Q2 2025 TELUS Corp Earnings Call
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Good day, everyone. Welcome to the TELUS 2025 Q2 earnings conference call. I would like to introduce your speaker, Mr. Robert Mitchell. Please go ahead.
Hello everyone. Thank you for joining us today. Our second quarter 2025 results, news release, MD&A, financial statements, and detailed supplemental investment information were posted to our website earlier this morning. On our call today, we will begin with remarks by Darren and Doug. For the Q&A portion, we will be joined by Zeo, Naveen, and Tovas. Brief prepared remarks, slides, and answers to questions contain forward-looking statements. Actual results could vary from these.
The assumptions on which they're based, and the material risks that could cause them to differ, are outlined in our public filings with the Securities Commissions in Canada and the U.S., including our second quarter of 2025 and our annual 2024 MD&A. And with that, over to you, Darren.
Thanks Mitchie and hello everyone.
In the second quarter, our team's commitment to operational excellence and power helped us deliver another quarter of industry-leading customer growth and strong financial performance.
These results demonstrate the strength of our leading portfolio of bundled offerings across mobile and home. The strategic expansion of TELUS pure fiber connectivity to homes.
And businesses inclusive of Ontario and Quebec.
We're delivering much more than just affordable internet; we're providing Canadians with differentiated and unique competitive services.
Including AI-fueled smart home energy management and next-generation healthcare.
Security and exciting entertainment Solutions.
Our investment in Canada will be augmented by our recently announced $2 billion investment to expand broadband services in Ontario and Quebec.
This will allow us to prudently progress on a national scale through smart broadband network builds and drive product innovation, competition, investment, and affordability in Canada.
The CRTC's wholesale fiber decision mirrors the access granted to Eastern-based companies in the West as well. The wholesale access that TELUS is providing to the cable company impacts our broadband and wireless network in Ontario and Quebec.
Relative to our peers, TELUS stands out as the company committed to bold, future-focused infrastructure investments, reflecting our confidence in the Canadian market.
Longer term, our strategy of bundling wireless and wireline broadband services.
Importantly, our track record aligns with the federal government's goals of unlocking private investment.
Building a strong Canadian economy by removing interprovincial barriers and addressing cost of living challenges for families. Diversifying Canada's economy through driving innovation of Canadian IP and ensuring Canada is on the leading edge of AI digital innovation and smart sustainability.
Turning back to our strong second quarter performance, we achieved total mobile and fixed customer growth of 198,000 in the quarter.
This was driven by mobile phones and connected devices: editions of 167,000, alongside fixed customer editions of 31,000.
The dedication of our team and delivering customer service excellence contributed to continued strong loyalty results once again this quarter.
Notably, postpaid mobile phone insurance remains at 0.9%, consistent with Q2 of last year, as we realized our 12th consecutive year below the 1% level.
Looking at our financial results, we achieved solid and resilient T Tech EVA dog growth, including TELUS Health of 4%, which is consistent with our Q1 results.
In mobile, we drove phone net additions to 55,000 and connected device net additions of 112,000.
These results were supported by our ongoing focus on economic margin and creative customer growth.
This is evidenced by our consistent industry-leading lifetime revenue, underpinned by our best-in-class churn results, which, of course, is the hallmark of our organization.
Let's turn now and take a look at our wireline business.
TELUS delivered another quarter of industry-leading total fixed customer additions. Indeed, we were the only company in the industry to deliver positive net additions within the wiring sector.
This included 27,000 internet net additions, alongside industry-leading fixed data services, and revenue growth of some 3%.
This is underpinned by our leading pure fiber offering and our consistent strategy of leveraging our superior portfolio of bundled products and services on a national basis that differentiate us meaningfully from the competition in a way that matters to customers.
Furthermore, TELUS Health continues to demonstrate strong operating momentum globally, achieving operating revenue and adjusted EBITDA growth of 16% and 29%, respectively. Doug will comment shortly on what the EBITDA growth looks like on a normalized basis and how consistent that growth has been historically.
Moreover, the team drove a very strong year-over-year increase in global lives covered to almost 160 million, inclusive of workplace options, alongside continued organic growth expansion.
These results were fueled by product enhancements, expanding sales channels, including cross-selling, and effective cost management through technology and synergy optimization.
Our team's deeply rooted dedication to putting customers first serves as the foundation for this success, and we're building on it.
Since acquiring LifeWorks, we've realized $400 million in combined annualized synergy.
You may recollect that our original target in this regard was $150 million to $200 million.
$400 million enclosed, $322 million from cost efficiency and $78 million from successful cross-selling strategies that are continuing to grow in the market.
We remain on track to meet our goal of 427 million by the end of 2025, and we will augment this materially with workplace options and global synergies that are on the come.
We are excited to accelerate Telus Health's growth momentum through 2025 and well beyond on this path. The monetization strategies are very interesting and productive.
The consistency of our results reflects our team's passion for delivering superior customer experiences over our world-leading wireless and pure fiber networks.
Our significant broadband network investments drive extensive socioeconomic benefits for Canadians in communities from coast to coast.
Same time, they are enabling continued advancement in our operational, financial, and customer experience performance.
Looking ahead, our financial position and our operational outlook remain strong, supported by continued EBITDA growth and stable capital expenditures, resulting in meaningful free cash flow expansion.
On a chronic basis prospectively.
This will be enhanced by significant value creation in our growth businesses and a multiplicity of asset monetization opportunities.
In this regard, today we announced the definitive agreement with the case.
Who will acquire a 49.9% interest in our newly formed Canadian wireless tower infrastructure operator, Terion?
This initiative will monetize our world-class tower infrastructure, portfolio, creating long-term value and strengthening TELUS's financial flexibility.
