TELUS reports operational and financial results for third quarter 2021
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Industry-leading total mobile and fixed customer growth of 320,000, up 43,000 over last year, marking TELUS’ highest quarter ever
Strong, high-quality mobile phone net additions of 135,000, a 24,000 increase over the prior year driven by industry-leading mobile phone churn; record connected device net additions of 110,000, up 23,000 year-over-year
Robust wireline customer net additions of 75,000, powered by world-leading customer loyalty in combination with TELUS’ PureFibre network, including sustained momentum on accretive copper-to-fibre migrations as TELUS continues to successfully execute on its accelerated broadband expansion plan
Continued strong operating momentum in TELUS International and TELUS Health, with double-double digit revenue growth driven by a combination of robust organic customer growth and acquisitions
Consolidated revenue and EBITDA growth of 6.8 and 7.1 per cent, respectively, alongside net income expansion of 11.5 per cent, demonstrating strong and consistent operational execution, powered by a leading asset mix, combined with superior product offerings and client service excellence
Quarterly dividend increased to $0.3274 per share, up year-over-year by 5.2 per cent as TELUS continues to execute on its leading, multi-year dividend growth program, supported by healthy cash flow generation and our robust capital structure
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VANCOUVER, British Columbia, Nov. 05, 2021 (GLOBE NEWSWIRE) -- TELUS Corporation today released its unaudited results for the third quarter of 2021. Consolidated operating revenues and other income increased by 6.8 per cent over the same period a year ago to $4.3 billion. Earnings before interest, income taxes, depreciation and amortization (EBITDA) increased by 7.6 per cent to $1.5 billion while Adjusted EBITDA increased by 7.1 per cent to $1.6 billion. This growth reflects: (i) higher internet and third-wave data service margins, as well as other fixed data service margins, resulting from subscriber base growth and expanded services; (ii) growth in network revenue from increases in our mobile phone and connected devices subscriber bases; (iii) growth in mobile equipment margins; (iv) an increased contribution from our Digitally-led customer experiences – TELUS International (DLCX) segment from customer growth, including business acquisitions, and increased depth and breadth of services offered to its existing customers; and (v) lower bad debt expense. This growth was partly offset by lower legacy fixed voice and legacy fixed data services and higher employee benefits expense.
“Our team once again achieved strong operational and financial results in the third quarter,” said Darren Entwistle, President and CEO. “TELUS’ continued execution excellence was again characterized by the consistent combination of industry-leading and profitable customer growth, resulting in strong financial results across our business as evidenced by consolidated revenue and EBITDA both increasing 7 per cent. 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 customer net additions of 320,000, an all-time quarterly record for TELUS, underpinned by industry-best client loyalty across our key mobile and fixed product lines. Notably, blended mobile phone, PureFibre internet, Optik TV, Security and voice churn are all below one per cent year-to-date.”
“Our results are buttressed by our highly differentiated and potent asset mix geared towards high-growth, technology-oriented verticals,” continued Darren. “Earlier today, TELUS International (TI) announced solid double-digit revenue 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 TI’s talented team to deliver end-to-end next-gen digital solutions and services powering a differentiated customer experience, including a unique and unparalleled mix of content moderation and artificial intelligence capabilities. At TELUS Health, our team drove double-digit year-over-year health services revenue growth in the quarter, while achieving important milestones as we continue to meaningfully scale our health operations, including reaching over 19 million lives covered, an increase of nearly 21 per cent on a year-over-year basis. Furthermore, we realized nearly 138 million digital health transactions during the quarter and earned close to one million new virtual healthcare members over the last 12 months, representing a 64 per cent increase over last year. We continue to leverage our leading position in healthcare technology solutions to deliver improved health outcomes for citizens through access to better health information, which has never been more critical. In TELUS Agriculture, through our team’s ongoing efforts to grow and integrate this unique business, we remain on track to generate double-digit revenue growth and annual revenues in agriculture of approximately $400 million in 2021, illustrative of the value we are creating as the globally-leading provider of agriculture technology solutions.”
