenced by cross-selling and upselling velocities across our global customer base today.
We're focused on the pursuit of our unparalleled opportunity in teles health to become a global leader in EFAP alongside with data-driven preventative health care, wellness and mental health.
Finally, I'll say we work tirelessly to extend our social purpose every day. Our recent collaboration with Tell Us Agriculture and Consumer Goods is a good example of this as we partnered to bring mental health services to Canadian farmers in a partnership with the Canadian Center for Agriculture and Wellbeing.
Thank you. Thank you Mayor. Next question please, Kyle.
The next question is from Jerome DuBreuil from Desjardins. Please go ahead Jerome.
Thanks very much for taking my question. Mine is on the strategy update you gave us a year ago. Wonder if you can update us on this. Basically the points you were making is that you were looking to maintain tech leadership, resurrecting B2B. Makes sense right?
reducing cost as well as killing the tech ventures. I wonder if there's any tilt or or shift in these strategic priorities or well-stay on the same road back basically. Thank you.
We're on the same roadmap, Jerome, explicitly in that regard.
Naveen, maybe given the improving EBITDA trajectory of our B2B operations, given that was referenced in the question, why don't you provide a succinct response to that component?
Yeah, thank you, Darren. So, as you said, Darren, the B2B has had a very strong 2022, and we expect that trend to not only continue, but accelerate in 2023. And what I think is notable, especially as we look across other global B2B, is that the trend is not only going to continue, but it's also going to continue to grow.
communication service providers is that tell us is B2B team delivered strong growth not only on an EBITDA basis but also revenue margin and cash and another key highlight is that this profitable growth came from across all B2B segments right from small business through to enterprise and public sector so
helping to concurrently improve our cost structure, remove non-value at work, all while improving the customer experience. TELUS International will play a very important role in enabling this digitization capability. And we look to the recent Willow Tree acquisition to help further improve our customer experience.
both their capabilities and our digitization efforts in P2B. Next, leveraging our significant investments and coverage in both pure fiber and 5G, which both reduce costs and improve service quality. We feel we've got a lot of opportunity to continue to drive.
further penetration and growth in these core connectivity areas. Also tied to 5G, we're very keen to see new revenue growth through vertical and horizontal based industry solutions as well as the data monetization opportunities.
And as part of this industry solutions capabilities, we see some really strong adjacencies with both health and agriculture in terms of how we go to market. And those adjacencies also drive some very significant differentiation in the market.
And then lastly, really strong geographic segment and product diversity, which gives us several levers to drive growth with significant market share upside. So all this to say, we expect strong cash contribution as well as accelerating revenue.
margin, Nebita gross in 2023 and beyond. And we expect that trend to accelerate not only in 23 but for several years beyond that.
Betta Gross in 2023 and beyond and we expect that trend to accelerate not only in 23 but for several years beyond that. So I will pass back to you, Dern.
Thanks, the meeting. Thank you.
Thanks, David. Thank you. Thanks, Jerome. Next question, please.
The next question is from...
Sorry, Gary Patekates, let's go ahead.
Thanks. I wanted to focus a little bit on tellers. Thanks for the color early on, but, you know, leave aside the synergies and recognize that's material with life works. I wanted to get a sense of how we should think about the shape back towards perhaps stronger organic roads.
around what kind of partnership you're looking for, which areas, what criteria, to the extent that you can disclose right now.
Okay, so firstly, 12-18 months is not the IPO time cycle, but it could be the time cycle for bringing in a strategic partner. If you're...
wanting color on what that model looks like. I think the example that we set in 2016 with bearings.
coming in to TELUS International.
As a precursor to what we would eventually do on the IPO front is a very good model to draw inference from.
The one area of important differentiation that we would be looking for is a partner coming in not just from a cash and a valuation point of view, but what they could add to the business strategically and commercially. And in that regard, there's two key things that matter to us in terms of potentially seeking a partner.
What can they do to assist us in the area of products and technology? And what can they do to assist us in the area of distribution, channels, and global reach in terms of scaling our customer penetration and our global customer growth?
Those are the attributes that we would be seeking if we chose to strike a partnership.
It would be fair to say that we do like the two-step model, establishing a partnership first, creating a semblance of independence of the business, whilst of course still integrated in terms of the operations with both Teleth and Teleth's international.
We think it's a good discipline in terms of getting the business to stand on its own two feet in a run-up to eventually earning the way to the IPO. And one of the things that we implemented with telecentral national that we would again emulate with tele-tell is that we had a TI.
pre-flight IPO checklist of things that needed to be achieved by Telus International if they were going to earn their way to the right of IPO in the business in servitude to the strategy. And so the other thing that we would be looking at which gets to the first part of your question is a business where we deliver very strong organic growth.
double-digit organic growth at the revenue level and at the EBITDA level. And that of course allows us to earn our way to the M&A opportunities because...
When you have a strong organic underpinning from a growth profile, you make better acquisition decisions because they are discretionary rather than necessities. Also, when you have stronger organic growth, you integrate those acquisitions significantly more effectively.
And if you look at some of the choices that tell us international is made in terms of its acquisition path, and how well those choices were and how well those acquisitions were integrated, that of course is going to be indicative of the ideology which tell a tell. And then lastly, if we're going to do an IPO, it's going to be for a high valuation.
Because clearly, an organization like Tellus, where going forward, the sources of cash are going to significantly and chronically exceed the uses of cash, it's not for a need of money. It's to establish a great valuation and a transaction currency that increases or amplifies the addressable market.
acquisition opportunities that we can pursue given the multiple that we've established with our transaction currency. We are only going to realize that high level of multiples if we have great execution results for Telus Health in 2023, 2024, and 2025 and those will be underpinned by excellence and organic growth but also the harvesting of the synergies.
with LifeWorks. And those synergies are deeply significant. We've given you lots of color on those on 200 million plus holistically and 60 million in the near term on the cost front. But the strength of what we can do on the cross-selling side of things, the strength of combining EAP with virtual care.
the strength of what we can do on new product development and of course underscored by the significant efficiency opportunities. I think that that's going to buttress the growth profile that we want to have in terms of the tele-telifio.
Thank you. Thank you, Venda. Carl, next question, please. The next question is from Drew McRennels from RBC Capital Markets. Thanks very much. Maybe for you, Doug, with respect to free cash flow, obviously a lot of growth here over the year.
below EBITDA for cash low items. My question is...
When you think about the $2 billion in 2023 with respect to your earmarked cat-backs, your cash taxes, the contract assets, all of kind of the moving parts, is that $2 billion in your view kind of more of a normalized level? Or are these things still kind of swinging?
back and forth a little bit more volatile with a little bit more volatility than usual.
