TELUS Corporation

Good day and welcome to the TELUS 2023 Q1 earnings conference call. I would like to introduce your speaker, Mr. Robert Mitchell. Please go ahead.

Hello, everyone. Thank you for joining us today. Our first quarter 2023 results released MD&A financial statements and detailed supplemental investor information were posted to our website earlier this morning at telus.com slash investors. Our call today will begin with remarks by Darren, Zainal, and Doug. For the Q&A session, as we typically do, we will be joined by other senior leaders, including Naveen, Jim, Tony, Jeff, Sid, and John. Today's remarks 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 U.S., including our first quarter 2023 and annual 2022 MD&As. With that, over to you, Darren.

Thank you, Rascal. And hello, everyone. In the first quarter, the TELUS team once again demonstrated our hallmark execution excellence, characterized by the potent combination of industry-leading customer growth and financial results. Our robust performance continues to be underpinned by our globally leading broadband networks and, of course, our customer-centric culture. This enabled our best first quarter on record, with total customer net additions of 163,000, up 10% on a year-over-year basis. Once again this quarter, our team's passion for delivering superior customer experiences contributed to strong client loyalty across all of our key product lines, including blended mobile phone, pure fiber internet, optic TV, security, and voice churn, all coming in at or below 1%, which reflects North American industry leading performance in that regard. In the first quarter, we delivered leading consolidated revenue and EBITDA growth of 16% and 11%, respectively, alongside industry-best double-digit free cash flow growth of 29%. Let's turn now to have a look at our mobile operating results. Telus achieved strong customer growth of 105,000 net additions in the first quarter. This included healthy mobile phone net additions of 47,000, up slightly over last year, and our best first quarter result since 2010. Notably, this strength was driven primarily by loading on our premium brand, reflecting our continued focus on high-quality and profitable customer growth. It also included healthy connected device net additions of some 58,000, which were up 26% on a year-over-year basis, indicative of positive momentum with respect to our 5G and IoT B2B solutions. Importantly, our team delivered another quarter of industry-best loyalty results, which continues to be the hallmark of the Telus organization and our customers' first culture put into action. Blended mobile phone churn was 0.88%. Moreover, our industry leading mobile phone churn of 0.7% represents the ninth quarter out of the last 13 that we've earned a customer loyalty rate below 0.8%. This distinguishes us from our competitors and indeed this is a result that is unsurpassed in North America with a churn rate that is amongst the lowest globally. Our consistently strong performance is powered by our highly engaged team who passionately delivers superior service offerings and digital capabilities over our world-leading broadband networks. Indeed, in this regard, in March, TELUS was recognized as Canada's best major mobile carrier in the inaugural 2023 Reader's Choice Awards conducted by U.S.-based PCMag, whilst Public Mobile was named Canada's best digital mobile carrier. In addition, TELUS was awarded Canada's best mobile carrier for business in PCMag's Business Choice Awards. Furthermore, In February, TELUS earned the top spot in six categories in the Mobile Network Experience Report by global analytics company OpenSignal, making TELUS Canada's most awarded network for the 12th consecutive time. The consistent recognition from a range of independent organizations reinforces the superiority of TELUS' world-leading network's in terms of offering customers the fastest, most expansive, and most reliable service in Canada. The closed and mobile industry leading first quarter ARPU growth of 3.8% over last year was supported by roaming improvements as a result of increased international travel. It was also buttressed, however, by strength in our premium brand and domestic monthly recurring revenue, as well as our industry-best churn rate, whereby we are retaining our highest-value customers in addition to continued growth in IoT and connected device revenues that we will expect to see a tidy contribution from at the ARPU and AMPU level prospectively. This drove North American leading mobile network revenue growth, which is amongst the highest of developed markets globally. Quite a result. Notably, our leading mobile phone lifetime revenue continues to exceed our national peers by up to 62% and is amongst the best in the world. This is reflective of the combination of our consistent focus on high-quality customer growth and leading client loyalty, delivered consistently, as is the hallmark of the TELUS organization. Let's turn now and take a look at our fixed operating results, where TELUS delivered industry-leading first quarter wireline customer growth. Our team achieved leading internet net additions of 35,000 in the quarter, up 17% on a year-over-year basis. We continue to drive leading growth in our TV product line with net additions of 9,000, which was relatively flat on a year-over-year basis. Furthermore, residential voice losses were again an industry low at 8,000, which represents a 20% improvement over this time last year. Notably, this leading performance reflects our continued momentum with respect to multi-product