Q3 2025 TELUS Corp Earnings Call

Speaker #1: It seems to stand in my way . Cause no one knows now . No one likes to be let down . I know she loves the sunrise .

Speaker #1: No longer sees it with her sleeping eyes . And I know that when she said she's gonna try . Really ? Because of other .

Speaker #1: Times . And I know she usually . Dies in . I wouldn't want to break up . Knot . I wouldn't wanna break em .

Speaker #1: Maybe she'll help me to untie this . But until then , well , I'm gonna have to lie to you . It seems to me that you maybe be pretty much always me .

[Analyst]: Maybe she'll help me to untie this. Until then, well, I'm gonna have to lie. It seems to me that maybe it pretty much always means no. Don't tell me you might just let it go. Oftentimes of late, it seems to stand in my way. 'Cause no one, no one likes to be let down. It seems to me that maybe it pretty much always means no. Don't tell me you might just

Speaker #1: No . Don't . Don't tell me you might just let it go . Seems to stand in my way . Cause no one knows .

Speaker #1: No one like to be let down . It seems to me . That you're with me . No . So don't tell me you might just .

Speaker #2: The conference is now being recorded .

Operator: The conference is now being recorded.

Darren Entwistle: Remove from my mask.

Speaker #3: The roof of my mouth .

Speaker #4: Good day . Everyone . Welcome to the Tellus 2025 Q3 Earnings Conference call . I would like to introduce your speaker , Robert Mitchell .

Operator: Good day, everyone. Welcome to the TELUS 2025 Q3 Earnings Conference Call. I would like to introduce your speaker, Robert Mitchell. Please go ahead.

Speaker #4: Please go ahead .

Speaker #5: Good morning everyone . Thank you for joining us today . Our third quarter 2025 results news release . MDA Financial statements and detailed supplemental investor information were posted on our website earlier this morning .

Robert Mitchell: Good morning, everyone. Thank you for joining us today. Our Q3 2025 results, news release, MD&A financial statements, and detailed supplemental infrastructure information were posted on our website earlier this morning. On our call today, we'll begin with remarks by Darren and Doug. For the Q&A portion, we will be joined by Zainul, Navin, Jason, Tobias, Hesham. Briefly prepared remarks, slides, and answers to questions contain forward-looking statements. Actual results could vary from these statements. The assumptions on which they're based and the material risks that could cause them to differ are outlined in our public filings with securities commissions in Canada and the US, including in our Q3 2025 and our annual 2024 MD&A. With that, over to you, Darren.

Speaker #5: On our call today, we'll begin with remarks by Darren Entwistle and Doug French for the Q&A portion. We will be joined by Zainul and Navin.

Speaker #5: Jason Tobias , Hesham . Briefly prepared remarks , slides and answers to questions contain forward looking statements . Actual results could vary from these statements .

Speaker #5: The assumptions on which they are based and the material risks that could cause them to differ are outlined in our public filings with securities commissions in Canada and the U.S.

Speaker #5: , including in our third quarter 2025 and our annual 2020 . Four MDA . With that , over to you , Darren .

Speaker #3: Thank you . Ravi , and hello , everyone . In the third quarter of 2025 , Telus delivered another period of strong customer growth and financial performance , powered by our teams relentless focus on operational excellence .

Darren Entwistle: Thank you, Ravi, and hello, everyone. In Q3 2025, TELUS delivered another period of strong customer growth and financial performance, powered by our team's relentless focus on operational excellence. Our results showcase the compelling value of our comprehensive bundled services across mobile and home solutions. We're doing that in a complementary fashion with the strategic rollout of TELUS PureFibre connectivity to homes and businesses nationwide. We're delivering far more than connectivity. We're empowering Canadians with transformative digital experiences, including AI-powered smart home energy solutions, including cutting-edge tech-enabled healthcare and wellbeing services, and as well, comprehensive security offerings at the dispositions of our client. These offerings are revolutionizing productivity and enhancing quality of life for our customers. Indeed, this quarter we achieved an industry-best 288,000 total mobile and fixed customer additions.

Speaker #3: Our results showcased the compelling value of our comprehensive bundled services across mobile and home solutions , and we're doing that in a complementary fashion with the strategic rollout of Telus Purefibre connectivity to homes and businesses nationwide .

Speaker #3: We're delivering far more than connectivity . We're empowering Canadians with transformative digital experiences , including AI powered smart home energy solutions , including cutting edge , tech enabled healthcare and well-being services , and as well , comprehensive security offerings at the dispositions of our client .

Speaker #3: These offerings are revolutionizing productivity and enhancing quality of life for our customers . Indeed , this quarter , we achieved an industry best 288,000 total mobile and fixed customer additions are close to 21 million customer connections reflects an industry leading 5% growth as compared to the same period a year ago .

Darren Entwistle: Our close to 21 million customer connections reflects an industry-leading 5% growth as compared to the same period a year ago. Our sustained focus on delivering exceptional client experiences continues to drive leading customer loyalty metrics. This was demonstrated by our industry-best postpaid mobile phone churn of 0.91% this quarter as we progress through our 12th consecutive year below the 1% level. Truly a hallmark of this organization and our culture. Looking at our financial results, we achieved solid and resilient T-Tech EBITDA growth of 3%. In mobile, we drove healthy phone net additions of 82,000 and leading connected device net additions of 169,000. These results were supported by our ongoing focus on profitable margin-accretive customer growth.

Speaker #3: Furthermore , our sustained focus on delivering exceptional client experiences continues to drive , leading customer loyalty metrics . This was demonstrated by our industry best post-paid mobile phone churn of 0.91% this quarter .

Speaker #3: As we progress through our 12th consecutive year below the 1% level , truly a hallmark of this organization and our culture . Looking at our financial results , we achieved solid and resilient tech EBITDA growth of 3% in mobile .

Speaker #3: We drove healthy phone net additions of 82,000 and leading connected device net additions of 169,000 . These results were supported by our ongoing focus on profitable margin accretive customer growth .

Speaker #3: This is once again evidenced by our consistent industry leading customer lifetime revenue , underpinned by our industry best churn result , which remains clearly .

Darren Entwistle: This is once again evidenced by our consistent industry-leading customer lifetime revenue underpinned by our industry-best churn result, which remains clearly the hallmark of the TELUS organization and the financial results that we derive from it. Let's turn now and take a look at wireline. TELUS delivered another quarter of industry-leading total fixed customer additions. We have consistently delivered positive wireline net additions every year since Q3 2010. This is a remarkable 15-year track record in that regard. This included an industry-best 40,000 internet net additions underpinned by our leading TELUS PureFibre offering. Our consistent strategy of leveraging our superior and growing portfolio of bundled products and services on a national basis continues to differentiate us from the competition in a way that is relevant to customers.

Speaker #3: The hallmark of the Telus organization and the financial results that we derive from it . Let's turn now and take a look at wireline .

Speaker #3: Telus delivered another quarter of industry leading total fixed customer additions . Indeed , we have consistently delivered positive wireline net additions every year since the third quarter of 2010 .

Speaker #3: This is a remarkable 15 year track record in that regard . This included an industry best 40,000 internet net additions , underpinned by our leading pure fiber offering .

Speaker #3: Our consistent strategy of leveraging our superior and growing portfolio of bundled products and services on a national basis continues to differentiate us from the competition in a way that is relevant to customers .

Speaker #3: Turning to TELUS Health, we continue to execute against our global growth strategy, generating revenue and adjusted EBITDA growth of 18% and 24%, respectively.

Darren Entwistle: Turning to TELUS Health, we continue to execute against our global growth strategy, generating revenue and adjusted EBITDA growth of 18% and 24% respectively. Moreover, we've now extended our reach to over 160 million lives covered on a worldwide basis. This global scale of our TELUS Health footprint stems from a variety of factors, including smart, targeted strategic investments. It comes from continuous product innovation with a digital and AI thesis. It comes from broadening our sales channels with strong cross-selling execution that is paying off for us. It comes from disciplined cost optimization through technology integration and synergy realization. Importantly, these factors are all solidly anchored in our customer's first promise. Our LifeWorks integration has now delivered CAD 417 million in combined annualized synergies, CAD 329 million from cost efficiencies, CAD 88 million from successful cross-selling strategies.

Speaker #3: Moreover , we've now extended our reach to over 160 million lives covered on a worldwide basis . This global scale of our telehealth footprint stems from a variety of factors , including smart , targeted , strategic investments .

Speaker #3: It comes from continuous product innovation with a digital and AI thesis . It comes from broadening our sales channels with strong cross-selling execution that is paying off for us .

Speaker #3: And it comes from disciplined cost optimization through technology integration and synergy realization . Importantly , these factors are all solidly anchored in our customers .

Speaker #3: First promise . Our lifeworks integration has now delivered $417 million in combined annualized synergies , $329 million from cost efficiencies , and $88 million from successful cross-selling strategies .

Speaker #3: Notably , this is nearly three times above our initial target of $150 million that we set when we first acquired Lifeworks in September of 2022 .