Let's back and more forth over to Douglas. Exactly. There's definitely a few one items in there. The restructuring cash that we anticipate for 2023, we would assume would be decline over time. So again, that would be more creative outside the 2023 timeframe.
I think with handsets, and thank you for pointing that out on the deck issue, you guys. On the handsets, we've assumed at intensity levels we saw in Q4, throughout part of 2023, and including, you know, an investment in high quality loading is exactly what we should be doing, and we were transparent in our assumptions around that.
I think because COVID was a bit of a wall, that once we get over 2023, we should see a normal run rate or more of a normal run rate on a handset. So I think the climb back out of COVID again would be limiting a little bit this year, but 2024 and beyond again, would be a year over year neutral basis.
And then when you look at our cat-backs continuus and the growth we talked in the DA, I would say we're going to have nothing but accelerated growth on pre-cultural and immune interests. And interest as we de-lover your right, thank you, Darren. We are at a bit of that peak after the willow tree acquisition.
You'll see us deliver over the next few quarters and as the year progresses into the next few years. And with that, the interest amount also will be more managed or more reduced. Thank you.
Thanks Drew. Carl, our next question please. The next question is from Vince Valentini from TD Securities. Please go ahead Vince.
Yeah, thanks very much. Question on connected devices and the impact they're having. The first time you gave us disclosure was 2018. There was about 1.2 million and now it's more than doubled to 2.47 million devices. Is that starting to have a meaningful impact on your service revenue in ARPU and maybe you could just clarify or verify for me?
the success of connected devices, finding its way through to the economics of the business. Frankly, it's still not yet scaled sufficiently, so there's tremendous upside on that front, still to be harvested, which I think will be added and embedded by what we're doing on the 5G front and product development that leverages.
5G bandwidth in that regard. Naveen, do you want to maybe just top up a little bit on the connected device front? Maybe even if you want, highlight a couple of vertical examples that are indicative of the future growth that we expect to realize and the strong economics that go with it. And maybe also highlight that this is not just an ARP who's story on connected devices.
It's an AMPU story given the attractive margins. Over to you Naveen.
Yeah, thanks, Darren. So, grieffully, we are very bullish on IoT connected devices and actually the industry solutions capabilities that will ride on top of that connected device and connectivity capability. So, as I mentioned previously, this is a meaningful nine figure solution.
business for us, it has double digit growth on the IoT and industry solution side. And we're getting some good traction in the market across several key verticals and horizontals. Just before I give some examples.
We're really liking how by GIP and peer fiber are driving some nice adjacencies across our health and agriculture business units, again providing some important market differentiation. One example would be really how we're kicking advantage of our Western and the competency and the logical linkage to.
transportation and so recently tell us was selected as the exclusive 5G connectivity partner for Project Arrow which is you know Canada's electric vehicle manufacturing initiative and So you know and maybe one one other example of where we're partnering With academia and industry as we just announced a five million dollar investment with the universe
space, but we really like the margin profile. And that's mainly driven by a high volume business with a lot of automation, a lot of self-served and digital capabilities. So in terms of scaling that revenue growth, huge potential.
but at very little cost increases. So, you know, we definitely like the economics of this business.
very little cost increases. So, you know, we definitely like the economics of this business. So, that I'll pass it back to you there.
Also with sticky churn in terms of client retention, another attractive feature which helps you achieve attractive lifetime revenues out of the IoT sector. And then secondly, the biggest opportunity going forward is milking the data analytics over all those data volumes.
Okay, let's go to the thanks bench for the question. Next question please, Carl. The next question is from Stephanie Price from CIBC World Markets. Please go ahead, Stephanie. Hi, good afternoon.
I was curious to give you about the strategy around the acquisition of two small internet service providers in Ontario. Just curious to give you the interest to know wireless plus wireline offering in Ontario. And maybe more broadly, how you think about the growth vectors in telecom, post-appidental Rogers-Charmerger.
Thanks Stephanie. Sandal, do you want to take that question? Sure. So Stephanie, we have been doing small tuck-in acquisitions in specific areas where we've competed for a number of years. These are no different.
We have a very significant and growing smart home security business as an example. These particular acquisitions are helping to advance our capabilities in that area. And so, you know, they're relatively consistent with these types of acquisitions we've done in the past.
in Ontario and nationally. Great, thank you. Thank you.
and nationally.
The next question is from David Barton from Bank of America. Please go ahead, David. It's not sitting in for Dave. Thanks for taking the question. I was wondering just on two points if I could.
I know you just released 2023 guidance, but if I look ahead a little bit, can you talk about what your expectations are for maybe improving flow through your EBITDA growth to free cash flow as you move forward with some of these acquisitions in your plan? And secondly, on the $75 million...
of CAPEX for the kind of real estate opportunity. Can you touch on whether or not this includes also a partner? I know that's been a discussion in the past that you might bring in a partner for these things. And then also on the lag between...
when you would make these investments and when you might see a return? How many years is the right measure should we expect to kind of elapse for this type of activity? Thanks.
Doug, would you take that? Yeah, so we'll start the second question first. So on the real estate one, the 75 million does not include a partner at the moment. We have assumed we would get potentially partners on individual real estate opportunities where appropriate and bring in high quality partners to get things up and running.
but it really is to start to build the portfolio so that over time frame you're thinking we would have something of substance that could be monetized probably in the three year period is probably the appropriate ramp on that one but we absolutely intend to bring in partners and that number could go down the more we do that. On the flow through I think in this and you know and Darren highlighted that it's for the uh
direction up on free cash flow and margins. If you look at the integration costs we're currently doing for life works, our margins are going to continue to enhance. The double-digit growth we have in health is going to continue to contribute to that. As a Zag, that some of the acquisitions we did were J-CURS. And...
The double-digit growth in both revenue and EBITDA and both ag are now going to contribute in addition to what Naveen had highlighted. And so I think you're going to continue to see more and more flow through on an ongoing basis both in 2023 and beyond on all of those fronts in addition to the strength of our core business. And if you look at that EBITDA flow through
and the cash flow trajectory over 23, 24, and 25. Also calculate what the dividend payout ratio is a free cash flow and the headroom that we're creating as it relates to our dividend growth model. I think those figures are very interesting.
Great. Thanks, Mike. Thanks, Matt. Carly, have time for one more question, please.