“Our third quarter performance was backed by our strong digital capabilities and superior service offerings, over our world-leading wireless and fibre broadband networks,” added Darren. “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 seven categories in U.K.-based Opensignal’s August 2021 Mobile Network Experience: Canada Report. Notably, Opensignal found TELUS’ wireless download speed of 73.9 Mbps to be 6 per cent faster than the second place finisher and close to 30 per cent faster than the third place finisher. This is 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. These awards reinforce TELUS’ leadership in terms of offering customers the fastest service in Canada across both our fibre and wireless broadband networks, as also confirmed by other independent, third-party organizations, including Canada-based Tutela and U.S.-based J.D. Power. Moreover, this recognition of the superiority of TELUS’ national broadband networks underscores the value of our significant investments in fibre and wireless technologies, including our ongoing accelerated broadband expansion program through 2022. These generational investments will fuel enhanced customer growth and operating efficiencies, and drive positive cash flow benefits as TELUS completes our expedited broadband build.”
“Importantly, our significant, ongoing broadband network investments will 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 per cent year-over-year dividend increase announced today represents the 21st since 2011, with our program now in its eleventh year. Since 2004, TELUS has 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 supported by EBITDA growth and value creation in our TI, Health and Agriculture businesses, as well as 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.”
“Our TELUS team members and retirees continue to demonstrate their unwavering support for the communities where we live, work and serve,” expressed Darren. “Reinforcing our long-standing dedication to working collaboratively with Indigenous communities, we introduced TELUS’ 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. Indeed, thanks to our customers and our TELUS team, our portfolio of For Good programs continues to deliver on our promise of a friendly future for all.”
Doug French, Executive Vice-president and CFO said, “In the third quarter, TELUS once again delivered strong operational and financial results, including healthy free cash flow growth, with year-to-date performance tracking to our annual financial targets established earlier this year and reaffirmed today. These results build on the strong operating momentum that our team has achieved over the long-term, enhancing our position of strength as we close out the final quarter of the year and move into 2022.”
Doug added, “During the quarter, our team continued to execute on our accelerated broadband build, connecting more homes and businesses directly to our leading TELUS PureFibre service and expanding our 5G network to 64 per cent of the Canadian population, and to be enhanced with the deployment of 3500MHz in the months ahead. These transformational investments are bolstering our competitive positioning, driving strong profitable customer growth and positive economic outcomes, as Canadian consumers and businesses continue to benefit from the superiority of our world-leading broadband networks and the experiences and societal benefits they enable. Furthermore, we continue to actively migrate copper customers to our PureFibre network, leading to a three percentage point decline in our copper subscriber base within our fibre footprint. As we move towards completing our copper-to-fibre migration program, we will see the benefits to our margin and cash flow profile through meaningful cost structure efficiencies and, over the longer term, real estate rationalization opportunities.”
“Consistent with our long-standing, multi-year dividend growth program, today we announced a quarterly dividend increase to $0.3274 per share, or $1.3096 on an annualized basis. The dividend increase reflects our healthy balance sheet position, along with our confidence in executing on our growth strategy, leading to strong financial performance, including EBITDA growth and margin expansion. Furthermore, as we ramp down our accelerated broadband build at the end of next year, we expect a material reduction in our capital expenditure profile, beginning in 2023, to support sustainable cash flow generation. Looking forward, our team is excited to continue delivering on our track record of execution excellence and to further advance our unique growth strategy. Powered by our leading and diversified asset base, at home and around the globe, we are in a strong position to continue to deliver superior operating and financial outcomes, further buttressing our return of capital objectives along with an eye on maintaining a strong balance sheet to support long-term value creation for our investors,” concluded Doug.