Darren Entwistle: Notably, this is nearly three times above our initial target of CAD 150 million that we set when we first acquired LifeWorks in September 2022. Across our B2B portfolio, we have a potent story of differentiation and diversification. We are the market leader in Canada in respect of IoT, private wireless networking, and 5G solutions. Moreover, we have a leading cybersecurity practice that is at the forefront of how AI is changing the cyber threat and cyber protection landscape. Over the years, through a thoughtful and cohesive data-centric strategy, we have significantly and successfully built high-value, diversified lines of business. These global business verticals include TELUS Health, TELUS Agriculture & Consumer Goods, and of course, TELUS Digital. This has enabled business resiliency through the diversified portfolio approach whilst providing global scale and diverse sources of revenue and EBITDA.

Speaker #3: Across our B2B portfolio , we have a potent story of differentiation and diversification . We are the market leader in Canada in respect of IoT , private wireless networking and 5G solutions .

Speaker #3: Moreover , we have a leading cybersecurity practice that is at the forefront of how AI is changing the cyber threat and cyber protection landscape .

Speaker #3: Over the years , through a thoughtful and cohesive data centric strategy , we have significantly and successfully built high value , diversified lines of business .

Speaker #3: These global business verticals include Telus health , Telus Agriculture , and Consumer goods . And of course , Telus Digital . This is enabled business resiliency through the diversified portfolio approach .

Speaker #3: Whilst providing global scale and diverse sources of revenue and EBITDA . Notably , at the end of October , we completed the acquisition of Telus Digital , making a significant upward move on our data and AI competency set .

Darren Entwistle: Notably, at the end of October, we completed the acquisition of TELUS Digital, making a significant upward move on our data and AI competency set. This marks a significant milestone in the strategic evolution of our organization. We expect this integration to generate approximately CAD 150 million to CAD 200 million in annualized cash synergies and will deliver the CAD 150 million within the 2026 financial year. That will be driven predominantly through operational efficiencies. Let's make sure we can do here what we did on the LifeWorks synergy realization front. The synergies coming from the privatization of TELUS Digital include accelerated digital and AI transformation. They include smart business simplification strategies, and they include strategic cross-promotion of our industry-leading product portfolio and services.

Speaker #3: And this marks a significant milestone in the strategic evolution of our organization . We expect this integration to generate approximately 150 million to $200 million in annualized cash synergies , and will deliver the $150 million within the 2026 financial year .

Speaker #3: And that will be driven predominantly through operational efficiencies . Let's make sure we can do here what we did on the Lifeworks synergy realization front , the synergies coming from the privatization of Telus digital include accelerated Digital and AI transformation .

Speaker #3: They include smart business simplification strategies , and they include strategic cross-promotion of our industry leading product portfolio and services . This will further strengthen our financial performance .

Darren Entwistle: This will further strengthen our financial performance and yield significant shareholder value creation. Our well-established AI-enabling capabilities across TELUS will continue to be an integral part of our business and increasingly critical to our success. These capabilities are driving maturely better outcomes within our organization, and in turn, TELUS can be leveraged as an innovation lab, as a product creator, as a testimonial to commercialize these capabilities to support our external customers on their own AI journey to win in their respective markets. Indeed, the opportunity at TELUS is substantial. Combined across TELUS, our AI-enabling capabilities are approaching CAD 800 million in revenue in 2025. This is expected to increase to approximately CAD 2 billion by 2028, representing an annualized growth rate north of 30%.

Speaker #3: And yield significant shareholder value creation . Our well-established AI enabling capabilities across Telus will continue to be an integral part of our business and increasingly critical to our success .

Speaker #3: These capabilities are driving materially better outcomes within our organization and in turn , Telus can be leveraged as an innovation lab , as a product creator , as a testimonial to commercialize these capabilities , to support our external customers on their own .

Speaker #3: AI journey to win in their respective markets . Indeed , the opportunity at Telus is substantial . Combined across Telus , our AI enabling capabilities are approaching $800 million in revenue in 2025 .

Speaker #3: This is expected to increase to approximately $2 billion by 2028 , representing an annualized growth rate north of 30% . Notably , this is composed of solely external client revenue , and it excludes other parts of our global B2B portfolio , such as health and agriculture and consumer goods .

Darren Entwistle: Notably, this is composed of solely external client revenue, and it excludes other parts of our global B2B portfolio, such as health and agriculture and consumer goods. Supporting this growth are 4,000 dedicated professionals and AI engineers delivering digital products and solutions that help clients transform their businesses and to do that transformation at scale. One component of this growth is our September launch of Canada's first sovereign AI factory. This firmly establishes TELUS's leadership position in this space as we have ready today the infrastructure and compute ecosystem to help Canadian businesses broadly deploy AI. We are the first North American service provider to become an official NVIDIA cloud partner, utilizing our state-of-the-art data centers to support customers and partners such as OpenText, League, EY, Accenture, and Railtown, to name but a few, who immediately benefit from our sovereign AI compute solutions.

Speaker #3: Supporting this growth , our 4000 dedicated professionals and AI engineers delivering digital products and solutions that help clients transform their businesses . And to do that , transformation at scale , one component of this growth is our September launch of Canada's first sovereign AI factory .

Speaker #3: This firmly establishes Telus leadership position in this space as we have ready today . The infrastructure and compute ecosystem to Canadian businesses broadly deploy AI .

Speaker #3: We are the first North American service provider to become an official Nvidia cloud partner , utilizing our state of the art data centers to support customers and partners such as OpenText , League II , Accenture and Railtown to name but a few who immediately benefit from our sovereign AI compute solutions .

Speaker #3: Tell us is providing the secure sovereign foundation our country needs to create made in Canada solutions to accelerate growth and to advance our competitiveness in the global digital economy .

Darren Entwistle: TELUS is providing the secure, sovereign foundation our country needs to create made-in-Canada solutions to accelerate growth and to advance our competitiveness in the global digital economy for generations to come. To wrap up, our Q3 performance reflects the strength of our core operations and the power of our differentiated strategy. The reliability of our results demonstrates our team's dedication to delivering superior customer experiences across our industry-leading wireless and TELUS PureFibre broadband infrastructure and technology. Our substantial network investments enable positive social and economic outcomes for Canadian communities nationwide, while continuously enhancing our operational performance, our financial results, and our customer satisfaction. Moreover, these network investments are powering Canada's digital sovereignty through our pioneering and leading AI infrastructure and technology.

Speaker #3: For generations to come. To wrap up, our Q3 performance reflects the strength of our core operations and the power of our differentiated strategy.

Speaker #3: The liability of our results demonstrates our team's dedication to delivering superior customer experiences across our industry , leading wireless and pure fiber broadband infrastructure and technology .

Speaker #3: Our substantial network investments enable positive social and economic outcomes for Canadian communities nationwide . Whilst continuously enhancing our operational performance . Our financial results and our customer satisfaction .

Speaker #3: Moreover , these network investments are powering Canada's digital sovereignty through our pioneering and leading AI infrastructure and technology . And as we look ahead , we are positioned for sustained success , underpinned by ongoing EBITDA expansion and disciplined capital deployment .

Darren Entwistle: As we look ahead, we are positioned for sustained success, underpinned by ongoing EBITDA expansion and disciplined capital deployment that together generate substantial free cash flow growth for our organization and our investors. Our strong financial foundation supports our industry-leading dividend growth program, where today we increased our quarterly dividend at a moderated rate of 4% to CAD 0.4184. This is reflective of our ongoing commitment to delivering sustainable shareholder returns. Furthermore, we continue to progress considerable deleveraging initiatives. Notably, we remain on track to achieve our leverage target of 3x by 2027, whilst at the same time stepping down and importantly eliminating our discount dividend reinvestment plan. In September, we closed our transaction with La Caisse, establishing Terrion as Canada's largest dedicated wireless tower operator.

Speaker #3: That together generate substantial free cash flow growth for our organization and our investors . Our strong financial foundation supports our industry leading dividend and growth program , where today we increased our quarterly dividend at a moderated rate of 4% to 41.80 $0.04 .

Speaker #3: This is reflective of our ongoing commitment to delivering sustainable shareholder returns . Furthermore , we continue to progress considerable deleveraging initiatives . Notably , we remain on track to achieve our leverage target of three times by 2027 .

Speaker #3: Whilst at the same time stepping down and importantly , eliminating our discount dividend reinvestment plan . In September , we closed our transaction with Lex , establishing Tarion as Canada's largest dedicated wireless tower operator .

Speaker #3: This unique partnership will enhance wireless connectivity for Canadians whilst unlocking significant value for Telus shareholders . By strengthening our balance sheet , accelerating our deleveraging program and providing another growth factor for Telus to leverage .

Darren Entwistle: This unique partnership will enhance wireless connectivity for Canadians whilst unlocking significant value for TELUS shareholders by strengthening our balance sheet, accelerating our deleveraging program, and providing another growth factor for TELUS to leverage. The team is working hard to quickly operationalize Terrion, which already has 3,000 wireless sites across the country. Moreover, it has begun construction of its first multi-carrier tower in Nanaimo, BC, with more planned in the months to come. Finally, in closing, with Remembrance Day approaching, I would like to offer on behalf of the entire TELUS organization, my heartfelt gratitude to our veterans here in Canada and around the globe. These brave individuals, including my own father, Desmond, who served with the Royal Canadian Navy in the Second World War, demonstrate immense courage to preserve the rights and freedoms of all Canadians.