So the final question is from Simon Flannery from Morgan Stanley . Please go ahead, Simon. Great. Thanks for the question. Can you talk a little bit about the market environment for 2023? I think looking through your discussion, you're assuming a slower macro growth right next year, we've obviously had a lift from COVID in terms of 10% demand.
Sounds like you think that will continue, but how should we think about the overall industry KPIs across wireless and across broadband? Do you think we can sustain the pacing across the industry that we've seen in 2022, in 2023 given continued immigration, et cetera, or are you expecting some sort of moderation overall? Okay, Jim, why don't you kick that off? Dana, why don't you do the part two?
Okay, so for sure we're seeing persistent promotional activity in the low end of the market. But that said,
industry best, our poor growth at 2.2%, really good underlying domestic, our poor characteristics coming from the high value subscriber mix, and also the base management and the step up to 5G.
We're also seeing industry best churn on the back of our product intensity and our customer experience.
In fact, our post-paid churn continued to be really strong, very similar to pre-pandemic levels. Our pre-paid churn is elevated due to travelers, but over 200 basis points better than our competitors. When you look at our Kee4Nets, we're up 80,000 versus pre-pandemic 2019. So a lot of the focus we've gone on distribution, like mobile clinic.
digital, direct-to-consumer are driving benefits. And so when we look into next year, we would expect that that promotional activity is gonna continue at the low end of the market, but our strength is really on the premium side of the market and bundling, and we feel that's very robust.
So we expect consistent trajectory from where we are on ARPU. We see upside in business roaming. We're already seeing that in Q1. We will continue to see that high value subscriber mix washing through the base.
Our base management around 5G and Kudo pick your perk step ups is working really well. The growth in our IoT subscriber base is now contributing meaningfully to our network revenue growth. And we're not as reliant on the low end flanker promotions, which is good.
So, you know, I feel really good on the wireless side that will continue this trajectory and we'll see that kind of consistent growth. On the home solution side, and Daniel, maybe you want to top up, but we're seeing similar characteristics, especially around the bundling.
And with the bringing together of mobility and home solutions in the consumer organization, that presents tremendous opportunities for us to drive further efficiencies and even better bundling. But St. Ol' maybe you want to say a couple words on the home solution side. Sure. Thanks, Jim. And I think you gave a really great summary.
lower level of churn and a higher arpooh position. So the delta between us and our peers on customer lifetime value is significant and there's an opportunity for growth and continued growth there on the back of our completion largely of the fiber to the prem build in the west. So if you take those characteristics and extend them out, we see a higher margin.
per household at over 20% increase. We see a significantly lower churn of 16 points. We see a higher product intensity, 25% less cost and 70% less fewer outside plant repairs. So we have an incredible margin accretion opportunity and we also have a significant level of digitization and product development taking place so that we can continue to grow our share.
and to develop new products under Jim's leadership, as well as leverage TI and willow tree in terms of driving margin accretion across our segments so that, you know, even in the lower end of the market where we see significant immigration growth, we can come to the table with value props that are more margin accretive than our competitors. So we're quite excited about the growth potential in the market.
And we think that we're positioned incredibly well across segments and across the demographics. We absolutely do see some customers characterized as looking for value in their bundle, value higher levels of value in their purchase patterns. But because we provide solutions at every end of the market.
we're really poised well for that growth. Thanks, Simon. Thanks Simon, and thank you everyone for joining us today. Please feel free to reach out to the IR team with any follow-up questions you may have.
This concludes the tell us 2022 QVU running conference call. Thank you for your participation and have a nice day.
I have you.
Good day everyone. Welcome to the Tell us 2022 Q4 Earnings Conference call. I would like to introduce your speaker Mr. Robert Mitchell. Please go ahead.
Thanks, Carl. Hello everyone. Thanks for joining us today. Our fourth quarter and year end 2022 results News release, MD&A financial statements and detailed health medallion information. We're posted on our website this morning at tellus.com slash investors.
Our call today will begin with remarks by Darren and Doug. The Q&A portion of our call will be joined by Zain El-Mauji, President of Consumer Solutions, Naveen Arora, President of Business Solutions, Jim Senko, our Chief Product Officer, Tony Guerin, our Chief Operating Officer, Jeff Curit, President and CEO of TELUS International, John Raines, President of TELUS Agriculture and Consumer Goods, and Michael Dangle, Chief Operating Officer at TELUS Health.
Briefly, this discussion on answers questions contained for looking statements. Extra results could vary materially from those statements.
These assumptions in which they're based and the material that risks the good cause of the different our online Republic filings of security commissions in Canada and the US including in our 2022 annual MD neck with that or you don't Thank you. Go and hello everyone
Throughout 2022, Tell Us Achieve Strong Operational and Financial Results across our business, leading our North American peer group with respect to 2022 operating revenue, adjusted EBITDA and free cash flow growth, along with most operating metrics. This is a trend the Tell Us team has consistently demonstrated over the longer term.
Our robot's performance in the fourth quarter and for the full year reflects the chemistry of our globally leading broadband networks and customers-first culture, driving our hallmark combination of profitable customer growth alongside strong financial results.
Industry leading telecom net additions of 301,000 represented our best fourth quarter on record and concluded another year of industry leading expansion of our customer base. Indeed, in 2022 we delivered all-time record customer growth, surpassing total annual net additions of more than 1 million for the first time. This included another best every year for fixed subscribers.
focus on delivering exceptional customer experiences over our globally leading peer fiber and 5G networks. Our team's passion for delivering customer experience excellence once again contributed to strong client loyalty across our key product lines.
including blended mobile phone, peer fiber internet, object TV, security, and voice churn all below 1% for the year.
Also for the full year, operating revenue growth of 8.6% came in above our revised guidance of approximately 8% while EBITDA growth of 9.5% led it comfortably in the midpoint of our revised guidance range. Moreover, we achieved strong pre-cash flow growth of 64% for the year.
exceeding our original free cash flow target. In addition, CapEx was in line with our target and reflected the final year of our accelerated broadband build program that has been considerably successful.
Strength in our court telecom operations continues to be bolstered by continued strong operating momentum in our highly differentiated technology-oriented business at telecentral international, telehealth, and teleculture and consumer goods. Let's now turn and take a look at the fourth quarter.
Tell us once again, achieve industry-leading operating revenues and EBITDAG growth of 12.6% and 11.3% respectively. Looking at mobile, tell us achieve strong customer growth of 218,000 net additions in the fourth quarter. It's included healthy mobile phone net additions of 112,000, which was similar to last year. Notably, the strength continued to be driven primarily.
by loading on our premium brand, reflecting our consistent focus on profitable customer growth. It also included leading and record fourth quarter connected device met editions of 106,000, up 31% on a year-over-year basis. Importantly, our team delivered another quarter of industry-best loyalty results.
which continues to be the hallmark of the tele-sorganization. Blended mobile phone churn was an industry low 1.22% in the fourth quarter, reflecting a year-over-year increase as a result of the intensely competitive Black Friday promotional environment. Looking at our industry leading post-paid mobile churn.
