TELUS Corporation

Good morning, everyone, and welcome to the TELUS 2021 Q3 earnings conference call. I would like to introduce your speaker, Mr. Robert Mitchell. Please go ahead.

Hello, everyone, and thank you for joining us today. Our third quarter 2021 results, news release, MD&A and financial statements, and detailed supplemental investor information were posted on our website this morning at telus.com slash investors. On our call today, we have remarks by Darren Infusel, President and CEO of John Raines, incoming president of Telus Agriculture, Jim Senko, EVP Mobility Solutions, and Doug French, EVP and CFO. In addition, for the Q&A portion of our call, we will be joined by Zainal Malji, EVP Home Solutions, and Tony Guerin, EVP and Chief Customer Officer. Briefly on slide two, this presentation and answers to questions contain forward-looking statements that are subject to risks and uncertainties and made based on certain assumptions. Accordingly, actual performance could differ from statements made today, so we ask that you do not place undue reliance upon them. We disclaim any obligation to update forward-looking statements except as required by law, and we refer you to the risks and assumptions as outlined in our public disclosures, including our third quarter 2021 MD&A, our 2020 annual MD&A, and followings with securities commissions in Canada and the U.S. With that, over to you, Darren.

Thank you, Ronaldo, and hello, everyone. For the third quarter, our team once again achieved strong operational and financial results. Our ongoing execution excellence continues to demonstrate the consistent combination of industry-leading profitable customer growth and strong financial performance coming from across our business. Our robust performance reflects the effectiveness of our globally leading customer-centric culture and broadband networks underpinned by our highly engaged team and their passion for delivering outstanding connected experiences. This contributed to leading total mobile and fixed customer net additions of 320,000 in the quarter, an all-time quarterly record for Telus, supported by industry-best client loyalty across our key wireless and wireline product lines. Notably, blended mobile phone, pure fiber internet, optic TV, security, and voice churn are all below 1% on a year-to-date basis. Moreover, our results were buttressed by a highly differentiated and potent asset mix geared towards high-growth, technology-oriented verticals, which I'm going to elaborate on in just a minute. Looking at our consolidated financial results for the third quarter, we achieved industry-leading year-over-year growth of 7% across both revenue and EBITDA. And when excluding the impact of share-based compensation at TI, our Q3 consolidated EBITDA growth would have been 8.5%. This performance is illustrative of our unmatched capabilities and competitive position that we will continue to leverage to our advantage as the economic recovery progresses. Looking now at our mobile operating results, Telus achieved robust industry-leading customer growth of 245,000 net additions, up close to 25% on a year-over-year basis. This included 135,000 mobile phones and 110,000 connected device net new customers, up 24,000 and 23,000 on a respective basis. Impressively, connected device customer additions represented an all-time record high for our organization, something to build upon yet again going forward. Notably, with respect to this momentum on connected devices, TELUS was recently named GM Canada's 5G network provider for their OnStar connected vehicle service. This represents the first time GM has selected a domestic communications company to provide connected vehicle services for their Canadian customers. This historic alliance will leverage the skill, customer centricity and passion of our collective teams in a potent combination with our expansive world-leading 5G network to enable an unparalleled experience that will keep GM's customers and our fellow citizens safe and connected. Importantly, our team yet again delivered another quarter of best-in-class loyalty results. Blended mobile phone churn was 0.9%, an improvement of nine basis points over this time last year. This performance is backed by strong digital capabilities and superior service offerings over our world-leading broadband networks and potent customers-first culture that has served us so well. At a time when the human connection continues to be more important than ever, TELUS has been named the fastest mobile operator in Canada by U.S.