Speaker #3: The team is working hard to quickly operationalize Tarion , which already has 3000 wireless sites across the country . Moreover , it's begun construction of its first Multi-carrier tower tower in Nanaimo , BC , with more planned in the months to come .

Speaker #3: Finally , in closing with Remembrance Day approaching , I would like to offer on behalf of the entire Telus organization my heartfelt gratitude to our veterans here in Canada and around the globe .

Speaker #3: These brave individuals , including my own father Desmond , who served with the Royal Canadian Navy in the Second World War , demonstrate immense courage to preserve the rights and freedoms of all Canadians .

Speaker #3: I hope you join me in wearing a poppy as we pay tribute to those who served and who continue to serve , so that we and our future generations can enjoy a better life .

Darren Entwistle: I hope you join me in wearing a poppy as we pay tribute to those who served and who continue to serve so that we and our future generations can enjoy a better life. On that note, I'll turn the call over to Doug French.

Speaker #3: And on that note , I'll turn the call over to Uncle Doug . Thank you .

Doug French: Thank you, Darren, and hello, everyone. Mobile network decreased slightly, consistent with Q2 at 0.6%. This performance reflects mobile phone and connected device subscriber growth and 9% increase in IoT revenue, offset by lower mobile home revenue or ARPU, sorry. ARPU continues to improve, declining 2.8% in Q3, a 50 basis point improvement sequentially. We continue to see improvements quarter-over-quarter across new activations, rate plan changes, and customer re-renewals, reflecting our ongoing efforts to mitigate network revenue pressures. Fixed data revenue grew 1% year-over-year, making us the only provider to report positive growth and making our 19th quarter of that positivity. Within consumer, data revenue increased by 4%, driven by a 6% increase in residential Internet revenue, reflecting continued customer growth and higher ARPU, alongside higher security and automation revenue.

Speaker #6: Darren , and hello everyone . Mobile network decreased slightly consistent with the second quarter at 0.6% . This performance reflects mobile phone and connected device subscriber growth and 9% increase in IoT revenue , offset by lower mobile home revenue or sorry , Rpu continues to improve , declining 2.8% in the quarter .

Speaker #6: A 50 basis point improvement sequentially . We continue to see improvements quarter over quarter across new activations , rate plan changes and customer renewals , reflecting our ongoing efforts to mitigate network revenue pressures .

Speaker #6: Fixed data revenue grew 1% year over year , making us the only provider to report positive growth and making our 19th quarter of that positive .

Speaker #6: Positivity within consumer data revenue increased by 4% , driven by a 6% increase in residential internet revenue , reflecting continued customer growth and higher ARPU , alongside higher security and automation revenue in business , fixed data declined with variability from year over year events and customer contract changes .

Doug French: In business, fixed data declined, with variability from year-over-year events and customer contract changes. This was partially offset by continued growth in small and medium businesses, leveraging our differentiated and diversified portfolio of solutions. T-Tech adjusted EBITDA excluding health increased by 2% alongside a margin expansion of 210 basis points to 43.4%. These results were driven by our consistent emphasis on profitable growth alongside our ongoing focus on cost reduction and our increased adoption of TELUS Digital Solutions, resulting in meaningful competitive benefits. In TELUS Health, operating revenues and adjusted EBITDA grew by 18% and 24%. This growth was driven by global business acquisitions, including Workplace Options, as well as organic growth in payer and provider solutions, reflecting strong performance in collaborative health records and recurring revenue in electronic medical records and virtual pharmacy solutions.

Speaker #6: This was primarily offset . This was partially offset by continued small growth in small and medium businesses . Leveraging our differentiated and diversified portfolio of solutions .

Speaker #6: Ketek adjusted EBITDA , excluding health , increased by 2% alongside a margin expansion of 210 basis points to 43.4% . These results were driven by our consistent emphasis on profitable growth alongside our ongoing focus on cost reduction and our increased adoption of digital solutions , resulting in meaningful competitive benefits in telehealth , operating revenues and adjusted EBITDA grew by 18 and 24% .

Speaker #6: This growth was driven by global business acquisitions , including workplace options as well as organic growth in payer and provider solutions , reflecting strong performance in collaborative health records and recurring revenue in electronic medical records and virtual pharmacy solutions .

Speaker #6: Telehealth . Adjusted EBITDA margin expanded 60 basis points to 17.1% , slightly lower than Q2 . As we begin post acquisition and integration work associated with workplace options .

Doug French: TELUS Health adjusted EBITDA margin expanded 60 basis points to 17.1%, slightly lower than Q2 as we begin post-acquisition integration work associated with Workplace Options. Looking at TELUS Digital segment, operating revenue grew 5% with solid performance across many industry verticals. Across the service lines, we continue to see strong performance in our AI and digital solutions. However, pressures on TELUS Digital's profitability persist, with adjusted EBITDA margin at 11.1% net for Q3. We remain focused on mitigating the operating margin pressures while making targeted investments in customer quality and planned initiatives to transform our operations through tech enablement and greater efficiencies globally. Near-term synergies of the TELUS Digital privatization include the elimination of public company costs, lowering borrowing costs as we leverage TELUS's stronger credit position and the operational efficiencies as referred by Darren.

Speaker #6: Looking at TELUS' digital segment, operating revenue grew 5% with solid performance across many industry verticals and service lines. We continue to see strong performance in our AI and digital solutions.

Speaker #6: However , pressures on tells Digital profitability persist with adjusted EBITDA margin at 11.1% . Net for the third quarter , we remain focused on mitigating the operating margin pressures while making targeted investments in customer quality and planned initiatives through transform our operations through tech enablement and greater efficiencies globally , near-term synergies of the Telus digital privatization include the elimination of public company costs , lowering borrowing , borrowing costs .

Speaker #6: As we leverage Telus , stronger credit position and the operational efficiencies as referred by Darren . These digital tells digital remain a segment presented in our financial statements to the end of 2025 .

Doug French: TELUS Digital will remain a segment presented in our financial statements to the end of 2025. We'll review TELUS Digital as a segment and provide more update when we release our Q2 results in February 2026. On a consolidated basis, net income in the quarter of CAD 431 million and EPS of CAD 0.32 were higher by 68%, primarily driven by the gain on the purchase of long-term debt in respect of our tender process that closed in July 2025. On adjusted basis, net income of CAD 370 million decreased by 10%, while EPS of CAD 0.24 was down 14%.

Speaker #6: We review tells digital as a segment and provide more update when we release our key two results in February of 2026 . On a consolidated basis , net income in the quarter of $431 million and EPs of $0.32 were higher by 68% , primarily driven by the gain on the purchase of long term debt .

Speaker #6: In respect of our tender process that closed in July 2025 on adjusted basis , net income of $370 million decreased by 10% , while EPs of $0.24 was down 14% .

Speaker #6: Capital expenditures , excluding real estate , declined by 16 million , or 2% , driven primarily by the elimination of certain by the completion of certain projects .

Doug French: Capital expenditures excluding real estate declined by CAD 16 million or 2%, driven primarily by the completion of certain projects for wireless and fiber networks, in addition to our continued investments in AI. Overall, capital intensity was 12%. That was an improvement from 13% in the prior year and continues to lead the industry. Free cash flow of CAD 611 million increased by 8% compared to the same period a year ago, driven by TTech EBITDA growth, lower capital expenditures, and lower contracted wireless volumes. Looking at our guidance for 2025, our target for TTech operating revenue including our Health segment is expected to be at the lower end of our target range of 2% to 4%, with variability on mobile handset equipment revenue as we go into a high-volume Q4.

Speaker #6: For wireless and fiber networks . In addition to our our continued investments in in AI . Overall capital intensity was 12% . That was an improvement from 13% in the prior year and continues to lead the industry .

Speaker #6: Free cash flow of 611 million increased by 8% compared to the same period a year ago , driven by tech EBITDA growth , lower capital expenditures and lower contracted wireless volumes .

Speaker #6: Looking at our guidance for 2025 , our target for tech operating revenue and including our health segment is expected to be at the lower end of our target range of 2 to 4% , with variability on mobile handset equipment revenue .

Speaker #6: As we go into a high volume fourth quarter . Importantly , all other targets remain unchanged . These targets demonstrate the resilience of our business and the effectiveness of our operational execution .

Doug French: Importantly, all other targets remain unchanged. These targets demonstrate the resilience of our business and the effectiveness of our operational execution. Following TELUS Digital's completion of privatization, we begin to execute our integration plan. The guidance that we previously issued for TELUS Digital will no longer be relevant and will not be updated for the rest of the year. Turning to our balance sheet. The average term to maturity of our long-term debt stands a little over 13 years, and our weighted average cost of capital is 4.61%. Our leverage ratio has improved to 3.5x, a decrease of 20 basis points sequentially from the Q2 of 2025. The improvement was driven by the cash received as a result of our partner on Terrion and as we did the repayment of the TELUS Digital credit facility in the Q3.