This was once again below 1% in the quarter. Indeed, at 0.75% for the year and relatively flat over last year, 2022 represented our ninth consecutive year of industry-leading post-paid wireless turn below 1%.
One key factor behind this consistent industry best performance is the superiority of our world-leading networks.
In this regard, in 2022, tell us once again, burn numerous accolades from independent third party organizations.
Notably, Global Analytics Company opened signal out of the UK, recognized tell us with five industry awards in the year for both our 4G and 5G networks, making tell us Canada's most awarded network by Open Signal for the 11th consecutive time. Similarly, tell us was honored with three awards from US-based UClub in 2022.
including being named North America's fastest mobile network according to results from their speed test. Moreover, Canada-based Tatella recognized our wireless network with four national awards for excellent consistent quality, core consistent quality, 5G excellence consistent quality, and 5G core consistent quality. Likewise, our wireless network also received praise.
and pure fiber networks. Moreover, this recognition of TELUS' national broadband network leadership underscores the tremendous value of our generational investments in world-leading network technologies, including our now concluded accelerated broadband expansion program.
undertaken over the past couple of years. Importantly, these investments will continue to drive extensive socioeconomic benefits to Canadians in communities from coast to coast for decades to come.
The close on mobile industry leading fourth quarter are put growth of 2.2% over last year was supported by roaming improvements as a result of increased international travel. It was also supported by strong performance on our premium brand.
Also supported by strength within our MRC and supported of course by our low churn rate keeping our premium customers.
Notably, mobile phone, lights are in turn, and the revenue that we generate continues to be up in terms of lights time revenue by 48 percent higher than our national peers reflective of the critical combination of our consistent focus on high quality economic customer growth and leading client loyalty. And what a combination that is.
and what a huge differentiator that is versus our peers. Now let's take a look at our VIX operating results. We'll tell us delivered another quarter of industry fast wireline customer growth.
Our team achieved strong fourth-order Internet net additions of 42,000 up 5% on a year over year basis.
We continue to drive strong growth in our TV product line with industry leading net additions of 17,000 relatively flat over the prior year despite modestly higher churn. Furthermore, residential voice was again a very positive story this quarter with industry low line losses.
of only 4,000, which was down 60% on a year-over-year basis and represent our best fourth quarter results since 2002.
Notably, this reflects our momentum with respect to our product intensity or product bundling, if you will, and the inherent turn benefits associated with this strategy that are proving to be so successful for tell us. Strong and leading security net additions of 28,000.
Further reflects our successful strategy of driving profitable customer growth and multi-product penetration. Overall, our robust industry-leading external fixed net additions of 83,000 represented our best quarterly wireline customer growth on record.
These performance attributes reflect the strength of our unique and highly attractive bundle offers across our unmatched portfolio of products and services. Products and services that are buttressed by our ever-expanding broadband networks.
Our leading customer centric culture, as well as our strong and highly differentiated social capitalism attributes that truly do underpin the strength of the Telus brand and culture. Now let's take a look at our Teleth Health business.
In 2022, Health Services Revenue increased by 75% nearing the $1 billion revenue milestone, including four months of contribution from the acquisition of life works at the beginning of September .
As we progress into 2023, we continue to focus intensely on integrating and scaling our global health operations to build the healthiest communities and workplaces on the planet.
Notably, we recently united light works with teletelps together under the teletelps name and one brand going forward with the aim of integrating the best of the global brand and culture from across both light works and telets. The expanding scale of our healthcare programs.
Within our integrated tele-tell organization includes covering 68 million lives and increase of more than 47 million over last year.
In addition, digital health transactions were up over 5% in 2022 to more than 580 million. Furthermore, we welcomed 1.7 million new virtual care members in the last 12 months alone, increasing our membership to 4.5 million up 61% over the prior year. For 2023, we anticipate strong growth until its health, including solid organic growth.
as we continue to integrate and expand this business into an asset of scale and significant global consequence. This will be supported by our intent focus on crystallizing meaningful synergy of $200 billion dollars or more.
that we expect to drive over the next three to five years, inclusive of revenue synergies from cross-delling and $60 million in near-term cost synergies.
And of course, KELOLAND's International has a critical role to play to help us achieve these results and beat the targets that we've set for ourselves.
Before we close on health, I'm pleased to share the appointment of Sid Costa Raju as our president of Tallah Tal.
With more than 20 years of global experience leading organizations with a focus on innovative healthcare technology and services, Sid is exceedingly well positioned to lead the ongoing transformation and scaled growth of Tel-A-Tel.
Indeed, leveraging his tremendous expertise, SID will drive product innovation, distribution strength and an engaged culture that puts customers first across our healthcare business.
Myself and the executive leadership team look forward to supporting SID and our Telehealth team as we accelerate our transformational strategy of leveraging data analytics and dynamic insights to revolutionize access to advanced healthcare services, including preventative health and wellness optimization solutions.
driving remarkable health experiences for the benefit of the clients and individuals that we serve in Canada and worldwide.
The economic growth that stems from that will put us on the IPO trajectory that we all find so exciting.
Turning to tell us agriculture and consumer goods, annual revenues of $354 million were up 24% in 2022 over the prior year.
through a combination of organic growth and the impact of business acquisition in 2021 as our team continues to integrate and grow this compelling global business. We are creating significant value as the leading provider of agriculture and consumer goods technology solutions.
around the world as we advance the sector's efficiency and effectiveness including food quality production, waste reduction,
Food and retail execution, trade promotion optimization, and doing it all through advanced data analytics and dynamic insights that help our customers from agribusiness to food retailing. In 2023, we look forward to strong progress.
and double digit revenue growth in this business. Now let's take a look at Telecentral National. Despite a challenging macroeconomic environment, this morning, Telecentral National announced strong 2022 results, including double digit revenue growth, leading profitability, and robust cash flow for the full year.