Indeed, this allows us to accelerate balance sheet delivery and progress towards achieving our target ratio of 3 times net debt to EBITDA by 2027, while turning off our discounted dividend reinvestment program on a progressive basis over the same time period.
Strategically, Terry and Will will focus on building new towers for TELUS, who will be its largest customer from the start. They will also develop partnerships to expand tower access in the industry and further monetize this valuable asset.
We are working with a Canadian partner in Les to support broad national wireless access for the benefit of consumers and small businesses across the country.
This move also aligns with TELUS' commitment to infrastructure, sharing, leveraging smart partnerships to extend the reach of our technology while continuing to lead in network quality and services.
Just as we are providing mandated wholesale access through the regulatory, MVNO framework on our broadband wireless network across both our traditional operating territory and our expansion territory.
And also enabling competitors to access our fiber infrastructure under the CRTC pro-competition wholesale framework. We are now extending that to our wireless infrastructure across Canada.
to enable broader use of our wireless tower real estate to maximize its utility for Canadians.
Indeed, having a single company focused on tower expansion will positively impact all wireless providers' abilities to deploy acquired spectrum to enhance coverage, capacity, and service improvements for the customers.
Again, it's good for competition. It's good for investment, and competition and investment are synergistic.
Importantly, our new tower initiative mirrors our position on internet wholesale.
Specifically, that's fair access to infrastructure can foster meaningful competition, affordability, and consumer choice, whilst incentivizing private investment along the way.
A longtime colleague and former Executive Vice President of Technology Strategy is assuming the CEO role of TELUS.
I expect that he is going to deliver an excellent performance in this assignment.
My sincere thanks, as well, to TELUS and the kids' teams for working diligently and innovatively to bring this important initiative to fruition.
Finally reflecting our TELUS team's long-standing commitment to putting our customers first.
And our communities. First, in June, the TELUS Friendly Future Foundation. Health is second, annual Gala.
Notably, the foundation raised more than $2.6 million in sponsorships, cash donations, and in-kind contributions to support the foundation's Talus Student Bursary Fund.
This was also complemented over and above the $2.6 million with our partnership with CIBC. In this regard, we aim to expand the student verse refund even further.
Since its launch in 2023, the TELUS Friendly Future Foundation has provided over $4 million in TELUS student bursaries, helping more than 1,000 students from underserved communities reach their dream of post-secondary education, while also affecting meaningful change within their communities through volunteerism.
Closing, I’d like to express my gratitude to our team and commend them for their efforts, resilience, and grit in executing our consistent winning strategy to meet or exceed the commitments that we have to all of our stakeholders.
And on that note, let me turn the call over to Uncle Doug.
Thank you, Darren. And hi, everyone. We had another very strong quarter of operating execution, financial performance, and delivering activities on our mobile network. Revenue was down slightly as mobile phone and connected device subscriber additions, as well as higher IoT revenue of 9%, were offset by lower mobile phone RPU.
While the 3 Dot, 3% decline in ARPU is reflective of the ongoing competitive pressures observed during the prior periods.
As well as lower overage on lower or lower or reach and roaming revenues, we are seeing an improved operating environment. As market conditions stabilized,
We saw RPU trend improvements quarter over quarter across new activation rates, plan changes, and customer renewals, reflecting our ongoing efforts to mitigate network revenue pressures.
Fixed data services grew 3% year-over-year, marking the 18th consecutive quarter of positive growth.
Uh, driven by subscriber RPU growth and Internet, as well as security and automation. Additionally, fixed revenue was supported by higher managed services in the business area.
Gtech adjusted EVA increased 3%, alongside margin expansion of 100 basis points to 41.7%.
These results were driven by our consistent emphasis on profitable customer growth, ongoing focus on cost efficiency and effectiveness, and asset monetization programs.
Tell us, Health operate tells Health revenues and adjusted Eva de group 16 and 29% respectively and adjusted margin. Expanded 180 basis points. The 17.5%, this growth was driven by organic growth and Employer Solutions as well as business Acquisitions. Including workplace options, tell us how ibid day excluding workplace. Workplace options was over 20% that is 8 quarters in a row. Now of over 20% Eva de growth in Telus health.
Ralph was also supported by various other services, including our provider vertical.
And digital operating revenues and adjusted EBITDA were in line with expectations. Please refer to TELUS's earnings release and analysts' call commentary earlier today.
At the end of Q2.
Informed by TELUS, digital's most recent financial model, we recorded a non-cash impairment adjustment to Goodwill.
The key assumptions that were updated during the latest model included a higher weighted average cost of capital, a lower perpetual growth rate, and lower cash flow forecasts due to pricing and margin pressures. You can find all the details of the impairment and underlying assumptions in the notes to the financial statements of both PELIS and TELUS Digital.
By the impairment, after deducting the non-controlling interest share, basic EPS was zero.
On an adjusted basis, net income was $342 million, and earnings per share (EPS) was $0.22.
Capital expenditures, excluding real estate, declined by $11 million or 2%, primarily driven by the completion of certain projects and wireless and fiber network builds. The plan transitions to fiber builds in partner build models for brownfield and new market areas.
Overall capital intensity was 13% and unchanged over the period.
Free cash flow of $535 million increased by 11% compared to the same period a year ago, driven by higher IBA, as well as lower capital expenditures and interest paid.
Looking ahead, we remain focused on driving towards achieving our 2025 targets, which we reiterated today.
This includes Total Telecommunications Assets (TTAC), including health operating revenues, and adjusted EVA growth of 2% to 4% and 3% to 5% respectively. Consolidated capital expenditures, excluding real estate, of $100 million are targeted to remain stable at $2.5 billion. Lastly, consolidated free cash flow for 2025 of $2.15 billion is also confirmed.