-based Ookla for the fifth year in a row in their Q3 Canada Market Report for 2021. In addition, our team earned the top spot in six of the seven categories in UK-based OpenSignal's August 2021 mobile network experience, the Canada report. Notably, OpenSignal found TELUS's wireless download speed of 73.9 megabits per second to be 6% faster than the second-place finisher and close to 30% faster than the third-place finisher. This represents the 10th time TELUS has received a top ranking from OpenSignal, including being recognized as having the fastest mobile network in the world in 2020, a true reflection of the incredible expertise and dedication of our entire team led by Aerospedaro. With the ongoing operationalization of New Spectrum and expansion of our national 5G network TELUS will continue to offer Canadians globally leading network reliability, globally leading speed, coverage, and low latency. These technology attributes matter because they drive continuous innovation that enables the diversity, the productivity, and the competitiveness of our country's private sector, supporting economic growth, and job creation and sustainability. Additionally, these technology investments in our network strengthen connections to help us answer society's most pressing social challenges, challenges that we're looking to answer in health, education, food security, and environmental sustainability, whilst improving economic equality for the benefit of all Canadians. Closing on mobile, network revenue was up 3.7%, reflective of our focus on high-quality customer growth and excellent base management. In a few minutes, Jim's going to have the opportunity to provide further commentary on our outstanding results within our wireless business. Turning now to our fixed operating results. Dana and her team once again delivered impressive wireline data revenue growth of 13%, supported by great results on the B2B front from Naveen and his organization. This ongoing data revenue expansion was supported by another quarter of robust customer growth. Third quarter internet net additions of 46,000 represented our best third quarter results compared to all pre-pandemic periods since 2003, in spite of being down slightly compared to Q3 last year, which was, of course, flattered by pandemic-related impacts. Importantly, continued double-digit residential internet ARPU growth bodes exceedingly well for future lifetime economics of our fast-growing fiber-based internet product line. TELUS continues to drive strong TV attach rates, with TV net addition of 10,000. Notably, we remain the only provider in North America to consistently deliver positive TV growth quarter in and quarter out, as customers recognize the unique value of our flexible packaging and integrated over-the-top streaming. Whilst residential voice line losses of 11,000 were up slightly over last year, when market activity was muted in the early stages of the pandemic, our leading security and home automation net additions of 30,000 increased by 12,000 compared to one year ago, reflecting the strength of our digital capabilities and continued expansion of our home and security automation bundle. In total, we achieved robust, industry-best overall wireline product net additions of 75,000 in the third quarter of 2021. This was driven by our unique and highly attractive bundled offers available to customers across our superior product portfolio, as well as our strong customer loyalty, coupled with our team's focus on leveraging the distinctive competitive differentiation inherent in our expanding pure fiber network that Tony and the team have been building. Indeed, fixed net additions continue to be enhanced by our significant investments in fiber and 5G wireless technologies, including our ongoing accelerated broadband expansion program being stewarded by Tony and Eros and their teams through 2022 that's yielding such significant beneficial results for this organization, both operationally and economically. Indeed, these generational investments will fuel enhanced customer growth and operating efficiencies and drive positive cash flow benefits as we complete our expedited broadband build and retire our remaining copper infrastructure in the next 18 months. This is going to be a unique accomplishment in the global telecommunications sector. Turning now to TELUS Health, our team drove double-digit year-over-year health services revenue growth in the quarter, whilst achieving important milestones as we continue to meaningfully scale our health operations. This included reaching over 19 million lives covered, an increase of over 20%, on a year-over-year basis, realizing nearly 138 million digital health transactions during the third quarter alone, and finally adding close to 1 million new virtual healthcare members over the last 12 months, representing a 64% increase over last year, with 2.3 million members now using our virtual care solutions. TELUS will continue to leverage our leading position in healthcare technology solutions to deliver improved health outcomes for citizens through access to better health information, which of course has never been more critical. Furthermore, at TELUS Agriculture, or TAG, through our team's ongoing efforts to scale and integrate this unique business, we remain on track to generate annual revenues in agriculture in excess of $400 million in 2021. We will continue to expect this business to drive double-digit expansion in revenue and EBITDA contribution, clearly illustrative of the value we are creating as the globally leading provider of agriculture technology solutions. Earlier this