Indeed, TI's strong results and strong outlook also reflect the important relationship with Telus as an anchor customer, enabling Telus with superior customer service excellence and powering our digitization strategy, a unique relationship that significantly benefits both organizations.
and one that is expected to continue growing, and we will realize the success of that mutualism. TI continues focus on profitable growth, powered by an attractive and end set of digital capabilities, position it as a trusted advisor.
for premier digital customer experiences and IT services for its over 650 global clients. Earlier in January , TI consummated the acquisition of full service digital provider, Willow Tree, significantly bolstering TI's front-end development and design competencies. And importantly,
unlocking unprecedented and deeply attractive cross-selling opportunities for both organizations. The transaction resulted in the addition of new, marquee customers that further diversified TI's enviable list of client partners. Importantly, TELUS International and WillowTree also support the acceleration of TELUS' ongoing digital transformation and altering of TELUS scale in aWorks
drive profitable growth over the longer term. On the back of the differentiated asset base, best-in-class customer experiences, world-leading networks and our unique growth businesses provide us with our confidence.
in the robust outlook for our business and our ability to deliver on the ambitious annual targets that we announced today. For the year we are targeting industry leading operating revenue and a judge at EBITDA increases of up to 14 percent and 11 percent respectively. As previously announced.
We expect a very meaningful drop in core capital expenditures to approximately 2.6 billion following the successful completion of our accelerated broadband investment program.
This will represent a cat-backed intensity ratio of circa 13%, which represents a historic low fatelis and is amongst the lowest globally within our peer group. As a result, we expect free cash flow of approximately $2 billion, up close to 60% supported by strong EBITDA growth and the material capital expenditures stepped out.
Our targets will be supported by the Healthy Guidance for 2023 announced this morning by TELUS International, once again targeting double-digit revenue and EBITDA growth alongside leading margins as they continue to drive solid and profitable operating momentum.
TI's financial objectives will be backed by their end-to-end design capabilities as they build and deliver these capabilities, tapping into the accelerated need for premium digital customer experiences, digital transformation, content moderation, and AI data solutions across its strategic industry verticals.
on a global basis. Importantly, the unparalleled skill, innovation, grit, and execution excellence of our team in progressing our consistent and winning strategy underpins our leading multi-year dividend growth program, now unbelievably in its 13th year, and extended that particular ambition for annual growth.
of 7 to 10 percent through to the end of the 2025 financial year. Finally, I'd like to take this opportunity to recognize our team for the way they continue to exemplify our social purpose in action. In 2022 along, our team members and retirees donated $125 million.
and volunteered close to one and a half billion hours in support of charitable and community organizations. This is more than any other company in Canada. Indeed, since 2000, we've demonstrated our global leadership in social capitalism by gifting one and a half billion dollars, including two million days of global volunteerism. Myself and the leadership team.
continue to be inspired by the unparalleled compassion of our Telus family and their dedication to making the future friendly for all of our stakeholders. They are indeed the best exemplification of our brand values in action.
Before I came to tell this, I spent ten years
Before I came to tell this, I spent 10 years in global telecoms.
hunting for value in most places on the planet. So it is with some degree of familiarity.
that I say the growth profile that we have
day, the growth profile that we have is truly unmatched.
on a global basis. I don't know of a global peer that can match the strength.
and critically the sustainability of our revenue growth, our even dog growth,
critically the sustainability of our revenue growth, our even dog growth, our cash flow growth.
and our dividend growth. And that's not just the story for 2023. It's the story for 2024, 2025.
and beyond, and that truly makes us unique. And on that note, I'll hand the call over to Uncle Doug. Thank you, Darren, and hello, everyone. Our fourth-quarter results extend our track record of delivering leading operational and financial results, supported by our high growth and diversified asset mix.
In the quarter, we continue to see strong growth across all areas of our business. In mobility, we delivered network revenue growth at 6.5% driven by strong customer growth and higher RPUs. Furthermore, as compared to the pre-pandemic Q4 2019 period, mobile network revenue is 11% higher showcasing our strong, consistent growth and customer service excellence.
We continue to see a steady improvement in roaming revenue, with a Q4 amount of approximately 122% as compared to pre-pandemic levels.
We remain focused on driving sustainable ARPU growth by maintaining our consistent focus on high quality customer growth, executing on our 5G monetization strategy, excellent base management, diligent cash management on handsets, and leveraging our leading churn profile within a competitive and dynamic market environment. fixed data services revenue grew 5.9% year over year.
of customer excellence on our pure fiber network while the compelling value of symmetrical speeds and reliability lead in this product set. Health services revenue of 411 increase by 270 million over the prior period reflecting the contribution from life works as well continued organic growth.
As we progress into 2023, we remain very focused on the LifeWorks integration and executing on the significant synergies and health outcomes our combined organizations can unlock together. Early in January , we announced the successful acquisition of Willow Tree as highlighted by Darren. Stage 2
Together, these transactions represent important steps we are taking to scale our high-growth, technology-oriented business, further setting us apart from our global peer group while adding capacity for value creation and diversification of our overall business. At the segment level, TTAC operating revenues were up 13.
expenditures declined by 28% reflecting the conclusion of our accelerated capital program. DLCX operating revenues from external customers were higher by 9% year-to-year, primarily for growth in our tech and gain clients, arriving from additional services provided to existing customers.
and the addition of new customers. DLCX Adjusted EVGA was up 23% while margins improved 200 basis points or approximately 25%. Consolidated operating revenues increased by 13% year-to-year and adjusted EVAs DA growth by over 11.
Furthermore, our annual EBAGA growth in each of 2020, 2021 and 2022, our cumulative EBA growth was over 1.3 billion since the pandemic started, while most of our industry peers are still humanly negative, we did not go negative in any year. Consolidated income was down 60% year-over-year.
While EPS was down 64% due to the disposition of the financial services business I highlighted earlier, excluding the impacts of our virtual power purchase agreements, financing costs in Q4 were primarily higher due to higher indebtedness over the past 12 months along with higher interest rate environment.
On an adjusted basis, then income was slightly higher while ETS remained unchanged to 23 cents. Freed cash flow of 323 million in Q4 increased by 280 million, driven by decline in capital expenditures and higher EBITDA, partially offset by higher mobile contracted volumes during a highly competitive Black Friday period and higher cash interest in the period. Looking ahead, we have set leading.
annual financial targets while advancing our leading growth profile and building on the momentum of strong and consistent operating momentum. In 2023, our operating revenue growth of 11 to 14 percent and the justity of a key growth of 9.5 to 11. Our financial outlook reflects continued healthy growth within our telecom business, including profitable customer growth. Our financial outlook reflects continued growth in our telecom business, including profitable financial
and continued demand for our superior bundle products over our broadband networks. In 2023, we anticipate growing contributions from our unique IN businesses, including Tel's International, which is highlighted by Darren released their targets today, as well as Tel with Tel and agriculture and consumer goods. Not included in our formal CAPEX target of her core capital is 75 million earmarked for real estate development.
is forecasted to increase by over 700 million or 60% over 2022 to approximately 2 billion. The increase is industry leading and materially higher than our peers driven by EBITDA and lower CapEx. thrilled.