As it relates to our balance sheet, the average return to maturity of our long-term debt stands at 13 years, with a weighted average cost of 4.71%.
Additionally, our financial position remains robust, and our leverage ratio is declining to 3.7 times, down 20 basis points sequentially since the first quarter.
As we progress through 2025, we expect continued improvements to our leverage ratio, including a net debt to EBITDA ratio of 3 times by 2027, alongside removing the discount associated with our dividend reinvestment program.
In June, we successfully raised $2.85 billion in hybrid securities across multiple offerings in Canada and the United States, building upon the $1.6 billion raised in April.
These financings support the leveraging, with 50% of the proceeds receiving equity treatment by the credit rating agencies.
Subsequent to June 30th, we completed our debt tender to retire $1.8 billion of securities in Canada and the United States for the repurchase in the amount of just under $1.6 billion, recapturing approximately $230 million of reduced future cash flow debt obligations.
Our continued organic operational growth, including IBA expansion, declining capital intensity, and free cash flow compliance, combined with the ongoing asset monetization initiatives, will further strengthen our balance sheet.
Notably, we monetized our wireless powers that were announced. This morning, we will reduce our leverage by approximately 0.17 times on a pro forma basis. Including this transaction, we expect to achieve a leverage ratio of 3.55 times. Exiting 2025, as we progress towards our 2027 target of 3 times.
The accounting for account this power transaction was an equity transaction. There will be no debt on our balance sheet, and we will be consolidating the entity of Terion. In addition, there will be no impact to EBITDA.
Free cash flow and our planning period will be positive from this transaction between interest reductions and the leasing opportunities, as highlighted by Darren.
All the rent paid to Pterion, is that fair market value lease rates, um, that you would see in the market?
Looking ahead through 2025 and beyond, we are well positioned to drive sustainable performance as we maintain our focus on profitable growth, our strategic initiatives, and customer expansion, product innovation, and service enhancement. This will further strengthen our market position and drive long-term value creation. Now, Robert, back to you.
Thanks, Doug. Carl, could you please provide the questions?
Certainly. For those who would like to queue up to ask a question at this time, please dial Star 1 on your phone's keypad. If you wish to withdraw from the queue, please dial Star 2. The first question is from D. Please go ahead.
Hey, thanks for taking my questions. Uh, first I'd like to start on whether we should read anything in terms of a strategic shift from your proposed privatization of TXT. I mean, does it mean there's a change in terms of the monetization path for other Tech Venture centers that are adjacent to Telecom, or is the move based on maybe more idiosyncratic items at All Digital? Thanks.
Movies related to supporting the deleveraging goals of the organization. Um, and I don't think you should read anything into that on an agency basis to the other monetization strategies that we have with our emerging growth businesses.
Okay, thank you. And if you can maybe provide, uh, financial details on the towers, maybe numbers about, uh, the Entity. I recognize it's consolidated, but that would still be helpful. Thanks.
Yeah, we haven't disclosed even DE, um, but you will see, um, that all the towers are at fair market value rent. So, uh, I think it’d be, um, fairly, uh, transparent on the number of towers we have, um, as mentioned, we will be consolidating. So there will be no impact on debt, no impact on even DE. Uh, and we will be free cash flow positive in all of our future modeling on an annual basis to tell us. Um, when you bring in the, uh, business model that we have put forward and have agreed upon with our partner.
Thank you.
Thanks, Jerome. Next question. Please, Carl.
Uh, the next question is from Mayor Yagi from Sports Bank. Please go ahead.
Uh, great. Thank you for taking my question, Doug.
Um, thanks for the additional disclosure this morning on, uh, on the deal. Uh, you indicated that in the short term to uh, you know, I guess the medium-term your uh, free cash. Flow should be uh, having an A positive impact from the transaction. How should we think about the long-term impact of this deal as you deploy more Towers? I think there's, uh, in the deal, uh, you know, a plan to deploy more towers and um, what happens if we see more collocations on these towers if uh other of your peers, begin to put their antennas on them. Uh, so that's my first question just a question on wireless, uh,
You know, not there any indicated in your prepared remarks uh that you feel uh that the market is uh you know, getting better in terms of uh its direction on price.
Um,
What gives you I guess what what gives you the the the view that this could be sustained. Uh I think this is an important question that a lot of investors are are trying to get an answer to that, you know the recent Improvement in prices uh have the potential to be sustained or
The medium-term. Thank you.
On the first 1. Um, as you're well aware the demand for data continues to increase, So, within, uh, our model and, and our partnership with Terry and they're going to continue to build towers for capacity and densification for for Telus. In addition they will continue to um, uh, lease with with other colos as you highlighted. Um, the the business model we have in front of us is that not only will we break even or be very positive or positive cash flow into the future? Um, the co-locate, um, based on our current plan which is, uh, very reasonable. We'll also keep us cash flow, um, positive for the, the term of the agreement. And when you think of some of the challenging margins, that the industry has um, as Darren highlighted, um, this is a great opportunity for us to utilize assets across the whole industry uh better and more effectively to increase the profitability and return.
On these assets by all providers.
So, um, Laura, I don't have a crystal ball, um, and it's probably not appropriate that I wax lyrical on.
On pricing. Um,
So, I just put those out as, um, as a caveat.
um, in terms of
Um, what gives me, um, hope—I don't think certainty is on the table. Um, it’s probably a few things. Um, number one, I I think the current trend is encouraging. So, um, it’s not just AI that does inference from trends on data, so I think, uh, that is an encouraging, um, component.
That level of irrationality, leading to negative MPV outcomes, eventually given the amount of capital that we deployed within our industry, I think.
