TELUS Corporation (T:CA) Q3 2025 Earnings Call Transcript

TELUS Corporation reported robust Q3 2025 performance, achieving an industry-best 288,000 customer additions and 0.91% postpaid mobile churn, which contributed to 3% TTech EBITDA growth and an 8% increase in free cash flow to $611 million. Strategic initiatives included the privatization of TELUS Digital, expected to yield $150M-$200M in annualized synergies, and significant expansion of AI-enabling capabilities, projected to grow from $800 million to $2 billion in external client revenue by 2028 through its sovereign AI factory and NVIDIA partnership. TELUS Health also demonstrated strong growth with 18% revenue and 24% adjusted EBITDA increases, while the Terrion tower transaction bolstered the balance sheet and deleveraging efforts, supporting a 4% dividend increase and reaffirming the 3x leverage target by 2027.

Analysis

TELUS Corporation reported a robust Q3 2025, demonstrating strong operational execution with an industry-best 288,000 total customer additions and a leading 0.91% postpaid mobile churn. This performance translated into a 3% growth in TTech EBITDA and an 8% increase in free cash flow, reaching $611 million, underscoring the company's resilient core business and effective bundled service strategy. Despite a 2.8% mobile ARPU decline, a sequential 50 basis point improvement suggests stabilizing trends.

Strategic initiatives are poised to drive future growth and efficiency, notably the privatization of TELUS Digital, expected to generate $150 million to $200 million in annualized synergies by 2026. The company's AI-enabling capabilities are projected to expand significantly, from $800 million in 2025 to $2 billion by 2028, fueled by its sovereign AI factory and NVIDIA partnership. TELUS Health also delivered impressive results, with 18% revenue and 24% adjusted EBITDA growth, exceeding LifeWorks integration synergy targets by nearly threefold at $417 million.

Financially, TELUS is strengthening its balance sheet, with leverage improving to 3.5x and remaining on track for a 3x target by 2027, partly aided by the Terrion tower transaction. This financial discipline supports a 4% increase in the quarterly dividend to $0.4184 and a planned elimination of the DRIP discount, signaling confidence in sustainable shareholder returns and robust free cash flow generation. Capital intensity also improved to 12% from 13% year-over-year.

Key Decisions for Investors

• Monitor the execution and financial impact of the TELUS Digital privatization and the ramp-up of AI-enabled revenue towards the $2 billion 2028 target.
• Evaluate the sustainability of mobile ARPU stabilization and the effectiveness of bundling strategies in mitigating competitive pressures, while acknowledging consistent industry-leading churn.
• Assess progress on deleveraging and asset monetization initiatives, including potential partnerships for TELUS Health and Agriculture, for their impact on financial flexibility and shareholder returns.