Speaker #6: Following Carlos completion of privatisation , we begin to execute our integration plan . The guidance that we previously issued for Telus digital will no longer be relevant and will not be updated for the rest of the year .

Speaker #6: Turning to our balance sheet , the average return to maturity of our long term debt stands a little over 13 years , and our weighted average cost of capital is 4.61% .

Speaker #6: Our leverage ratio has improved to 3.5 times , a decrease of 20 basis points sequentially from the second quarter of 2025 . The improvement was driven by the cash received as a result of our partner , Ontarian , and as we repay , and we did the repayment of the Telus digital credit facility in the third quarter .

Speaker #6: We anticipate leverage in the fourth quarter to increase slightly as we pay for the Telus digitization , Telus digital privatization remain on track to deliver our leverage ratio of approximately three times by the end of 2027 .

Doug French: We anticipate leverage in Q4 to increase slightly as we pay for the TELUS Digital privatization. We remain on track to deliver our leverage ratio of approximately 3x by the end of 2027, while thoughtfully stepping down our discount on our dividend reinvestment program beginning in 2026, with a full removal by the end of 2027. Our financial position will continue to strengthen and will continue to drive shareholder value throughout 2025 and beyond. We'll continue to focus on EBITDA growth, moderating capital intensity as we progress to our target of 10%, robust free cash flow generation, and our active asset monetization program, including securing partners when appropriate for TELUS Health and TELUS Agriculture. With that, Robert, back to you. Thanks, Doug. Carl, we are ready for questions, please.

Speaker #6: While thoughtfully stepping down or discount on our dividend reinvestment program beginning in 2026 with a full removal by the end of 27 . Our financial position will continue to strengthen and will continue to drive shareholder value throughout 2025 and beyond .

Speaker #6: We'll continue to focus on EBITDA growth, moderating capital intensity as we progress to our target of 10% robust free cash flow generation, and our active asset monetization program, including securing partners when appropriate for Telus Health and Telus Agriculture.

Speaker #6: With that , Robert , back to you .

Speaker #5: Thanks , Doug . Carl , we are ready for questions . Please .

Speaker #4: Very well . For folks on the phone , if you would like to queue up to ask a question at this time , please press star one .

Operator: The first question is from Maher Yaghi from Scotiabank. Please go ahead.

Speaker #4: If ever you wish to withdraw from the queue , press star two . Again , if you'd like to queue up , please press star one .

Speaker #4: Now we have some people queuing up . The first question is from Mia Jaggi from Scotia . Please go ahead .

Maher Yaghi: Thank you for taking my question. Maybe a first question on wireless and the second one on Terrion. Doug, you mentioned in your prepared remarks how ARPU has improved a little bit sequentially, but can you give us maybe an overview of what you think will need to happen to return to growth on the ARPU front? Maybe just some views on the outlook for churn. You're running at a low churn, but it's starting to, you know, we saw a slight increase in the quarter. Maybe just, you know, what's driving that behavior just on the wireless. The second question on Terrion is, you know, how should we think about the capital needs for the business going forward?

Speaker #7: Great . Thank you for taking my question . Maybe a first question on on wireless . And the second one , Ontarian . So , so , Doug , you mentioned in your prepared remarks how Arppu has has improved a little bit .

Speaker #7: The sequentially. But can you give us maybe an overview of what you think will need to happen to return to growth?

Speaker #7: On , on our front and maybe just some views on , on the outlook for churn . You're running at a low churn , but it's starting to you know , we saw a slight increase in the quarter .

Speaker #7: Maybe just , you know , what's driving that behavior . Just on on on the wireless . And the second question , Ontarian is .

Speaker #7: You know , how should we think about capital needs for the business going forward ? Are you looking to transact and acquire towers or it's just going to be building new co-location towers in different parts in Canada and maybe the accounting of how we'll see the cash flows from that business flowing into your free cash flow calculation .

Maher Yaghi: Are you looking to transact and acquire towers, or it's just gonna be building new co-location towers in different parts in Canada? Maybe the accounting of how we'll see the cash flows from that business flowing into your free cash flow calculation. Thank you.

Speaker #7: Thank you .

Speaker #3: All right , Doug , go ahead . On the last one , you're the chair of Tarion . So .

Doug French: All right, Doug, go ahead. Especially on the last one, you're the chair of Terrion, so. We'll do Terrion and then maybe pass to Zainul for ARPU. No, I think you should do it all. Go ahead. All right. On Terrion, I think the best way to describe it is yes, we are looking at acquiring towers where appropriate to do so, and that could be either outright purchases and/or partnerships on bringing more partners into to our overall partnership. We will continue to build, and we have a diversification of our network and building our capacity as even Darren highlighted some of the new ones that we've already started. Cash flow out of the gate, any of the build costs are coming out of Terrion.

Speaker #6: We'll do tarion . And then maybe pass the Zeno for for Arppu .

Speaker #3: No , I think you should do it all .

Speaker #6: Go ahead . All right . So , Ontarian , I think the the best way to describe it is we . Yes , we are looking at acquiring towers .

Speaker #6: Where appropriate to do so . And that could be either outright purchases and or partnerships on bringing more partners into to our , our overall partnership .

Speaker #6: We will continue to build and we have a diversification of our network and building our capacity as is . Even Darren highlighted some of the new ones that we've already started cash flow out of the gate that any of the build costs are coming out of Tarion , and so any distributions that would be coming out of Tarion would be net of that CapEx .

Doug French: Any distributions that would be coming out of Terrion would be net of that CapEx. As we consolidate Terrion into our books, you will see 100% of the CapEx, and then you'll see a lower distribution. As we define our free cash flow definition into the future, we will make sure that that is very clear on the ins and outs, as you see that in both pieces. I think that will be very clear and it'll be transparent when you see anything of materiality. Terrion's only been in play for 2 months, there has been minimal impact this quarter.

Speaker #6: And so as we consolidate , tearing into our books , you will see 100% of the CapEx , and then you'll see a lower distribution .

Speaker #6: And as we define our free cash flow definition into the future , we will make sure that that is very clear on the ins and outs as as you see that in both pieces .

Speaker #6: So I think that will be very clear, and it will be transparent when you see anything of materiality. Taryn's only been in play for two months.

Speaker #6: So there has been minimal impact this quarter . And our growth , I think it's going to be the continued hard work that we see from the team on step ups and the price , the prices that we're seeing on new acquisitions as well .

Doug French: On ARPU growth, I think it's gonna be the continued hard work that we see from the team on step-ups, and the price, the prices that we're seeing on new acquisitions as well. We've seen a little bit better on device subsidy as well, but as we get into the Q4 and you see, you know, Black Friday and Christmas specials that will come in and any, say, aggressive specials could obviously slow that down. I think it's momentum. Once it's through your base, it's gonna be slow and steady back on the way out. So far, good momentum, but I think it's to be determined that if that holds or not as we move into the Q4.

Speaker #6: We've seen a little bit better on device subsidy as well . But as as we get into the fourth quarter and you see , you know , Black Friday and back to and Christmas specials that will come in and any say , aggressive specials could , could obviously slow that down .

Speaker #6: But I think it's momentum . Once it's through your base , it's going to be slow and steady . Back on the way out .

Speaker #6: And so, so far, good momentum. But I think it's to be determined whether that holds or not as we move into the fourth quarter.

Doug French: I think that would be my best assessment. Just two top-ups on that.

Speaker #6: And so I think that would be my best assessment.

Speaker #3: Just two top ups on that . Given that we don't entirely control our own destiny on . The front , I think it's important that we continue to improve our profile on unit cost to serve .

Darren Entwistle: Given that we don't entirely control our own destiny on the ARPU front, I think it's important that we continue to improve our profile on unit cost to serve. You've seen us make some good progress there, getting into the double digits on the cost reduction front. I think we need to keep going down that particular path and lower our unit cost to serve. That's one of the attractive aspects of having TELUS Digital now fully in the fold, so that we can leverage AI technology to really drive down unit cost to serve within our consumer and our B2B wireless operations. The other thing that is a great antidote to ARPU pressure, as we hope for better days ahead, is product bundling.

Speaker #3: So, you've seen us make some good progress there. Getting into the double digits on the cost reduction front, I think we need to keep going down that particular path and lower our unit cost to serve.

Speaker #3: And that's one of the attractive aspects of having TELUS Digital now fully in the fold, so that we can leverage AI technology to really drive down unit costs to serve within our consumer and our B2B wireless operations.

Speaker #3: And then the other thing that is a great antidote to our pressure , as we hope for better days ahead , is product bundling .

Speaker #3: We've got the best product portfolio in the industry, to the extent to which we can increase our product intensity in our customer relationships through progressive bundling.

Darren Entwistle: We've got the best product portfolio in the industry to the extent to which we can increase our product intensity in our customer relationships through progressive bundling. That's gonna give us a holistic outcome with the client in terms of overall economics that's extremely appealing.