Have to drive, uh, our pricing, uh, decisions and I'm hoping, you know, maybe not in any given day or any, you know, point in time. Um, but over the medium to longer term, uh, that's the Axiom that's, uh, reflected, um, in our go to market, uh, decision, making the other thing that I think is interesting to draw inference from, in terms of, you know, observable comps is that, uh, looking across other jurisdictions globally. Um, you see more sanguine Behavior. So, um, if it seems to work there, um, you know, it might work here. Um, again, given the commonality of the economics overall, for our industry, particularly how much we have to invest? So, you know, let's make sure that um, we get a, a proper Roi um, on that investment.
Um, having said that, um, I think what you want, um, out of um, an investment in TELUS, um, is to um, hope for the best.
A plan for the worst. Um, which is why, you know, we're fanatical um, on the, on the ampu front uh which is why you've seen a a 10% uh unit cost uh to serve uh Improvement. Um, next, I think there's not many organizations that you're going to find anywhere in the world on Telecom. Um, that's getting back, stopped the way we are with Telus digital and so, that drives everything from hygiene cost efficiencies from labor Arbitrage, uh, to the AI enablement of our business. Um, which provides huge productivity benefits that manifest themselves, um, in better amp who, uh, results, uh, even in a pressurized, uh, Ark, who environment? And, you know, that is a distinguished or differentiated capability of our organization.
Next, what else? Differentiates tell us? Um, we're not a 1 Pony, um, on on wireless. Um, if you look at our W line, um, uh, business. We're we're the only 1 that's growing there as it relates to net ads, um, and we've had a tremendous amount of consistency in terms of data, Revenue growth. And I would expect that to expand pro pro prospectively because we have a lot of product differentiation, um, within this area, um, you see the moves that we're making, um, on home energy. Um, you see the success that we've had, uh, within our security of of business? Uh, you see what we're
Um striving to do on home health. Um, effectively what we're doing is to say, okay we spend all that money uh on broadband infrastructure, uh, Wireless. Um and fiber let's get economies of scope out of that fixed cost infrastructure um by delivering new Services, um, over existing facilities and the beauty of that is those new Services aren't getting commoditized.
Um so if there's aggressive pricing, you know, activity taking place on 1 product, well we've got 6 other products where that's not occurring um and that's true for delos, but it's not true for our competition. Um and I think that's a you know, massively distinguishing Factor um, for our organization.
And then lastly, we have our emerging businesses.
Um, and you know, you heard Doug's comments as it relates to the economics on health and my comments in terms of, you know, what the future looks like. But it's not just the growth attributes of those businesses that are differentiated from telecom pressures but aligned with telecom in terms of the data analytic thesis along the way. It gives us a topology, you know, of international exposure. So if things are under duress in the Canadian market, you know, we can enjoy an exposure in other geographic markets that are doing well. Um, and I guess, really, what I'm saying is we've got a lot of elegant diversification within our portfolio that makes us very resilient.
Great. Thank you.
Thanks, Mayor. Next question, please, Carl.
Uh, the next question is from Stephanie Price from CIBC World Markets. Please go ahead.
Thank you for taking the question. I just wanted.
To circle back on the towers for a minute, I was hoping that you can unpack the interest savings versus the rent payments. When you kind of talked about getting to the net cash flow and the positive impact.
51% of that. Um, that is the, the, the math in itself. Um, and so I'll just leave it at that and we'll, we'll, um, we've built in and we've agreed to the model with our partner, um, on those fronts and we're planning to execute to that level. Okay? Um, sounds good. And then, just on Kudo, uh, Koodo reintroduced 5G, plans, at the flanker level. Um, obviously we saw the similar thing to back to school last year, just curious. We could talk a little bit about that strategy and the positioning, the flanker versus the flagship offerings. As we head into back to school,
Daniel, do you want to take that one?
Yeah, sure thanks for the question Stephanie. Um so I think what we've done across our offers is really look at 3 pillars, related to customer economic value, from a data size roaming and speed to your perspective, device subsidy, and then the financing floor and we've really done a lot of research on what we think. Um, you know, customers are going to, um, you know, gravitate towards and the features and functions that are aligned, uh, with our ample objectives. Um, in reintroducing 5D back into Koodo, uh, made sense from that perspective. Because there were other value drivers that we are monetizing out of, of the flanker strategy. Um, so, you know, we're really trying to keep it commensurate with what customers are willing to pay for what attracts them to the brand.
And what service level and device, uh, you know, type that they're going to gravitate towards and how that aligns with the overall economic value of the offer. Um, so, you know, that that that's how we, you know, move towards that decision. And it it, um, you know, I think, I think we're pleased with some of the traction on the premium versus flanker differentiation, but there's more to go in that regard.
Thank you.
Uh, thank you.
See you next time. Thanks, Stephanie. Next question, please.
The next question is from Vince Valentini from TD Securities. Please go ahead.
Hey thanks very much. Um 2 things 1 Doug, can you just clarify the working capital uh 223 million outflow obviously. That's the part that does not include the the contract assets and and easy installment. Uh, plans, is that something 1 off lumpy and will it recur in in the second half? Second 1 um, bigger picture, we're back to back to wireless, but let me try to take the crystal ball out of it, not predict the future. But just if the recent trend of, you know, slight Improvement in in pricing discipline were, were to s be sustained. Yeah. How long will it take for your wireless service Revenue to get back to positive? Uh, versus the minus 1% clip you've been at is this is this something that's still going to take 4 or 5 quarters for all of the past?
Pricing Behavior to flow through or are we much closer to an inflection point? If again, if you know, if the current price discipline holds maybe another way of asking us is there any way to quantify what percentage of your your customer base is is already repriced with very little risk of of any further movement down, thanks
So on working capital events, we expect working capital to be somewhat net neutral on free cash flow or on cash flow for the year. It is the lumpiness of timing between payables and receivables, along with the seasonality that our industry sees. So there is no expectation that it will be a drain on cash for the full year.