This is partially offset by a couple of non-operating items such as higher cash flow or in cash interest as highlighted, an increase in cash restructuring to drive margin accretion, higher hands that investments from the continued loading of our high value customers and higher taxes with our higher operating income.
A list of these details are detailed in our 9.3 of our MDNA. We are confident in our ability to continue generating strong pre-cash flow for years to come, benefiting from an industry-leading growth profile and consistently showcasing our superior asset mix and operational execution. Our continued.
Strong operation of financial performance supports our robust balance sheet and liquidity position. We have a strong debt maturity schedule with average debt to maturity over 12 years and only 500 million of debt maturity in 2023. The average cost of long term debt remains at a low 4% while 86% of the debt is fixed. Additionally, our balance sheet straight.
will further be enhanced by the strong cash flow as highlighted. The strong position further supports our dividend growth will now be in place for 2025, along with the delivery of our balance sheet and supporting strategic investments. Robert O'Reary. Thank you, Doug. Carl, please proceed with questions.
Certainly. As a reminder for people on the phone, if you would like to queue up to ask a question, please dial star one on your phone's keypad. If ever you wish to withdraw from the question, please start here. So the first question is from Mayor Yaghi from the Social Bank. Please go ahead. Thank you for taking my question.
Maybe I'll start with a question on health. By my calculation, I'm getting around 5% organic growth on the business, on the revenue side, and 2% on life force. You discussed in your MD&A that demand for health and wellbeing services has never been low.
higher than it is right now. So I'm trying to figure out, is it a pricing issue that you guys are having that is pressuring the top line from growing faster? And when you talk about your expectations for 2023 with the integration with Light of Life Works, can you talk a little bit on what you expect this business to look like in 2023? Thank you. Okay.
Doug will kick it off and then Michael will do the follow-up. As you can see in our KPIs, yes, there is significant demand for our products as you can see our KPIs continue to grow. There was a re-rate in one of our more material customers as we renewed for a long period of time. That is generating significant long-term value.
And I think the opportunity in front of us, as Michael will highlight, will be the integration and cross-selling that is in its infancy with LifeWorks at the moment. So Michael, maybe I can have you talk about that.
Thank you, Doug, and thank you for the question. That's right. While Q4 did see a slight slowdown in respect of one segment in the health business as a result of a customer reprise on a renewal, Q4 also saw our team laser focused on two priorities. The first being servicing our global customer base and the second being increasing the pace of our post acquisition integration activities with respect to life works.
In addition to our post-acquisition integration efforts, the Tellus Health team has been hard at work partnering across Tellus.
to seize opportunities for collaboration as highlighted by our substantial partnership with TELUS International, which is focused on customer experience and digital transformation, including bringing AI to TELUS Health's market-leading digital health solutions.
In Q4, we deepened our partnership with TI by partnering on over $100 million in business, which affords us the opportunity to deliver increased customer value through increased customer service levels across our business units. And we're ahead of our integration plans, which sets us up very well for 23 and beyond. As Darren shared earlier, 2023 sees us going to market under one brand, Telus Health.
underpinned by our strategic intent to be the most trusted well-being company in the world. Expect strong contributions from Telus Health in 2023 and beyond.
Combining the skills and capabilities of Telus Health and LifeWorks creates a globally leading end-to-end, digital-first employee wellness platform that now covers better than 68 million lives. Our teams continue to drive strong growth fueled by the LifeWorks acquisition.
as evidenced by cross-selling and up-selling velocities across our global customer base today. We're focused on the pursuit of our unparalleled opportunity in teles health to become a global leader in EFAP alongside with data-driven preventative healthcare, wellness and mental health.
Finally, I'll say we work tirelessly to extend our social purpose every day. Our recent collaboration with TELUS Agriculture and Consumer Goods is a good example of this, as we partnered to bring mental health services to Canadian farmers in a partnership with the Canadian Centre for Agriculture and Wellbeing.
Finally, I'll say we work tirelessly to extend our social purpose every day. Our recent collaboration with Tell Us Agriculture and Consumer Goods is a good example of this as we partnered to bring mental health services to Canadian farmers in a partnership with the Canadian Center for Agriculture and Wellbeing. Thank you, Mayor. Next question please, Raul.
The next question is from Geron Dubrai, from Desjardins, please go ahead, Geron. Yes, thanks very much for receiving my question. Mine is on the strategy update that you gave us a year ago. I wonder if you can update us on this. Basically, the points you were making is that you were looking to maintain tech leadership, resurrecting V2B and reducing cost as well as scaling the tech ventures. I wonder if there's...
to that component.
Yeah, thank you, Darren. So as you said, Darren, the B2B has had a very strong 2022, and we expect that trend to not only continue, but accelerate in 2023. And what I think is notable, especially as we look across other global B2B communication service providers, is that tell us as B2B team delivered strong growth, not only on an even dub basis, but also revving.
And underpinning that growth are a few important contributors. So first digitization and automation is really helping to concurrently improve our cost structure, remove non-value at work, all while improving the customer experience. Tell us international will play a very important role in enabling this digitization.
both reduce costs and improve service quality. We feel we've got a lot of opportunity to continue to drive further penetration and growth in these core connectivity areas. Also tied to 5G, we're very keen to see new revenue growth through vertical and horizontal based industry solutions.
as well as the data monetization opportunities. And as part of this industry solutions capabilities, we see some really strong adjacencies with both health and agriculture in terms of how we go to market. And those adjacencies also drive some very significant differentiation in the market. And then lastly, really strong geographic segment and product diversity, which gives us several weeks to helpables
several years beyond that.
So I will pass back to you, Derns. Great. Thank you. Thanks for your own car on this question, please.
The next question is from Gary Vendee, Gally Patigate.
Thanks for asking my question. I wanted to focus a little bit on telehealth. Thanks for the color early on, but leave aside the synergies, and I recognize that's material with LifeWorks. I wanted to get a sense of how we should think about the shape back towards perhaps stronger organic growth that telehealth and what the construct of that would be.
And then connected to that, I know that fall to 18 months from now, you are looking at prospects of an IPO, maybe a strategic partnership on the on the latter option, maybe a little bit of definition around what kind of partnership you're looking for, which areas, what criteria to the extent that you can disclose right now. Thank you.