intensity, or multi-product penetration, and in the inherent churn benefits that have been so consistently successful for the TELUS team. Strong and industry-best security net additions of 22,000 in the first quarter contributed to the important milestone of achieving one million total security customers. Quite the progress on the security front over the last five years, a lot of dining Thomas's that we'd hit the million sub mark. And we've now done that. And we're still growing significantly, both individually within the security product line, but it's also as part of the bundle on both the consumer and the B2B front. Notably, this one millionth of achievement comes on the heels of our security team being named BrandSpark's most trusted home security service in Canada for the second year in a row. Overall, thanks to our team, our robust and industry-leading external fixed net additions of 58,000 represented our best first quarter on record. This performance reflects the strength of our unique and highly attractive bundle offerings across our truly unmatched portfolio of products and services. Products and services that are buttressed by our ever-expanding, leading Pure Fiber and 5G networks. Our products being supported by our leading customer-centric culture that delivers global best customer outcomes. And finally, And critically, our success is supported by our highly differentiated social capitalism attributes that underpin the strength of the Telus brand in action and the way that it resonates with customers when they think about who they're going to give their patronage to and which company does the most for their communities. Notably, in April, our Telus Pure Fiber Network was recognized by OpenSignal as the best fixed broadband network in Western Canada in their inaugural Fixed Broadband Experience Report. Indeed, the accolades on both of our fixed and mobile networks underscore the tremendous value of the generational investments that we have made in global best network technologies. which will continue to drive extensive socioeconomic benefits for Canadians for decades and decades to come. This certainly highlights the efficacy of the facilities-based competition regulatory model. TELUS's broadband leadership is owing to our unique innovation-centric culture and as well the determination and skill of our team as we built out and rapidly, aggressively expanded our Pure Fiber network over the past 10 years, which is one of the most advanced fiber deployments in the entire world. This generational investment is the cornerstone of our leading customer growth and the significant ongoing market share gains that we have driven over many years and will do so going forward. Moreover, Telus Pure Fiber has truly and fundamentally transformed the way we do business. It's not just about the glass, but the etiology in terms of the business transformation of our organization. And this includes enabling meaningful simplification and enhanced efficiency effectiveness. It includes supporting our social purpose and environmental sustainability promises. And finally, it positions us in terms of what we have done so diligently over the last 10 years in terms of our pure fiber investments for decades of robust free cash flow generation. In the same way, our organization reaped a century of attractive returns from copper, as we continue our world-leading copper decommissioning and recycling program. In a moment, Daniel is going to have the opportunity to provide additional color on our consumer mobile and fixed businesses. Looking at TELUS Business Solutions and what a story this is turning out to be for our organization. Our team continues to accelerate profitable growth and make meaningful contributions to our success achieving strong growth in revenue, EBITDA contribution, and cash flow in the first quarter across our B2B product lines. Our business solutions team secured a number of significant wins and strategic renewals in the commercial and public sector space, including a nine-figure deal to deploy TELUS Cloud Collaboration Services that will modernize communications for one of our high-profile clients. Now let's take a look at our TELUS Health business. Significant growth in the first quarter in terms of our revenues coming out at $423 million reflects the significantly enhanced scale of our health operations driven by our acquisition of LifeWorks, which is enabling us to make meaningful progress in respect of our goal to be the most trusted well-being company in the world. The expanding scale of our healthcare programs within our integrated TELUS Health organization includes covering 67 million lines, an increase of more than 45 million over last year. In addition, digital health transactions were up 7% to 49 million in the quarter. Furthermore, we welcome close to 2 million new virtual care members in the last 12 months alone, increasing our membership to 5.2 million, up nearly 60% over the prior year. We anticipate continued strong growth in TELUS Health, buttressed by the integration of our product suite that enables us to not only meet, but exceed the diverse and evolving needs of our customers with a differentiated, highly differentiated, and comprehensive range of innovative healthcare solutions. This will be supported by our ongoing and intense focus on crystallizing meaningful synergies with respect to the integration of LifeWorks. Looking at over $200 million in total synergies that we initially identified, we're looking to stretch that to a quarter of a billion dollars in total synergies. This is inclusive