Thanks for the disguise, question on quarterly, our poop forecasting uh Vince of appreciate that. Um, of course, for me to give you a precise answer, I would have to know the trajectory of the recovery for the industry on a macro basis. Um, I'll try to answer your question, um, with uh, 2 components. Uh, 1 is uh, the majority of our base, um, has been, uh, repriced. Um, I won't be
I won't be precise as to the exact percentage in that regard. Um, but it is the majority, um, you know, and if there is a continuity of the, um, a performance, uh, I would hope, um, within, uh, the next, uh, 3, uh, to 4 quarters. Um, we would, uh, achieve
the inflection point that you're alluding to in that regard.
That helps. Thank you.
Thanks Vince. Next question, please.
The next question is from Tim Casey from BMO. Please go ahead, Tim.
Doug, you mentioned there's a variety of drivers on the fixed data line, which was...
You know, up 3%. Um, I'm just wondering if...
We should think of that as a sustainable number into the back half of the year and into 206.
Given what you've seen in terms of competitive activity and, you know, your continued efforts in out-of-footprint, and secondly, just maybe if you could an update on some of the other leveraged drivers. I guess particularly real estate.
Um, you know how you are thinking about what paths you might choose there and what the, you know, interim monetization patterns you're going to see as you sell some stuff. Thank you.
Daniel, you want to take, uh, the...
Fixed component. Um, at first, I think you've got a pretty robust response, uh, to that, to say the least. Um, and then, Doug, why don't you do real estate?
Sure thanks. Thanks very much for the question. Tim. So, on on fixed data growth, I think we've definitely shown a lot of consistency as Darren highlighted in, in his remarks. I think the other, uh, element underpinning that is the diversity of the contribution. Um, so when you look at uh, the diversity of that contribution, you can see that you know, there's strong growth across uh bundle and portfolio of services from uh internet to other contributing.
Elements including our security portfolio. But also uh, with respect to the the business growth that uh, helps support that fixed, um, Revenue profile. Um, so you know, n Naveen may want to top up on that. But I think, I think that diversification certainly helps with the continuity. Maybe the last comment, I'll make. Is that you? You can see. I believe that while we're growing, uh, sustainably and consistently. Um, we are also growing profitably. So whether that's in footprint or out of footprint, uh, we're really looking at ensuring, uh, that our value propositions our pricing, um, and our customer acquisition. Our commensurate, uh, with, you know, driving profitable, uh, consumer growth and ensuring that we leverage our existing customer base to grow into from a household standpoint, uh, so that we're able to achieve that at at a lower cost of acquisition. So, I, I, I believe that there's good sustainability, uh, in that growth profile and we're
being very, um,
Disciplined in terms of how we're seeking that growth, and we're continuing to build our diversification accordingly.
And just before duck goes, um, uh, given the, the story here is not relegated exclusively to Consumer. Uh, Naveen. Would you like to, to top up on the, on the B2B basis and the opportunity that that you see there on, uh, the performance, um, on the team?
TVs front across SMB and mid-market, both to date performance but also potential.
Yeah, thanks, Darren. I'd be happy to, you know, I I think the first thing, um, I would say is that, um, you know, we've continued to outrun, um, competitive, uh, and, and pricing challenges with volume. And we're doing that both, um, on the fixed. And, uh, the wireless side, uh, we're we're seeing strong, uh, loading both um, in our in, our incumbent areas, as well as, uh, uh, nationally. So, you know, we we continue to see opportunities to grow, uh, market share, uh, across, um, the country and, uh, what I think is really, um, nice to see is that, uh, our ability to drive product intensity, um, is continuing to accelerate and improve and, and that's really on the back of strong. Um,
Customer experience, um, uh, capabilities from the Telus business team and customers seeing that as a key differentiator and making decisions to, um, you know, make, uh, product decisions that, uh, uh are Beyond just 1 product. So I think that's been really great, uh, our iot business continues, uh, to grow
As Darren mentioned with the strong, uh, assets, we have in Telus digital. We, we continue to, uh, Drive Ai and other Automation and digital capabilities in the business and uh, uh, improving both our customer experience and uh, cost profile. Uh, concurrently so I'll leave it at that. Darren back to you.
Thank you. Yeah. So on real estate and other delivering opportunities. We, we have 3 or 4 other buckets. Um, so real estate itself as you may recall, we had approximately 200 properties uh, that we're looking at. Um, and that would equate to a 2 to 3 billion dollar portfolio that um, we could roll into a Reit, uh, when the scale was appropriate to do. So, uh, that would include over 5,000 to 10,000 rental units depending on, you know, the the full rollout. Um, we're still a couple probably a couple years away from getting that scale and the build program. Uh we do have 3 buildings coming live, early 2026. Um, but in the meantime, we are still rationalizing real estate. Uh, you would have even seen in this quarter. There was uh, in the other line, a real estate transaction which generated more cash for our organization and we'll continue to do that where um we can rationalize real estate and not under the development.
Development side, but we're building an asset, a consequence pruning where necessary and continuing to drive long-term value of, um, from that asset. Uh, we still have, you know, we've only completed 3 of 31 Central offices, um, on the copper decommissioning side. So, we still have a significant amount of room to go as well on our copper monetization. Um, we've recycled over 5 tons so far, um, and generating double that, um, almost 10,000 tons of greenhouse gas reductions, um, from the recycling of of, that copper. Uh, and so again you know that billion dollar opportunity we have is probably only in its less significantly less than 10% um from a you know, an execution perspective. But we actually have site to getting to those remaining 31. Uh and then we have our call it, our pruning um, opportunities where we do have ventures in certain business. Um,
opportunities that are not necessarily in our strategic, um, long-term footprint. And you've seen a couple of those monetizations as well. Um, and you'll continue to see those in the tens of millions over the next few quarters. And then probably mid-term, we still have the partner opportunity, um, and I think Darren referred to this as well on both health and tech. But as we build these assets to consequence, and you've seen the, uh, especially the accelerated growth and.