Firstly, 12-18 months is not the IPO time cycle, but it could be the time cycle for bringing an inter-strategic partner.
Firstly, 12 to 18 months is not the IPO time cycle, but it could be the time cycle for bringing in a strategic partner. If you're
wanting color on what that model looks like. I think the example that we set in 2016 with bearings coming in to tell us international as a precursor to what we would eventually do on the IPO front is a very good model to draw inference from. The one area of important differentiation that we would be looking for is a partner coming in, not just from a cash, an evaluation.
a distribution channel and global reach in terms of scaling our customer penetration and our global customer growth. Those are the attributes that we would be seeking if we chose to strike the partnership. It would be fair to say that we do like the two-step model establishing a partnership first.
creating a semblance of independence of the business, whilst of course still integrated in terms of the operations with both Teleth and Teleth's international. We think it's a good discipline in terms of getting the business to stand on its own two feet in a run-up to eventually earning the way to the IPO. And one of the things that we implemented with Teleth's international that we would again emulate with Teleth's help,
is that we had at TI a pre-flight IPO checklist of things that needed to be achieved by Telus International if they were going to earn their way to the right of IPO-ing the business in servitude to the strategy. And so the other thing that we would be looking at, which gets to the first part of your question, is a business where we deliver very strong organic growth, double-digit organic growth at the revenue level and at the EBITDA level.
And that, of course, allows us to earn our way to the M&A opportunities because when you have a strong organic underpinning from a growth profile, you make better acquisition decisions because they are discretionary rather than necessities. Also when you have stronger organic growth.
you integrate those acquisitions significantly more effectively. And if you look at some of the choices that television international is made in terms of its acquisition path, and how well those choices were and how well those acquisitions were integrated, that of course is going to be indicative of the ideology with tele-tell. And then lastly,
If we're going to do an IPO, it's going to be for a high valuation because clearly, an organization like Talents where going forward, the sources of cash are going to significantly and chronically exceed the uses of cash. It's not for a need of money. It's to establish a great valuation and a transaction currency that increases or amplifies the a dressable market of acquisition opportunities that we can pursue, given the multiple that we've established with our transaction currency.
We are only going to realize that high level of multiple if we have great execution results for telehealth in 2023, 2024 and 2025. And those will be underpinned by excellence in organic growth but also the harvesting of the synergies with life works. And those synergies are deeply significant. We are giving you lots of color on those on 200 million plus, elistically.
and 60 million in the near term on the cost front, but the strength of what we can do on the cross-selling side of things, the strength of combining EAP with virtual care, the strength of what we can do on new product development, and of course underscored by the significant efficiency opportunities. I think that that's going to buttress the growth profile that we want to have in terms of the tele-tell IPO.
in the near term on the cost front, but the strength of what we can do on the cross-selling side of things, the strength of combining EAP with virtual care, the strength of what we can do on new product development, and of course underscored by the significant efficiency opportunity, I think that that's going to buttress the growth profile that we want to have in terms of the Telehealth IPO. Thank you. Thank you.
Thanks, Revenda. Carl, next question please. The next question is from Drew McRedals from RBC Capital Markets. Yes, thanks very much. Maybe for you, Doug, with respect to free cash flow, obviously a lot of growth year over year. It's nice to see tap back come down. I don't know if everyone on this call investor, I know, knows, but your free cash flow definition is a free cash flow definition.
is probably the most conservative among your peers. And I think all the analysts are understand that. So when you think about below EBITDA, free cash low items, my question is when you think about the $2 billion in 2023 with respect to your earmarked catbacks, your cash taxes, the contract assets, all of the moving parts, is that $2 billion in your view kind of more of a normalized level, or are these things still kind of swinging?
back and forth a little bit more volatile with a little bit more volatility than usual. Less back and more forth over to you Douglas. Exactly. There's definitely a few one items in there. The restructuring cash that we anticipate for 2023.
We would assume would be a decline over time. So again, that would be more creative outside the 2023 timeframe. I think with handsets, and thank you for pointing that out on the Dr. Issue, you guys. On the handsets, we've assumed the intensity levels we saw in Q4, throughout part of 2023, and including an investment in high quality loading is exactly...
would be a year over your neutral basis. And then when you look at our cat-backed continuous and the growth we talked in either DA, I would say we're gonna have nothing but accelerated growth on pre-couch growth in the future. An interest. Oh, an interest as we de-leather your right, thank you, Darren. We are at a bit of that peak after the willow tree acquisition. You'll see us de-lever over the next few quarters and as your progress is.
into the next few years and with that the interest amount also will be more managed or more reduced. Understood, thank you. Thanks Drew. Karl, our next question please. The next question is from Vince Valentini from TD Securities. Please go ahead Vince. Yeah, thanks very much. Question on connected devices and the impact they're having. The first time you gave us disclosure was 2018. There was about 1.2 million and now it's more than doubled.
to 2.47 million devices. Is that starting to have a meaningful impact on your service revenue in ARPU? And maybe you could just clarify or verify for me that you include that in service revenue, but it's not counted as a subscriber. So it should be inflating ARPU if the extent that line gets bigger. So that's correct. It's included in revenue, but it's not included in the sub-base. And if you look at the 2.2%
and product development that leverages 5G bandwidth in that regard. Naveen, do you want to maybe just top up a little bit on the connected device front? Maybe even if you want, highlight a couple of vertical examples that are indicative of the future growth that we expect to realize.
the strong economics that go with it and maybe also highlight that this is not just an ARPU story on connected devices It's an AMPU story given the attractive margins. Over to you Naveen. Yeah, thanks, Farron. So Agreefully, we are very bullish on IoT connected devices and actually the industry solutions capabilities that will ride on top of that connected device.
We're really liking how by GIP and PureFiber are driving some nice adjacencies across our health and agriculture business units, again providing some important market differentiation. One example would be really how we're taking advantage of our Western and the competency and the logical linkage to key natural resource industries.
So, tell us was selected to help build one of the largest private wireless network solutions for a mining operation in Canada. Another key area where we are focused is on transportation. And so, recently, tell us was selected as the exclusive 5G connectivity partner for Project Arrow, which is Canada's electric vehicle manufacturing initiative. And maybe one other.
example of where we're partnering with academia and industry as we just announced $5 million investment with University of Windsor to accelerate the development of 5G technology applications in agriculture, advanced manufacturing, cybersecurity and connected vehicles. And as Darren said,
We're not only bullish on the revenue growth in this space, but we really like the margin profile. That's mainly driven by a high volume business with a lot of automation, a lot of self-served and end-to-end.
digital capabilities. So in terms of scaling that revenue growth, huge potential, but at very little cost increases. So, you know, we definitely like the economics of this business. So, that I'll pass it back to you, Darren. Also with sticky churn in terms of client retention, another attractive feature which killed.