Speaker #3: That's going to give us a holistic outcome with the client in terms of overall economics. That's extremely appealing.

Speaker #7: Thank you for this . And just just to be clear , Doug , on on the free cash flow , any distribution that Tarion is going to be making to its equity shareholders will be deducted from your free cash flow calculation .

Maher Yaghi: Thank you for this. And just to be clear, Doug, on the free cash flow, any distribution that Terrion is gonna be making to its equity shareholders will be deducted from your free cash flow calculation?

Speaker #6: We're going through that as we speak , but it will be transparent of where it is . But it will be how we assess the capital item , because when you think through the capital item as well , we're not paying for 100% of the capital that we have to consolidate it .

Doug French: We're going through that as we speak, but it will be transparent of where it is. It'll be how we assess the capital item, 'cause when you think through the capital item as well, we're not paying for 100% of the capital, yet we have to consolidate it. I need to make sure that that is very clear on both the capital that we're accountable for and then the distribution. We'll make sure you see the net on both.

Speaker #6: So I need to make sure that that is very clear on both the capital that we're accountable for . And then the distribution .

Speaker #6: But we'll make sure you see the net on both . .

Speaker #7: Great . Thank you .

Maher Yaghi: Great. Thank you.

Robert Mitchell: All right.

Speaker #5: Thanks , mayor . Next question please .

Robert Mitchell: Thanks, Maher. Next question, please.

Speaker #4: The next question is from Jerome from Desjardins . Please go ahead .

Operator: The next question is from Jerome Dubreuil from Desjardins. Please go ahead.

Speaker #7: Hey .

Speaker #8: Good morning . Thanks for taking my questions . The first one is on the partner build model . If you can , please discuss the implications from a financial standpoint .

Jerome Dubreuil: Hey, good morning. Thanks for taking my questions. The first one is on the partner build model. If you can please discuss the implications from a financial standpoint. Maybe I'm just throwing ideas out there, but maybe the margin profile is going more toward a wholesale model but lower CapEx. Is this the right way to think about it? If you can discuss the different return profile of owners' economics versus the partner build, please.

Speaker #8: Maybe I'm just throwing ideas out there , but maybe the margin profile is going more toward a wholesale model . But lower CapEx is just the right way to think about it .

Speaker #8: And if you can discuss the different return profile of owner's economics versus the partner build , please .

Speaker #6: So just on the on the fiber side , I assume that's the partnership you're referring to . The economics are that we we would end up either signing a lease for , call it a dark fiber lease and or we take a community as it's built and it's our initiative to ramp up and scale it .

Doug French: Just on the fiber side, I assume that's the partnership you're referring to. The economics are that we would end up either signing a lease for, call it a dark fiber lease, and/or we take a community as it's built, and it's our initiative to ramp up and scale it. The economics are based on, I would say, similar to what you would see on any third-party fiber lease or fiber wholesale arrangement. The third party is making their money just as we would if we were wholesaling our fiber to someone else. It's very similar structure, and we just have a couple different scenarios out there of how we lease.

Speaker #6: And so the economics are based on , I would say , similar to what you would see on any third party fiber lease or fiber wholesale arrangement .

Speaker #6: And the the third party is making the money just as we would if we were wholesaling our fiber to someone else . So it's very similar structure .

Speaker #6: And we just have a couple different scenarios out there of how we lease . But it would be , you know , a fair market value for what a , lease arrangement would be on any kind of fiber transaction .

Doug French: It would be at, you know, a fair market value for what a lease arrangement would be on any kind of fiber transaction.

Speaker #3: And overall , our goal is to ensure that when we're leasing or when we're renting fiber on a wholesale basis , the return , the total economic return is equal to or better than the economic return that we derived historically from our own fiber build in Western Canada .

Darren Entwistle: Overall, our goal is to ensure that when we're leasing, or when we're renting fiber on a wholesale basis, the return, the total economic return, is equal to or better than the economic return that we derived historically from our own fiber build in Western Canada. The reason why we've set that axiom and think that it's doable, is clearly we have much greater scale today on the fiber front, so we should be better positioned to seize those economies of scale. We have better technology deployed than what we had historically during the fiber build time in the West from 2014 to 2020, that improves both operational efficiency and operational execution. We have far more products.

Speaker #3: And the reason why we've set that axiom and think that it's doable is clearly we have much greater scale today on the fiber front.

Speaker #3: So we should be better positioned to seize those economies of scale . We have better technology deployed than what we had historically during the fiber build time in the West from 2014 to 2020 .

Speaker #3: That improves both operational efficiency and operational execution. And we have far more products. When we started to build fiber in the West, the revenue returns were very much around Internet and TV.

Darren Entwistle: When we started to build fiber in the West, the revenue returns were very much around internet and TV. Now our business still has the internet and TV components, but we have the security component, smart home automation, and smart home energy services, so on and so forth. Again, leveraging the limitless bandwidth of fiber, we are also looking to secure economies of scope by creating new services over that rented fiber and getting a better return than what we did originally on our own build activities.

Speaker #3: Now, our business still has the Internet and TV components, but we also have the security component. We have smart home automation, we have smart home energy services, and so on and so forth.

Speaker #3: So again, leveraging the limitless bandwidth of fiber, we're also looking to secure economies of scope by creating new services over that rented fiber and getting a better return than what we did originally on our own build activities.

Speaker #8: Okay , thanks . A second one for me is can you please provide clarity on the on the I think you call it AI enabled revenue going from 800 million to 2 billion .

Jerome Dubreuil: Okay, thanks. Second one for me is, can you please provide clarity on the on the, I think you call it AI-enabled, revenue going from CAD 800 million to CAD 2 billion? If you can discuss maybe what are those lines of business. Is this replacing other existing revenue, or is there a kind of a direct line of revenue here that's going to be going from CAD 800 million to CAD 2 billion? Thank you.

Speaker #8: If you can discuss , maybe what are those lines of business ? Is this replacing other existing revenue or is there a kind of a direct line of revenue here that's going to be going from 800 to to 2 billion ?

Speaker #8: Thank you .

Speaker #3: Okay . Let me tackle that . And then if you want to have a follow up for additional detail , we can go there looking at the base right now at the 800 million level , that base in terms of the question that you're asking , is comprised of a variety of revenue sources .

Darren Entwistle: Okay. Let me tackle that, and then if you wanna have a follow-up for additional detail, we can go there. Looking at the base right now at the CAD 800 million level, that base, in terms of the question that you're asking, is comprised of a variety of revenue sources. They include SaaS solutions that we're providing. They include our cloud solutions. They include the myriad of GenAI applications that we have developed, both within TELUS proper as well as within TELUS Digital. They include our data annotation business. They will include, it's very minor right now, but it will grow to be major prospectively, our sovereign AI GPU compute solutions.

Speaker #3: They include SaaS solutions that we're providing . They include our cloud solutions . They include the myriad of gen AI applications that we have developed , both within Telus proper as well as within Telus digital .

Speaker #3: They include our data annotation business , and they will include it's very minor right now , but it will grow to me be major prospectively .

Speaker #3: Our sovereign AI , GPU compute solutions . We we like the position that we're in here because we are extremely unique in that Telus controls the entirety of the AI compute ecosystem , and that is significantly differentiated from our North American peer group .

Darren Entwistle: We like the position that we're in here because we are extremely unique in that TELUS controls the entirety of the AI compute ecosystem. That is significantly differentiated from our North American peer group. It's all in-house at TELUS, whether you're talking about AI inferences, whether you're talking about AI models, or whether you're talking about AI training. We would believe in terms of what supports our revenue going forward that our holistic in-house solution, aided and abetted by our partnership with NVIDIA, creates a series of superior attributes that's gonna drive the revenue model progressively in terms of getting from that CAD 800 million to CAD 2 billion.

Speaker #3: So it's all in-house at Telus , whether you're talking about AI inferences , whether you're talking about AI models , or whether you're talking about AI training and we would believe in terms of what supports our revenue going forward , that are holistic , in-house solution aided and abetted by our partnership with Nvidia , creates a series of superior attributes that's going to drive the revenue model progressively in terms of getting from that 800 million to 2 billion .

Speaker #3: And so when you look at these components , number one , I , I think we are fairly unique in that we explicitly qualify in terms of a desired made in Canada sovereign AI solution consistent with the white paper that the federal government has just published .

Darren Entwistle: When you look at these components, number one, I think we are fairly unique in that we explicitly qualify in terms of a desired made in Canada sovereign AI solution consistent with the white paper that the federal government has just published. I gotta believe that that is deeply relevant. I also believe it's important in terms of revenue generation as to where the government is gonna place their business, be it at a federal, provincial, or municipal level, because that's gonna be the qualifier, you know, on the RFP. The other thing that I think is distinct about us and our relationship with NVIDIA and our strategy of going from CAD 800 million to CAD 1 billion is that we're taking a modular build approach.

Speaker #3: And I got to believe that that is deeply relevant . I also believe it's important in terms of revenue generation as to where the government is going to place their business , be it at a federal , provincial or municipal level , because that's going to be the qualifier , you know , on the on the RFP .