In the third quarter, we added 320,000 new customer additions, up 43,000 over last year, and inclusive of 135,000 mobile phones and 110,000 connected devices, in addition to 46,000 internet, 30,000 security and 10,000 TV customer connections. This was partly offset by residential voice losses of 11,000. Our total TELUS technology solutions (TTech) subscriber base of 16.6 million is up 5.9 per cent over the last twelve months, reflecting a 3.9 per cent increase in our mobile phones subscriber base to approximately 9.2 million, and a 20 per cent increase in our connected devices subscriber base to more than 2.0 million. Additionally, our internet connections grew by 6.5 per cent over the last twelve months to more than 2.2 million customers, our TV subscriber base increased by 4.4 per cent to over 1.2 million customers, and our security customer base expanded by 13 per cent to 773,000 customers. In health services, as of the end of the third quarter of 2021, virtual care members were 2.3 million and healthcare lives covered were 19.3 million, up 64 per cent and 21 per cent over the past 12 months, respectively, while digital health transactions were 137.9 million, up 1.4 per cent over the third quarter of 2020.
Free cash flow of $203 million increased by $42 million or 26 per cent over the same period a year ago, resulting primarily from: (i) the timing of income tax payments, as a portion of the tax instalments in the first six months of 2020 were deferred into the third quarter of 2020 as permitted by several government jurisdictions as part of their pandemic responses; (ii) strong EBITDA growth; and (iii) the timing related to device subsidy repayments and associated revenue recognition and our TELUS Easy Payment device financing program. These factors were partly offset by higher capital expenditures in connection with our planned accelerated capital investments.
Consolidated capital expenditures increased by $250 million in the third quarter of 2021, due to accelerated investments in our 5G network, our broadband build, and digitization to increase system capacity and reliability, in addition to the advanced purchase of equipment to mitigate supply chain risks and support subscriber growth. With our investments, we are advancing the mobile speeds and coverage of our expanding 5G network, continuing to connect additional homes and businesses directly to our fibre-optic technology, evolving our TV ecosystem, and supporting system reliability and operational efficiency and effectiveness efforts. These investments also support our internet, TV and security subscriber growth, address our customers’ demand for faster internet speeds, and extend the reach and functionality of our business, as well as our healthcare and agriculture solutions.
As part of our accelerated broadband build, $442 million of the up to $750 million targeted for 2021 has been invested, to advance our fibre build and 5G coverage. This spend has enabled: (i) additional premises to be connected to our fibre network; (ii) acceleration of our copper-to-fibre migration program; (iii) expansion of the number of communities we are bringing fibre to, including many rural and Indigenous communities; (iv) advancement of our 5G network build which now covers 24.1 million Canadians, representing 64 per cent of the population at September 30, 2021; and (v) progress in the implementation of our digital strategy that will bolster both top line revenue growth and operating expense efficiency.
At the end of the third quarter, our TELUS PureFibre network covered more than 2.6 million premises, up from more than 2.4 million premises in the third quarter of 2020. As at September 30, 2021, approximately 12 per cent of our TV and internet customers within our PureFibre footprint are serviced by copper, down from 15 per cent at June 30, 2021. The majority of the remaining customers are expected to be substantially migrated to TELUS PureFibre by the end of 2022.
For the quarter, net income of $358 million increased by 11.5 per cent over the same period last year and Basic earnings per share (EPS) of $0.25 increased by 4.2 per cent. These increases are driven by the after-tax impact of increased Operating Income, including increased EBITDA, as detailed above, partly offset by higher depreciation and amortization; the after-tax impact of increased financing costs, including a long-term debt prepayment premium of approximately $10 million; and, as it relates to EPS, higher shares outstanding.
When excluding the effects of restructuring and other costs, income tax-related adjustments, other equity losses related to real estate joint ventures, and long-term debt prepayment premiums, adjusted net income of $392 million increased by $36 million or 10 per cent in the third quarter of 2021, while adjusted basic EPS of $0.29 was up 3.6 per cent.
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