The next question is from Stephanie Price from CIBC World Markets. Please go ahead Stephanie. Hi, good afternoon. I was curious if you could speak about the strategy around the acquisition of two small internet service providers in Ontario. Just curious if you'd be interested to know wireless plus wireline offering in Ontario.
And maybe more broadly, how do you think that the growth factors in telecom post-appidental Rogers-Chall merger? Thanks, Stephanie. Sandal, do you want to take that question? Sure. So Stephanie, we have been doing small tuck-in acquisitions in specific areas where we've competed for a number of years. These are no different.
We have a very significant and growing smart home security business as an example. These particular acquisitions are helping to advance our capabilities in that area. And so, you know, they're relatively consistent with these types of acquisitions we've done in the past in Ontario and nationally. Thank you. Thank you.
Thanks, Stephanie. Next question, please, Carl. The next question is from David Barton from Bank of America. Please go ahead, David. Hi, it's Matt sitting in for Dave. Thanks for taking the question. I was wondering just on two points if I could.
I know you just released 2023 guidance, but if I look ahead a little bit, can you talk about what your expectations are for maybe improving flow-through of your EBITDA growth to free cash flow as you move forward with some of these acquisitions and your plan? And secondly, on the $75 million of CapEx,
for the real estate opportunity. Can you touch on whether or not this includes also a partner? I know that's been a discussion in the past that you might bring in a partner for these things. And then also on the lag between when you would make these investments and when you might see a return, like how many years, if that's the right measure, should we expect to kind of elapse for this type of activity? Thanks.
Doug, why don't you take that? Yeah, so we'll start the second question first. So on the real estate one, the $75 million does not include a partner at the moment. We have assumed we would get potentially partners on individual real estate opportunities where appropriate and bring in high quality partners to get things up and running, but it really is to start to build the portfolio.
so that over the time frame you're thinking we would have something of substance that could be monetized probably in the three year period is probably the appropriate ramp on that one. But we absolutely intend to bring in partners and that number could go down the more we do that. On the flow through, I think in this, and you know, and Darren highlighted that it's for the direction up on free cash flow and margins. If you look at the integration costs we're currently doing for LifeWorks, our margins are going to kick...
and beyond on all of those fronts in addition to the strength of our core business.
And if you look at that, EBITDA flow through and the cash flow trajectory over 23, 24, and 25, also calculate what the dividend payout ratio is a free cash flow and the headroom that we're creating as it relates to our dividend growth model.
that EBITDA flow through and the cash flow trajectory over 23, 24, 25 also calculate what the dividend payout ratio is a free cash flow and the headroom that we're creating as it relates to our dividend growth model. I think those figures are very interesting.
Great. Thanks, Mr. Mish. Thanks, Matt. Carl, we have time for one more question, please. The final question is from Simon Flannery from Morgan Stanley . Please go ahead, Simon.
Great. Thanks for the question. Can you talk a little bit about the market environment for 2023? I think looking through your discussion, you're assuming a slower macro growth right next year. We've obviously had a lift from COVID in terms of 10% demand. Sounds like you think that will continue. But how do we think about the overall industry KPIs across wireless and across broadband?
Do you think we can sustain the pacing across the industry that we've seen in 2022 and 2023 given continued immigration, etc. or are you expecting some sort of moderation overall? Jim, why don't you kick that off? They know why don't you do the part two. So for sure, we're seeing persistent promotional activity in the low end of the market. But that said, industry best are poor growth at 2.2%.
really good underlying domestic RPU characteristics coming from the high value subscriber mix, and also the base management and the step up to 5G. We're also seeing industry best turn on the back of our product intensity and our customer experience. In fact, our post-ate turn continued to be really strong, very similar to pre-pendant.
direct-to-consumer are driving benefits. And so when we look into next year, we would expect that that promotional activity is gonna continue at the low end of the market, but our strength is really on the premium side of the market and bundling, and we feel that's very robust. So we expect consistent trajectory from where we are on ARPU. We see upside in business roaming.
We're already seeing that in Q1. We will continue to see that high value subscriber mix washing through the base. Our base management around 5G and Kudo pick your perk stepups is working really well. The growth in our IoT subscriber base is now contributing meaningfully to our network revenue growth. And we're not as reliant on the low end flanker promotions, which is good. So, you know, I feel really good on the wireless side.
that will continue this trajectory and we'll see that kind of consistent growth. On the home solution side, and Daniel maybe you want to top up, but we're seeing similar characteristics especially around the bundling and with the bringing together of mobility and home solutions in the consumer organization that presents tremendous opportunities for us to drive further efficiencies and even better bundling.
but, Sandal, maybe you want to say a couple words on the solution side. Sure, thanks, Jim. And I think you gave a really great summary, and one thing I would top up on as well is that we've been the lion's share of the net porting winner. So I think we demonstrate across the board that clients are choosing to tell us we're getting the larger premium share of the market.
We have a higher level of product intensity, a lower level of churn, and a higher arpooh position. So the delta between us and our peers on customer lifetime value is significant, and there's an opportunity for growth and continued growth there on the back of our completion largely of the fiber to the prem build in the West. So, you know, if you take those characteristics and extend them out, you know, we see a higher margin per household at over 20% increase.
We see a significantly lower turn of 16 points. We see a higher product intensity, 25% less cost, and 70% less fewer outside plant repairs. So we have an incredible margin of creation opportunity, and we also have a significant level of digitization and product development taking place so that we can continue to grow our share and to develop new products under Jim's leadership, as well as leverage TI and Willow Tree.
in terms of driving margin accretion across our segments so that even in the lower end of the market where we see significant immigration growth, we can come to the table with value props that are more margin accretive than our competitors. So we're quite excited about the growth potential in the market and we think that we're positioned incredibly well across segments and across the demographics. We absolutely do see some customers.
characterized is looking for value in their bundle, value higher levels of value in their purchase patterns. But because we provide solutions at every end of the market, we're really poised well for that growth.
is looking for value in their bundle, value higher levels of value in their purchase patterns. But because we provide solutions at every end of the market, we're really poised well for that growth. Thanks, Bob.
Thanks Simon and thank you everyone for joining us today please feel free to reach out to the IR team with any follow-up questions you may have. This concludes the tell us 2022 QVU or earning a conference call. Thank you for your participation and have a nice day. Thank you.