Speaker #3: The other thing that I think is distinct about us and our relationship with Nvidia and our strategy of going from 800 million to 1 billion is that we're taking a modular build approach .

Darren Entwistle: You know, you can, you can look in the papers this morning, look back historically. There's an Oklahoma Land Rush to build infrastructure, 2 weeks later people are worrying, Oh, this is gonna be a bubble, and we're gonna have overinvestment and too much infrastructure, and we're not gonna be able to move the inventory. It's oscillated back and forth in that regard. We think whilst, you know, the supply and demand component is still getting figured out, you know, our modular build approach is the right way to address the market opportunity but do it from a responsible CapEx investment point of view. The other advantage of the modular build rather than big bang is that we can continuously take advantage of improvements in chip technology, leveraging again our NVIDIA relationship.

Speaker #3: And , you know , you can you can look in the papers this morning and then look back historically , there's an Oklahoma land race to build infrastructure .

Speaker #3: And then two weeks later , people are worrying , oh , this is going to be a bubble . And we're going to have overinvestment and too much infrastructure , and we're not going to be able to move the inventory .

Speaker #3: And its oscillated back and forth in that regard . We think , well , you know , the supply and demand component is still getting figured out .

Speaker #3: You know , our modular build approach is the right way to address the market opportunity . But do it from a responsible CapEx investment point of view .

Speaker #3: The other advantage of the modular build , rather than Big Bang , is that we can continuously take advantage of improvements in chip technology , leveraging again , our Nvidia relationship .

Speaker #3: And as the chips continue to get better , we're not locked in on a bulk basis with last gen technology , we can leverage next gen technology and and that makes a difference on compute power .

Darren Entwistle: As the chips continue to get better, we're not locked in on a bulk basis with last-gen technology. We can leverage next-gen technology and that makes a difference on compute power, but it also gives us advantages in areas like power consumption, and cooling, which are of course, you know, non-trivial as it relates to their importance. Because we control the entirety of this ecosystem, I would imagine your next question is, well, if you're going to go from CAD 800 million to CAD 2 billion, what's the margin? Well, I'll tell you, the margins are, A, attractive, and they're more attractive to the organizations that control the totality of the compute ecosystem from inferences, models, all the way through to the training capability component.

Speaker #3: But it also gives us advantages in areas like power consumption and cooling , which are of course , you know , non-trivial as it relates to their importance .

Speaker #3: And because we control the entirety of this ecosystem , I would imagine your next question is , well , if you're going to go from 800 million to 2 billion , what's the margin ?

Speaker #3: Well, I'll tell you, the margins are attractive, and they're more appealing to the organizations that control the totality of the compute ecosystem from inferences and models.

Speaker #3: All the way through to the training capability component . And so , you know , that's an exceedingly attractive aspect for us . And we don't have to share our economics with a myriad of partners that have to buttress our solution because of our capabilities to do it in-house , aided and abetted by Telus digital from a specificity point of view , and going from 800 million to 2 billion across those product lines that I've just articulated from Sass all the way through to the sovereign AI component as it relates to the sovereign AI component , we're forecasting that by 2028 , we will be circa 25,000 GPUs , supported by 50MW of power .

Darren Entwistle: You know, that's an, you know, an exceedingly attractive aspect for us. We don't have to share our economics with a myriad of partners that have to buttress our solution because of our capabilities to do it in-house, aided and abetted by TELUS Digital. From a specificity point of view and going from CAD 800 million to CAD 2 billion across those product lines that I've just articulated from SaaS all the way through to the sovereign AI component. As it relates to the sovereign AI component, we're forecasting that by 2028 we will be circa 25,000 GPUs, supported by 50 MW of power. You know, our model will be a cluster as a service model.

Speaker #3: And , you know , our model will be a cluster as a service model . It's a rental model on , you know , a per GPU basis within the cluster construct with a dollar charge on a per hour basis .

Darren Entwistle: It's a rental model on, you know, a per GU basis within the cluster construct, with a dollar charge on a per hour basis. I'm not gonna get into pricing on this call. You can work through the economics as to how big that will be on a revenue basis and how attractive it can be on a margin basis, given the control of our ecosystem. The other big area that we see contributing to the CAD 2 billion. I think, again, is entirely unique to TELUS. Almost fortuitously so, if you will. We will lead the world in the combination of customer experience and AI. We will lead the world in the fusion of AI with CX on the client experience front.

Speaker #3: I'm not going to get into pricing on this call, but you can work through the economics as to how big that will be on a revenue basis.

Speaker #3: And how attractive it can be on a margin basis . Given the control of our ecosystem . And then the other big area that we see contributing to the $2 billion that I think , again , is entirely unique to Telus , almost fortuitously .

Speaker #3: So , if you will . But we will lead the world in the combination of customer experience and AI . We will lead the world in .

Speaker #3: The fusion of AI with CX on the client experience front. We will be developing AI capabilities from bots to specific copilots for lines of business to both help tell us and our external clients.

Darren Entwistle: We will be developing AI capabilities from bots to specific copilots for lines of business to both help TELUS and our external clients, leveraging the developments on the back of TELUS in terms of humans in the loop, aided and abetted by copilot capabilities across specific lines of business that drive better selling outcomes, better service outcomes, along with lower churn, better agent training outcomes that really support a superior client experience in terms of growth, service, as well as the economics because of the AI contribution to the human performance factor. We'll drive this contribution right through to the agentic level as well.

Speaker #3: Leveraging the developments on the back of Telus in terms of humans in the loop aided and abetted by copilot capabilities across specific lines of business that drive better selling outcomes , better service outcomes , along with lower churn , better agent training outcomes that really support a superior client experience in terms of growth service , as well as the economics .

Speaker #3: Because of the AI contribution to the human performance factor and will drive this contribution right through to the Agentic level as well . And we expect that to be a big source of growth on a go forward basis , because we already have a huge client base , a legacy client base within the Telus digital organization , where we have well over 650 clients .

Darren Entwistle: We expect that to be a big source of growth on a go-forward basis because we already have a huge client base, a legacy CX client base within the TELUS Digital organization, where we have well over 650 clients, some of the world's largest organizations, that are crying out for a CX AI transformation strategy and for us to help them along that particular journey. That's the color on the CAD 2 billion in terms of specificity and where it's coming from.

Speaker #3: Some of the world's largest organizations that are crying out for a AI transformation strategy . And for us to help them along that particular journey .

Speaker #3: And so that's the color on the 2 billion in terms of specificity and where it's coming from .

Speaker #8: Thanks for the color .

Jerome Dubreuil: Thanks, Westcarter.

Speaker #5: Thanks , Jerome . Carl , next question please .

Robert Mitchell: Thanks, Jerome. Carl, next question, please.

Speaker #4: The next question is from Vince Valentini from TD Cohen. Please go ahead, Vince.

Operator: The next question is from Vince Valentini from TD Cowen. Please go ahead, Vince.

Speaker #9: Hey , thanks very much , Darren . Great answer . And you're right , you would have predicted that the next question may have been margins , but close after that would be CapEx to to achieve the 2 billion , especially when it comes to the sovereign AI factories .

Vince Valentini: Hey, thanks very much. Darren, great answer. You are right, you would have predicted that the next question may have been margins, close after that would be CapEx. To achieve the CAD 2 billion, especially when it comes to the sovereign AI factories, can you talk a little bit about how much you have to invest and clarify to us that this definitely still fits within the 10% CI target that you have?

Speaker #9: Can you talk a little bit about how much you have to invest in clarify to us that this definitely still fits within the 10% CI target that you have .

Speaker #6: So yes , it would still fit into our our our bucket based on the module approach that we talked about . We see this as a very digestible but strategic and well laid out plan over the next few years .

Doug French: Yes, it would still fit into our bucket, based on the module approach that we talked about. We see this as a very digestible but strategic and well laid out plan over the next few years. I think, because we already have the land, we already have the data center infrastructure set up in both the East and the West, it'll allow us for that easier transition.

Speaker #6: I think because we already have the land, we already have the data center infrastructure set up in both the East and the West.

Speaker #6: It'll allow us for that easier transition.

Speaker #3: And I think the other attractive aspect of the modular build approach, as it relates to your question on cash flow, is that we'll be able to recycle the attractive margins that we make on GPU utilization and recycle that back into the funding of the next module and bringing new GPUs online.

Darren Entwistle: I think the other attractive aspect of the modular build approach as it relates, Vince, to your question on cash flow, we'll be able to recycle the attractive margins that we make on GPU utilization and recycle that back into the funding of the next module and bringing new GPUs online. It's a philosophy or mentality that we, you know, we'll eat what we kill, leveraging off the progress that we're making and the inventories that we're building.

Speaker #3: And so it's a a philosophy or a mentality that we , you know , we'll eat what we kill . Leveraging off the progress that we're making .

Speaker #3: And the inventories that we're building.

Speaker #9: Okay . Sorry . Did you say earlier that there's potentially partners involved with the build as well too though ? So it may not be all on your balance sheet .