of revenues and cost reductions. Indeed, we've now achieved over $70 million in nearer-term cost savings. or more than the $50 million we initially indicated as our objective when we announced the acquisition last June. Indeed, since that time, we've identified additional annual cost efficiencies approaching $70 million for a total of $120 million in cost synergies by 2025. Moreover, Our combined organizations are now fully ramped and delivering on revenue synergies, and they are significant on a cross-selling basis. With in-market efforts pursuing value creation by means of organic growth throughout the remainder of 2023 and beyond to allow us to achieve our goal of hitting total synergies now at a quarter of a billion dollars. turning to tell us agriculture and consumer goods. First quarter revenues of $84 million were essentially flat on a year-over-year basis, reflecting transient headwinds, including one-time sales last year and some softness related to macroeconomic challenges as our team continues to integrate and grow this compelling global business where there is no shortage of demand. We expect ongoing strong progress, including driving double digit revenue growth in 2023, reflective of the significant long-term value we are creating as a globally leading provider of agriculture and consumer goods technology solutions around the world. Thanks to the efforts of our team, we continue to advance the sector's efficiency and its effectiveness, including quality food production, material waste reduction, better food and retail execution, and significantly seize the material opportunities as it relates to trade promotion optimization within our consumer goods business, doing it through data analytics, yielding dynamic insights that allows our customers to realize better go-to-market outcomes. Now let's take a look at TELUS International. Despite the challenging global macroeconomic environment. Earlier today, our TI team once again announced strong double-digit revenue growth and solid profitability for the first quarter. TI's resilient results and outlook reflect the important relationship with TELUS as an anchor customer, enabling TELUS' customer service excellence and powering our critical digitization strategy. with attendant AI benefits. This is a unique and symbiotic relationship that significantly benefits both organizations and differentiates both organizations from our peer groups. TI's ongoing focus on smart, profitable growth powered by attractive end-to-end digital capabilities continues to strongly position it as a trusted advisor for premier digital customer experiences and IT services for its over 650 clients. Doug is going to have an opportunity to provide further commentary on both T-TECH and Telus International's first quarter results in just a moment. In closing, our ongoing broadband network investments further enable the continued advancement of our operational and financial performance, strengthening our confidence in the robust outlook for our business and the long-term affordability and sustainability of our dividend growth program, which of course leads the industry on a global basis. The nearly 7.5% year-over-year dividend increase we announced today represents the 24th increase since we initiated our multi-year dividend growth program way back in 2011. This program is now in its 13th year, and of course, we've extended that through 2025. Enabled by a TELUS organization, we're looking forward. The sources of cash are chronically exceeding the uses. We think shareholders should benefit from that. Since 2004, Telus has returned more than $23 billion to shareholders, including over $18 billion in dividends, representing some $16 per share, supporting our global industry-leading total shareholder return achievements, another consistent hallmark of this organization. Importantly and tellingly, Future dividend growth and affordability is going to be supported by strong EBITDA and free cash flow growth. It's going to be supported by significant value creation across TI, health, and agriculture and consumer goods businesses. And it's going to be supported by the significant reduction in annual capital expenditures beginning this year, resulting in one of the lowest capital intensity ratios in the industry globally. Talk about a transition to a software-based organization. Talk about an organization that's leading on digital transformation. Talk about an organization that's leveraging the attributes of Telus International. And of course, these things in combination will drive meaningful and sustainable free cash flow expansion. Finally, I'd like to take this opportunity to always recognize our team, our customers, and our partners for helping us create stronger and healthier communities. This is rooted in the ideology of our organization and is at the nexus of our strategy. Notably, since its inception in 2018, TELUS's Friendly Future Foundation has granted $38 million in cash donations to charities in our communities, making a positive impact on the lives of 14 million young people. This includes $2.1 million in grants so far in 2023 alone to ensure even more youth have the opportunity, because they deserve it, to realize their full potential. Myself and the leadership team of TELUS and our board remain exceedingly grateful for the TELUS team's passionate efforts to support our communities across the globe as we strive to deliver outstanding results for all of our stakeholders, further exemplifying our world leadership in social capitalism. And on that note, I'll hand the call over to you, Zainal.