Tell us how, um, there is definitely, uh, a lot of interest in, uh, bringing in, um, partner relationships as well as partner interest on inbounds to us. Um, can they, uh, how can they help us grow that business?
Thank you.
Thanks, Tim. Next question. Please, Carl.
The next question is from Drew McReynolds from RBC. Please go ahead.
Yeah, thanks very much. Uh,
My question is, I think, bigger picture. I'd probably just start off for you, Darren.
I guess Canada's Sovereign AI push here, with respect to the ecosystem and infrastructure, uh, and it all seems very fresh. And of course,
um I think Canadian Telecom investors just wondering kind of what the role of
You know, traditional Telos, like yourself will be in this broader ecosystem. Um, you know, we've seen some some news announcements from, you know, many operators here. Just would love to get your sense of where, you know, you think the biggest incremental, Revenue growth opportunities are potentially within this ecosystem.
Hey, um,
I'm going to be tight, not expansive, on this because I'm very frustrated with.
Thought leadership and intellectual property leakage here, in terms of the strategy that we have been pursuing.
uh,
so,
3 areas for me that I
In terms of uh, compute power, um, and how that can be leveraged. Um, on both an inference and on a training uh basis. Uh and that Duality is important, uh, as well as our, um, sustainability uh, thesis, you know, getting into the real realm of, of liquid cooling. Um, and the like, um, and I think we have an opportunity there to play a, a pivotal role, um, in in that regard and
You have to be mindful that, you know, Telos, um, are, um, Originators um, carriers, um, deliverers stores of data. So our position here, including within, uh, the Broadband infrastructure, um, and security fronts is exceedingly strong. Uh, so that would be component number 1 component. Number 2, um, is the ingestion of AI within our business. Um, and the, the upside opportunity there, uh, I don't think has any limits, um, in terms of what it can do for us, uh, at a productivity, uh level um, on go to market operations, um from sales uh to service to care to uh ashore to billing, um and collection. Uh in that regard uh as well as the cost efficiency um attributes. Uh and then thirdly um, is the external go to market uh opportunity.
Um, within Telus digital, uh, Solutions, uh, led by, uh, to Bas um, and um, and his team. Um, and we are unique um, with this asset, on the Telus digital Solutions front, which is both a fantastic enabler, um, for Telus Corporation proper. Um, but is also a terrific vehicle, uh, to take, um, our AI solution set, um, out, um, into the, uh, external Market on a global basis. Um, and in some cases, but not limited to, uh, recycling. Uh, the product Factory that tell us is on the AI up front. Um, in terms of our ecosystem, uh, developing, uh, trial testing, uh, using and scaling, uh, these Services, improving it out. Um, and of course, then taking that particular show on the road with Telus digital Solutions.
To be. It's maybe I'll ask you just on the latter point that has led competitive uh sensitivity uh to it uh just to talk about um our attributes uh on uh on this front and why we like uh, our competitive positioning in this regard.
Yeah, thank you, Darren, for the question.
I would say that and I mentioned this on the Telus digital call earlier that this second half of the Year. We're seeing a real transition in the marketplace from uh proofs of concept to actual production level deployment of AI and 1 of the most exciting things for us at at at Telus. Digital is to work with t, as customer zero to really prove these Concepts out at scale, um, and that gives us a big differentiator versus most of our competitors. Um, who don't have a built-in customer zero. I can give you 2 quick examples. Um, tell us expert messenger, um, has been launched, its our asynchronous messaging customer support platform and because it's async, it's ideally suited for AI in its current state. I think we've all experienced, um, AI can at times be slow at times, you have to ask it. You have to really coax the answer out. So something asynchronous.
Is is perfectly positioned. Um, for AI, uh, we launched it this year. We've been able to improve first Contact resolution by 9 percentage points. Uh a 25% um Point reduction in agent attrition which goes to speak. How much if you deploy AI properly, how much it improves. Um team member experience.
Um, and when we included AI in this.
13% improvement in average handle time.
Um, another example.
Customer satisfaction score uplift is 16% within that cohort. So, those are illustrative examples of taking proofs of concept and taking them to full production. I think, um, really allowing us to be leaders, especially in contact centers.
Um, for Global deployment.
Thank you. Uh, thank you both. That's really helpful.
Thanks, Drew. Next question, please. Carl.
The next question is from Benjamin Swinburne from Morgan Stanley. Please go ahead, Benjamin.
Great. Thank you. Um, I have two questions I want to ask about the Internet business and then maybe come back to AI and data centers. So, on the Internet, um, there's some comment in your prepared remarks or in your earnings stock about churn being up year on year and sort of competitive intensity. I guess when I think about your brand and your fiber network.
I think it's really well positioned to win in the market. So, I'm just wondering if you guys had any more color on sort of what's happening with churn and competition, and whether you have any expectation for those trends to improve over the next couple of quarters.
Um, and then just back to this, this sort of tying Ai and the data center business is together. Um, is there an appetite or or plan to deploy? You know, Capital at Telus towards new data center construction? Um, I'm sure you're well aware Belle's been making a lot of, uh, news on that front. I'm just curious.
If you think that's an interesting opportunity, or maybe not the best use of capital from a Talus perspective. Thanks so much.