past week, we announced John Raines as the president of Telus Agriculture. With over 20 years of global experience in digital agriculture, data science, and farming, John is exceedingly well positioned to lead the ongoing evolution of this critical area of our business. Indeed, leveraging his tremendous expertise, John will focus on driving growth opportunities throughout our agriculture business, using technology innovation, artificial intelligence, and human ingenuity to optimize the agribusiness production chain, including helping farmers and ranchers to produce and deliver food for the world's ever-expanding population, and to do it more efficiently, more effectively, more safely, and of course, more sustainably. I look forward to supporting John and the TELUS Agriculture team in further progressing our goal of connecting the entire agricultural value chain with smart, secure, end-to-end technology and software solutions to ensure a safer and more nutritious food supply for citizens around the world. Following my remarks, John will share a few words regarding his vision for TELUS Agriculture. Overall, third quarter revenue for T-TECH operating segments increased by more than 4% on a year-over-year basis, while EBITDA was up in excess of 7% or 8% on an organic basis. Doug's going to provide further details on our T-TECH financials in just a minute. Turning now to our DLCX segment. Earlier today TI announced strong double-digit revenue and EBITDA growth with increased profitability for the third quarter. These continued strong results demonstrate TI's position as the partner of choice for premier digital customer experiences for clients around the world as they look to our talented team to deliver end-to-end next-gen digital solutions and services powering a differentiated customer experience. This includes a unique and unparalleled mix of content moderation, data annotation, and artificial intelligence capabilities. Doug is also going to provide further details on DLCX Financials during his commentary. To conclude, Our significant ongoing broadband network investments further enable the continued advancement of our financial and operational performance, strengthening our confidence in the robust outlook for our business and the long-term sustainability of our industry-leading dividend growth program. The 5.2% dividend increase announced today represents the 21st since 2011. with our program now, unbelievably, in its 11th year. Since 2004, TELUS has now returned more than $20 billion to shareholders, including over $15 billion in dividends, representing approximately $15 per share. Future dividend growth and affordability will be buttressed by strong EBITDA growth and value creation in our core TELUS TI, health, and agriculture businesses. It is also going to be supported by lower future capital expenditures consistent with the preliminary guidance we have provided for significantly reduced capital investments of $2.5 billion or less beginning in 2023 and the meaningful resulting free cash flow expansion that we expect and that we are going to deliver as an organization and do so on a continuous perspective basis. Finally, I'd like to take this opportunity to recognize our TELUS team members and retirees who continue to demonstrate their unwavering support for our communities, and they do it better than anyone else globally. Reinforcing our longstanding dedication to working collaboratively with indigenous communities, in September, we introduced TELUS's reconciliation commitment. Developed in partnership with and in support of indigenous peoples across the country, our commitment to reconciliation acts as a cornerstone of our action plan and other related activities moving forward. By way of example, In October, we launched our TELUS Mobility for Good for Indigenous Women at Risk program, through which we are providing free smartphones and data plans to Indigenous women at risk or surviving violence. In addition, this week TELUS announced a $1 million commitment to digitize, promote, and distribute the interactive, authentic experience of the Witness Blanket. in partnership with the Canadian Museum for Human Rights and Indigenous artist, Kerry Newman. Created to pay homage to the children and families impacted by Canada's residential school system, the original witness blanket is a 12-meter-long art installation that features 887 objects gathered from 77 residential school communities across Canada, such as letters, photos, stories, clothing, art, and fragments of buildings. Our team's efforts will help to ensure the digital witness blanket will have a lasting and powerful impression on every Canadian, standing as a national monument to recognize the atrocities of the residential school era and promise to truth-telling going forward. I remain exceedingly proud of and grateful for the entire TELUS team for their exemplification of our leadership in social capitalism as we deliver outstanding results for all of our stakeholders. On that note, I'd like to turn the call over to John. John, over to you, and welcome to TELUS.