Vince Valentini: Okay. Sorry, did you say earlier that there's potentially partners involved with the build as well too, though, so it may not be all on your balance sheet? Maybe I misheard you in your opening remarks.

Speaker #9: Maybe I misheard you in your opening remarks.

Speaker #6: We're looking at partnerships as well as our own data centers, so we're exploring opportunities that would allow for even further expansion as required.

Doug French: We're looking at partnerships as well as our own data centers, so looking at opportunities that would allow for even further expansion as required. I would say, yes, we are looking at partnerships where applicable, and it would go well beyond our just our Kamloops and our Rimouski data centers.

Speaker #6: And so I would say , yes , we are looking at partnerships where applicable and it would go well beyond our just our our Kamloops and our data centers .

Speaker #9: Okay . And if I could ask one other follow up , just to clarify something , you're your lease costs or lease principal payments came down 20% year over year .

Vince Valentini: Okay. If I can ask one other follow-up, just to clarify something. Your lease costs, or lease principal payments came down 20% year over year. It's nice to see, but can you explain, Doug, like how that happened, and is there any way that that's related to Terrion and leases for towers moving to a different subsidiary or something?

Speaker #9: It's nice to see , but can you explain how that happened ? And is there by any is there any way that that's related to Tarion and leases for towers moving to a different subsidiary or something ?

Speaker #6: No, it was just to... and we can get more detail after. But we've restructured some of the leases, and it's actually under the benefit of free cash flow.

Doug French: No. We can get more detail after, but we've restructured some of the leases, and it's actually under the benefit of free cash flow. We're trying to manage our cash flow more effectively and that was the whole move.

Speaker #6: So we're trying to manage our cash flow more effectively . And , and that was the the whole move .

Speaker #9: Okay . Thanks .

Vince Valentini: Okay. Thanks.

Speaker #5: Thanks, Vince. Next question, please, Carl.

Robert Mitchell: Thanks, Vince. Next question, please, Carl.

Speaker #4: The next question is from Drew McReynolds from RBC. Please go ahead, Drew.

Operator: The next question is from Drew McReynolds from RBC. Please go ahead, Drew.

Speaker #8: Yeah, thanks so much. Maybe one.

Drew McReynolds: Yeah, thanks very much. Maybe one question on sovereign AI from my perspective. Are we going to see this ramp up in revenue here through the fixed data services line? Does it kind of spread out through other lines just in your financials, just so we can kind of understand the moving parts there? Secondly, separately, can you just speak to some of your success you're getting on internet and the broader kind of product portfolio in Eastern Canada? Do you see any differences in terms of what you're able to do in the West versus what you can in the East?

Speaker #10: Question on on sovereign AI . From my perspective , are are we going to see this ramp up in revenue here through the fixed data services line ?

Speaker #10: Does it kind of spread out through other lines just in your financials, just so we can kind of understand the moving parts there?

Speaker #10: And then secondly , and separately , can you just speak to some of your success you're getting on internet . And the broader kind of product portfolio in Eastern Canada , do you see any differences in terms of what you're able to do in the West versus what you can in the East , and just maybe an update on , you know , where where you're getting more success on the product intensity portfolio and where there's more wood to chop in terms of commercialization .

Drew McReynolds: Just maybe an update on, you know, where you're getting more success on the product intensity, portfolio, and where there's more wood to chop in terms of commercialization. Thank you.

Speaker #10: Thank you .

Speaker #3: Maybe I'll kick it off and hand over to you, Doug, where you can look for the manifestation of the revenue created on our sovereign AI factories.

Darren Entwistle: Maybe I'll kick it off and hand over to you, Doug.

Doug French: Where you can look for the manifestation of the revenue created on our sales sovereign AI factories is twofold. You'll see it within our TELUS Business Solutions organization, and you'll also see it within TELUS Digital. We would intend in February to give additional guidance on how we'll report TELUS Digital as a business segment. On top of that, we will provide additional ad hoc disclosure, so you'll be able to assess the process that we are following, and the yield that we're getting off the sovereign AI factory and the GPU investment. We'll give you clarity into that specifically. Within some of the product reporting, between fixed date and others, you'll get even more insights as well of where that's showing up.

Speaker #3: Is twofold . You'll see it within our Telus business solutions organization , and you'll also see it within Telus digital . And we would intend in February to give additional guidance on how we'll report Telus digital as a business segment .

Speaker #3: On top of that , we will provide additional ad hoc disclosure so you'll be able to assess the process that we are following .

Speaker #3: And the yield that we're getting off the sovereign AI factory and the GPU investment. So we'll give you clarity into that.

Speaker #3: Specifically .

Speaker #6: And within some of the product reporting between fixed date and others , you'll get even more insights as well of where that's showing up on East , West , on , on loading .

Doug French: On East/West on loading, we’ve seen good loading across the board. It’s both East, both West, and then business in within the small business area is contributing to those internet loads. On a bundled basis, we are seeing obviously a little bit more bundling still in the West, but gaining momentum in the East.

Speaker #6: We've seen good loading across the board and it's it's both east both west . And then business . And within these small business area is contributing to those those internet loads .

Speaker #6: And on a on a bundled basis we are seeing obviously a little bit more bundling still in the West , but gaining momentum in the East .

Speaker #10: Okay, thanks very much.

Drew McReynolds: Okay. Thanks very much.

Speaker #5: Thanks, Drew. Next question, please. Carl.

Robert Mitchell: Thanks, Drew. Next question, please, Carl.

Speaker #4: The next question is from Stephanie Price from CIBC World Markets. Please go ahead, Stephanie.

Operator: The next question is from Stephanie Price from CIBC World Markets. Please go ahead, Stephanie.

Speaker #11: Hi. Good morning. Hoping you could talk a little bit about your strategy on device financing and how that's flowing through to the tech service revenue.

Stephanie Price: Hi. Good morning. I was hoping you could talk a little bit about your strategy on device financing and how that's flowing through to the TTech service, revenue and more broadly, how you think about TELUS's positioning in the wireless market at this point.

Speaker #11: And maybe more broadly, how do you think about TELUS's positioning in the wireless market at this point?

Speaker #6: I couldn't hear the first part. Was it...

Doug French: I couldn't hear the first part. What was it? Device financing. Oh, device financing. Device financing is really just a flow-through on the balance sheet. You'll see it build up over that two-year period. How it hits your P&L will be depending on how much of a handset subsidy you give. The handset subsidy then is prorated between upfront hit and an impact on your ARPU based on an allocation from the accounting rules. It takes the fair market value of the handset, the fair market value of the monthly recurring revenue, and allocates it to both. You'll see from a cash flow perspective, lower handset financing obviously is impacting positively on cash flow.

Speaker #3: Device ?

Speaker #6: Oh , device financing . So device financing is really just a flow through on the balance sheet . So you'll see it build up over that two year period where the how it hits your PNL will be depending on how how much of a handset subsidy you give and the handset subsidy , then is is prorated between upfront hit and an impact on your arppu based on an allocation from the accounting rules .

Speaker #6: So, it takes a fair market value of the handset, the fair market value of the monthly recurring revenue, and allocates it to both.

Speaker #6: And so you'll see from a cash flow perspective, lower handset financing obviously is impacting positively on cash flow. And then what goes through your P&L is really only impacted by whether you give a subsidy or whether you make a margin, and that's what you would see in our financials.

Doug French: What goes through your P&L is really only impacted by whether you give a subsidy or whether you make a margin. That's what you would see in our financials on any quarterly basis.

Speaker #6: On a quarterly basis .

Speaker #11: Okay . Thanks for the thanks for the color . And then just as a follow up , you know , tell has announced their no partner for for Cogeco's wireless launch in BCE recently announced a fiber expansion into Alberta and B.C.

Stephanie Price: Okay. Thanks for the color. Just as a follow-up, you know, TELUS has announced they're an MVNO partner for Cogeco's wireless launch, and BC recently announced a fiber expansion into Alberta and BC. I understand financial details aren't disclosed, hoping you can give some color on the financial profile versus the T-Tech segment and what kind of impact we can expect to see from this over time.

Speaker #11: I understand financial details aren't disclosed, but I'm hoping you can give some color on the financial profile versus the tech segment. And what kind of impact can we expect to see from this over time?

Speaker #3: Take it away .

Doug French: Take it away. Yeah. On the Cogeco one, it's all gonna be based on roaming, so we will get that through roaming revenue, and it'll build as their volume grows. And it'd be at a wholesale rate, a commercially driven wholesale rate. I think on the Bell side of reselling in the West, I think the as we've highlighted, we are obviously supportive of competition. The wholesale revenue that you get comes at a higher margin, and you don't have the success-based capital, but you don't get the product intensity. You would have a fast payback. You'd be earning margin and really good margin right up front. And then you would not have that success-based capital, so it'd take pressure off the capital number concurrently.

Speaker #6: Yeah . So on on . The the Cogeco one , it's all going to be based on roaming . So we will get that through roaming revenue and it'll build as their volume grows .