Dave, you want to take the the the first part I'm on that if you don't mind and maybe talk about what we've done, um, on pricing related to wire line economics, but also where we're going um, in terms of our turn Improvement measures,
I've seen some upticks in turn not to our liking. We've been a very strong proponent, um, and delivered on significant customer loyalty quarter after quarter. So even, uh, when we see some small changes that, you know, we take that very, very seriously.
We have seen um affordability constraints uh across uh the you know, the consumer environment and and aligning, you know, with customers on you know what what their price preferences are and ensuring that we right-size bundles towards their preferences. Um, but I think that the key element here is that um, we're really leaning in and uh, working with Tobias to leverage, AI on churn propensity on churn early identification on aligning pricing models. And we're seeing, uh, goodness with respect to making sure customers are seeing more consistency in their pricing and more opportunities to drive value into their households through other, uh,
Streaming or other, um, bundles that we offer. So, I think overall, uh, we're not happy with the trajectory that we've had in the past. We're taking very significant measures to ensure that we improve that trajectory, and we're continuing to leverage, um, the assets that we're known for with respect to the AI capabilities, the loyalty and customer service experience improvements, and the bundling capacity of ensuring that, you know, customers see more than just one product value in terms of our holistic bundle. Our product roadmap will continue to improve in that regard.
That's helpful.
And in terms of the next question, um,
I guess the response could be best characterized as being for Q2. It is, uh, for us because, um, TELUS had previously invested significant capital in the development of world-class, world-leading data centers, um, in Vokremuzzi, um, and in Kamloops. Um, when I say world-class, uh, we put a lot of effort and capital into the construction of those facilities to ensure, uh, that we optimize for, uh, power. Uh, we chose locations that had, you know, um, minimal seismic, uh, susceptibility and had sustainability and security attributes.
And broadband connectivity—that was truly second to none.
Did he? Uh, it's not nothing, but it's effectively de minimis. Um, because we're leveraging, uh, an existing asset. Um, not only, um, does that help us, um, on the affordability or the capital efficiency up front, uh, it helps us on the speed, uh, front, as well as the longevity in terms of how we can evolve, uh, the compute power, um, and sustainability characteristics uh, going forward. Um, and that's quite a potent and highly differentiated story.
Uh, the only other thing I would say on this front is, um, as these opportunities continue to, uh, evolve, um, it's not unforeseeable that we could also look at partnership opportunities there, uh, to bring in capital, uh, to support undertakings of this nature, given our advantageous position. Not unlike what we've just done with the case on, uh, the tower monetization. So, uh, lots of latitude, uh, and optionality, uh, here. Um, and there's nothing like sweating an existing capital asset, uh, to get a second life, if you will, on our return basis, and that's what we're doing.
Thanks, Dan.
Thank you. Uh, Carl. We have time for two more questions, please.
The next question is from Matthew Griffith from Bank of America. Please go ahead, Matthew.
Hi, thanks for taking the question. So on the towers, um, you mentioned that the plan or part of the strategy is to have the have Terry and build new towers and expand the business. So, obviously, you know, the monetization has benefits on deleveraging. Um, this sounds like it has the potential to allow you to expand that Business Without necessarily having capital on the balance sheet. So I just wondering if you could maybe talk about that and if the, uh, any bills would be kind of debt financed by Tyrion and maybe that would be separate, then what your consolidating is. So maybe it it ends up on your balance sheet anyway, but just how that idea of, um, deploying Capital may have factored in and on the same idea of capital, I thought I heard Doug. I thought I heard you say that you were exploring or doing some partner Bill activity. And I was wondering if that related to fiber, um, I just
Wasn't sure if I heard that right. But, um, obviously across the industry, we see a lot of this type of model where people partner up and there's a, you know, third-party capital that comes to contribute to, you know, fiber builds. Um, so just curious, if I might be a short question, maybe I heard that wrong, but if you could expand on that, if there's anything helpful.
Yeah, so Terry and will build um, the the the future towers for Telus, um, uh, and it will be funded by both us and our partners. So they're um, there is an opportunity there for um, uh, cash flow opportunity. Uh, but but because we do Consolidated, it it will show up um, and tell us as books what the offset to our our partner funding. Um, so it will still be a net cash differential but that's all built into the model. When I talked about, you know, our model going forward and yes, on the partner planning. Um, we're already using third-party Partners uh, in in the west and building fiber. Um, we are looking and started uh, the same in in the East, um, and so it would right now be uh, be focused on fiber. Um, but it's not limited to as Darren just highlighted on data, centers and other initiatives. So I would say yes, that was the reference in mind.
To fiber, um, but, uh, it is a great relationship going forward and other measures.
And can.
follow up on that, just
The next thing that comes to mind is, you know, how.
How much, you mentioned? I think earlier, the $2 billion being devoted to building in the east.
Um, is that a combined number? And is that a 5050 number with a partner? And lastly, is there anything you can say about the number of passing that this might be able to generate in the East?
Thanks.
um,
number related to the activity.
Um,
How many balance sheets support that number remains to be, um, determined, um, and as it relates to Holmes paths. I think, let's leave that within the competitively sensitive, uh, category.
Um, investment, uh, prospectively in terms of, uh, that program. I think the important thing to highlight is the comment that, uh, Zeno made. Um, we will be smart and strategic as it relates, uh, to this, uh, deployment. Um, we're not coming in just to offer the same old, same old in terms of Internet, you know. But, you know, at, you know, yet another, um, hollow discount. Um, we're looking to bring value and affordability to customers, but, um, we want to ensure that customers get to enjoy the full portfolio of teleservices, uh, ranging from health and security to smart energy and other ones that we have on the boil.
Um, and finally, we have an axiom, um, in terms of the economics of our expansion, um, which is that it is value or creative, uh, for the organization and when we highlight that, um, I think we've got the track record and the empirical evidence, uh, to back it up. Because if you look at our fiber deployment in the west, um, it is truly um, world-leading. Uh there's not another organization uh that can match the success that we have realized that on that front uh related to economics uh product intensity. Um, where we're, you know, 3.4 products on a per household basis and what we've been up to
Achieve on average revenue per home of the lowering of churn. Uh, the lowering of cost to serve through truck rules, uh, along the way. Uh, it's just tremendous. The penetration rates that we've secured, uh, within the communities. Uh, overall, um, would be a world best result. So we're bringing that intellectual property, uh, to bear. Um, and we're going to live up to the Axiom, um, of, uh, building value, not just rgus.
Thank you so much.
All right, we'll take our last question, please.
Uh, the final question is from Canon Venat from Barkley's. Please go ahead.
Thank you. Um,
Maybe a long-term question on, uh, the pricing structure within the model, uh, within the market itself, uh, when you think about, you know, the new-to-Canada market looks like structurally. That's going to be smaller.
Um, and then convergence, I mean, just given your own fiber plans and what's going on in the rest of the industry, it feels like, you know, everybody's just going to converge with respect to bundles. So.
When you think about the flanker strategy, or fearing the market across prepaid flanker and then, of course, the premium brands.
Does that uh clearing feel like it's too much for a market business and is there an alternative here to maybe pricing by actually tearing the market less? Um and you know so any thoughts on that longer term in terms of that be great?
And then, secondly, on the balance sheet side, you know, just given what's going on in the industry right now. And, you know, even if we do have a recovery in the next 3 or 4 quarters, it feels like the revenue growth rate we are heading towards is going to be slower than maybe what we saw, say, 5 years ago.
Um, so is 3 times leverage still the right number? Or, you know, as industry growth settles at a slightly lower level?
Um, should the leverage level drift closer to maybe some of your global players? Thanks.
Do you want to take, uh, the first part of that question? Um, from premium to flanker on that front, and then dive again? I will cover the balance sheet piece later.
That sounds good. Thanks for the question. I I, I think the answer is that it it has to be dynamic. So, you know, and it's not, uh, just an arpu, uh, level of sort of delineation across these Brands and offers, it's an ample level. Um, and I think what we've seen is, you know, a as Darren highlighted irrational Behavior, Uh, over the over the last little while in the market relative to the cost of acquisition,
That might not be forever. So, I, I think that we're going to consistently be dynamic. We're going to consistently evaluate the market based on, uh, what we think are the right winning strategies to attract the demographic at the Right arpu End, ampu level. And I would say that given that, you know, we are seeing some rational return to rational Behavior there is opportunity to continue right sizing. Um, what you know, what the winning strategies are with what the right service investment and the right promotional Investments are for those different segments. If we see that change, we will adapt to that change accordingly.
in terms of, uh,
Growth. I think we're missing out on a lot of elements. We're taking a singular focus related to wireless and we're propagating it into the future with some...
Negative assumptions associated with this. So, building upon the comments, uh, that, uh, that zo just made. I, I, I would expect, um, longer term progression here and a greater level of economic, uh, rationality, uh, along the way. But, um, I think that
Alone, um, discounts or does not fully value. Um, the benefits that we're going to get, um, out of AI and the meaningful impact that that's going to have on on our business from a sales service, um, and efficiency, um, point of of view. And I I think that's worth reflecting on further. The other thing is, um, it leads out the W line side of the business. Um, and, um, we have a growing, and, and profitable, uh, wines side of our business. Um, that um, is is a unique characteristic, uh, to tell us and again, agent and embedded or underpinned by the Telus digital organization.
Um, we have an opportunity for National Expansion. Um, it's a attractive market for us to pursue, um, in Ontario. Um, um, and Quebec is, I guess it's our version of ziply if you will, um, along that particular, uh, path. Um, and our track record on fiber deployment is is literally world best. So, uh, I think that's a, a nice growth opportunity. Um, we're loaded for bear on product differentiation, um, and I've highlighted this repetition on the call, but, you know, I think it's our job to squeeze economy to scope out of our, you know, fixed Broadband infrastructure. But I think these services are attractive to, um, both um, consumers and small businesses.
Uh, I think we're continuing to exclusively focus on consumers. Um, and tell us as you know, as much combined upside um on SMB and mid-market as we do uh on uh on the consumer front and uh I'd see that uh as being um underestimated.
Um, and then lastly, we've got some pretty attractive emerging businesses on the health, agriculture, and consumer goods side.
And it's a relate to 3 times. Net debt, that EBA died. I guess, you know, we could say, well, you know, we'll cross that bridge when we get to it, um, and the fullness of time. But just so that, you know, um, we're super scientific, um, in the way that we model it. Um, so it's not just a finger in an air, or in the air or we look at, you know, comps on an international basis. Um, we actually do the science, uh, on the Prato combination of of cost of equity, uh, and cost of tax affected debt. And we are a tax pain, um, organization, uh, to determine, um, how we can best minimize our weighted average cost of capital, um, and so 3.0 is not a notional Target. Uh, 3.0 actually equates uh to the minimization of our weighted average cost of capital through the Paro combination of cost of equity, um, and cost of tax affected, uh, debt. So that's a
Client, uh, number, uh, not picked out of thin air or calm, uh, number. And we do that, um, on the science front because we are, you know, material capital deployers. Um, and you don't have to look further than the impairment test and know how much a, you know, 100 basis point shift on the WACC, you know, means when you're deployers of capital. So we want to get the minimization of the WACC right? And right now, it's 3 times net debt to EBITDA, and we'll assess that on an annual basis going forward.
Thank you.
Those of you in Canada, we wish you a nice long weekend.
This concludes the TELUS Q2 2025 earnings call.
Have a nice day.