Speaker #6: And it'd be at a wholesale rate a commercially driven wholesale rate I think on the , the bell side of reselling in , in the West , I think the as we've highlighted , we are obviously supportive of , of competition and the wholesale revenue that you get comes at a higher margin and you don't have the success based capital .

Speaker #6: But you don't get the product intensity . So you would have a fast payback . You'd be earning margin and really good margin right up front .

Speaker #6: And then you would not have that success-based capital. So it would take pressure off the capital number concurrently. And there's a good chance these are customers that we would not have gotten.

Doug French: There's a good chance these are customers that we would not have gotten, so it is a net benefit to us. Over time, you could build up a base just like wholesale and wireless. It is high margin, and it is contributing obviously to our P&L. From a customer experience perspective, we still want to obviously win in retail, and our bundling and our product superiority will continue to compete well there.

Speaker #6: So it is a net benefit to us . So over time you could build up a base just like wholesale and wireless . And it is high margin and it's contributing obviously to our PNL .

Speaker #6: But from a customer experience perspective , we still want to obviously win in retail and our bundling and our product superiority will continue to compete .

Speaker #6: Well , there .

Speaker #11: Thanks for the color .

Stephanie Price: Thanks for the color.

Speaker #5: Thanks , Stephanie . Carl , we have time for one more question . Please .

Robert Mitchell: Thanks, Stephanie. Carl, we have time for one more question, please.

Speaker #4: The final question is from Matthew Griffiths from Bank of America . Please go ahead . Matthew , hi .

Operator: The final question is from Matthew Griffiths from Bank of America. Please go ahead, Matthew.

Matthew Griffiths: Hi. Thank you for taking the question. Sorry, I was wondering if you could maybe just talk a little bit about the outlook for TELUS Health. I know the growth has been strong this past quarter, you know, partially helped by the acquisition, but just if you could make some comments on, like, the underlying performance that we could assume going forward, just help on the modeling front. On the comments about and you gave a lot of information on the AI topic, so I don't really wanna open that up too much, but you made the comment about, you know, government versus enterprise and that government seemed well positioned, given their position papers that they would be buyers.

Speaker #12: Thank you for taking the question. Sorry, I was wondering if you could maybe just talk a little bit about the outlook for health.

Speaker #12: I know in the the growth has been strong this past quarter , partially helped by the acquisition . But just if you could make some comments on like the underlying performance that we could assume going forward , just help on the modeling front and then on the comments about and you gave a lot of information on the AI topic .

Speaker #12: So I don't really want to open that up too much . But you made the comment about , you know , government versus enterprise and that governments seem well positioned given their position papers , that they would be buyers .

Speaker #12: I mean, is your starting assumption in that $2 billion revenue target sort of heavily weighted towards government adoption of these services, with maybe a lag to enterprise?

Matthew Griffiths: I mean, is your starting assumption in that CAD 2 billion revenue target sort of heavily weighted towards government adoption of these services with maybe a lag to enterprise? Are you assuming sort of just, you know, an equal adoption across the kind of those main buckets of customers? Thanks.

Speaker #12: Or are you assuming sort of just an adoption across the kind of those main buckets of customers? Thanks.

Speaker #3: Yeah . So the the answer is the latter . A wider distribution not anchored on on the government front , it would include government , but equally or even more broadly , enterprises would include start up organizations that would want to be able to leverage the compute access that we could provide .

Doug French: Yeah. The, the answer is the latter.

Darren Entwistle: A wider distribution, not anchored on the government front. It would include government, but equally or even more broadly, enterprises would include startup organizations that would wanna be able to leverage the compute access that we can provide. You could think about research opportunities. It really is a broadly distributed portfolio of customers that we would be going after. You know, there's aspects of exploration as well. We've got the capability. Let's see how it develops related to market need along the way. Because we've done it in a modular basis, we can be agile and responsive. The answer is no, it's not anchored on government.

Speaker #3: You could think about research opportunities. It really is a broadly distributed portfolio of customers that we would be going after. And, you know, there are aspects of exploration as well.

Speaker #3: We've got the capability . Let's let's see how it develops related to market need along the way . And because we've done it in a modular basis , we can be agile and responsive .

Speaker #3: But the answer is no. It's not anchored on government.

Darren Entwistle: Navin, do you wanna maybe speak a little bit about the view on health prospectively from a growth point of view?

Speaker #13: Health .

Speaker #3: Naveen, do you want to maybe speak a little bit about the view on health prospectively from a growth point of view?

Speaker #10: Yeah , I'd be happy to . Thanks . Darren and thanks for the question , Matthew . I would say we're seeing good acceleration in the health business in terms of operating revenue .

Navin Arora [EVP and President, TELUS Business Solutions, TELUS Health, TELUS Agriculture & Consumer Goods, and TELUS Partner So: Yeah, I'd be happy to. Thanks, Darren, thanks for the question, Matthew. I would say we're seeing good acceleration in the health business in terms of operating revenue. We saw that improve to 18% in Q3, that obviously was helped by a full quarter of Workplace Options this quarter. When I look ahead, I see some strong organic growth in the business, both in the employer and Payvider business. We're seeing that because of strong churn performance and as well as really strong sales bookings. As an example, the employer business sales bookings are up 72%. Clinics are also up 44%, the Payvider business is up 18% all year-over-year.

Speaker #10: So we saw that improve to 18% in Q3 and that obviously was helped by a full quarter of workplace options this quarter . And when I look ahead , I see some strong organic growth in the business , both in the employer and wider business .

Speaker #10: And we're seeing that because of strong churn performance . And as well as really strong sales bookings . So as an example , the employer business sales bookings are up 72% .

Speaker #10: Clinics are also up 44% . And the business is up 18% all year over year . And so that bodes well for that revenue coming online in the future .

Navin Arora [EVP and President, TELUS Business Solutions, TELUS Health, TELUS Agriculture & Consumer Goods, and TELUS Partner So: That bodes well for that revenue coming online in the future. When we think about the WPO integration, not only are we seeing good organic revenue growth from that part of the business, what we're also seeing is their really strong operating model is driving EBITDA margin expansion as we migrate more and more of our former telehealth operations onto the WPO case management system. We're expecting even further improved churn, improved stickiness through customer experience, the opportunity to really drive improved product intensity tied to that improved experience, then, as I said, improved margin contribution from that business. Also prospectively, we really like the global footprint that we've developed, the markets that we're playing in have very strong growth opportunity.

Speaker #10: And when we think about the integration, not only are we seeing good organic revenue growth from that part of the business, but we're also seeing that a really strong operating model is driving EBITDA margin expansion as we migrate more and more of our former telehealth operations onto the case management system.

Speaker #10: And so we're expecting even further improved churn , improved stickiness through customer experience . The opportunity to really drive improved product intensity , tied to that , improved experience .

Speaker #10: And then , as I said , improved margin contribution from that business . And then also prospectively , we really like the global footprint that we've developed and the markets that we're playing in have very strong growth opportunity .

Speaker #10: And as products like EAP , employer Well-Being services , employer well-being platform capabilities in the gamification of wellbeing , mental health capabilities as those capabilities continue to improve in terms of importance in those markets , we're going to ride that market growth wave tied to that .

Navin Arora [EVP and President, TELUS Business Solutions, TELUS Health, TELUS Agriculture & Consumer Goods, and TELUS Partner So: As products like EAP, employer well-being services, employer well-being platform, capabilities in the gamification of well-being, mental health capabilities, as those capabilities continue to improve in terms of importance in those markets, we're gonna ride that market growth wave tied to that. Feeling very, very good about that. Then, you know, maybe the last thing I'll close with is on the Payvider side, we've seen some very good organic growth coming from deals tied to platform-as-a-service, our data capabilities and our ability to monetize the analytics coming from the data, and we're starting to see strong growth there. We also sold, you know, our largest pharmacy management system deal recently. Feeling very good about the prospects of continued growth in the health space.

Speaker #10: So feeling very , very good about that . And then maybe the last thing I'll close with is on the on the provider side , we've seen some very good organic growth coming from deals tied to platform as a service .

Speaker #10: Our data capabilities and our ability to monetize the analytics coming from the data . And we're starting to see strong growth there . We also sold , you know , our largest pharmacy management system deal recently .

Speaker #10: So, feeling very good about the prospects of continued growth in the health space. With that, I'll pass it back to you, Dan.

Navin Arora [EVP and President, TELUS Business Solutions, TELUS Health, TELUS Agriculture & Consumer Goods, and TELUS Partner So: With that, I'll pass it back to you, Darren.

Speaker #12: Thanks so much .

Darren Entwistle: Thanks so much. Okay, Robert.

Speaker #3: Okay , Robert .

Speaker #5: Okay . Thank you Matt . And thank you everyone for joining us today . Please feel free to reach out to the IR team with any follow ups .

Robert Mitchell: Okay. Thank you, Matt. Thank you everyone for joining us today. Please feel free to reach out to the IR team with any follow-ups. With that, back to you, Carl.

Speaker #5: And with that, back to you, Carl.

Operator: This concludes the TELUS 2025 Q3 Earnings Conference Call. Thank you for your participation. Have a nice day.