TELUS Corporation today released its unaudited results for the
fourth quarter of 2020. Consolidated operating revenues and other
income increased by 5.2 per cent over the same period a year ago to
$4.1 billion. Earnings before interest, income taxes, depreciation
and amortization (EBITDA) decreased by 2.3 per cent to $1.3 billion
while Adjusted EBITDA was down 0.2 per cent. This decline reflects
multiple impacts from the COVID-19 pandemic, declines in wireline
legacy voice and legacy data services and higher employee benefits
and other costs, including support for business acquisitions. This
was partly offset by growth in wireline data service margins
resulting from business acquisitions, expanded services and
customer growth; growth in our wireless subscriber base; increased
organic and inorganic EBITDA contribution from TELUS International;
and enhanced cost efficiency programs.
“Throughout 2020, TELUS achieved strong operational and
financial results in both wireline and wireless” said Darren
Entwistle, President and CEO. “This is a trend the TELUS team has
demonstrated over the long-term and, in 2020, realized against the
backdrop of an unprecedented operating environment. Our performance
in the fourth quarter, and for the full year, was characterized by
our hallmark combination of robust, high-quality and profitable
customer growth, alongside strong financial results. The quarter
concluded another year of industry-leading customer growth, with
777,000 total net customer additions, including an all-time record
for annual wireline customer growth of 240,000. Notably, we
achieved strong free cash flow for the year, within the range
initially targeted in February 2020, and TELUS was the only telecom
provider amongst its national peers to report positive EBITDA
growth for the year. Our industry-leading customer growth was
driven by our team’s passion for delivering outstanding customer
experiences, which contributed to strong and enhanced client
loyalty across our key product lines, including postpaid mobile
phone, internet and TV churn all below one per cent in the fourth
quarter. Indeed, 2020 represented our seventh consecutive year of
industry-leading postpaid wireless churn below one per cent. This
performance was backed by our highly engaged team, world-leading
wireless and fibre broadband networks, strong digital capabilities,
and superior service offerings.”
“The efficacy of ongoing investments in our globally leading
broadband networks continues to be evidenced by major, independent
reports. In 2020, TELUS’ wireless network was recognized by
UK-based Opensignal as the fastest in the world, and by U.S.-based
Ookla as the fastest and most expansive on a national basis; both
awards have now been received by TELUS for four consecutive years.
In addition, for the second year in a row, Canadian-based Tutela
placed TELUS first in respect of quality, latency and download
throughput, for our wireless network, nationally. Our wireline
broadband network was similarly recognized, with U.S.-based PCMag
ranking our PureFibre network as Best for Gaming in 2020, and
naming TELUS as the fastest internet service provider on a national
basis. At a time when the speed, quality and expansiveness of our
networks has become more important than ever, these recognitions
are particularly resonant.”
Darren further commented, “The TELUS team’s ability to
consistently drive profitable growth over the long-term, provides
us with confidence in delivering on the annual targets for 2021
that we have announced today. This includes expected
industry-leading revenue and EBITDA growth of up to 10 and 8 per
cent respectively, alongside free cash flow of approximately $1.5
billion. Furthermore, the unparalleled skill, innovation and grit
of our team underpins our leading multi-year dividend growth
program, now in its eleventh year. Notably, we have returned over
$19 billion to shareholders since 2004 through our dividend and
share purchase programs, representing $15 per share.”
“Last week, TELUS International (TI) achieved a monumental
milestone with its successful initial public offering (IPO),
establishing a market capitalization of more than $10 billion. In
Canada, this accomplishment makes TI’s IPO the largest technology
IPO in TSX history, with total aggregate proceeds of $1.36 billion.
Impressively, as TI embarked upon its next journey as a publicly
traded company on both the Toronto and New York Stock Exchanges,
TI’s market capitalization exceeded the $8 billion market
capitalization of TELUS two decades ago when we first embarked on
our national growth strategy. This significant value creation
reflects TI’s steadfast focus on delivering leading customer
experiences and strong financial results, in concert with an
unparalleled dedication to giving back to their local communities;
emulating the parameters of TELUS’ own success in growing from a
western-based telecommunications company into a globally leading
organization. TELUS International has evolved, over the last 15
years, into a digital customer experience innovator that harnesses
the power of technology to provide outstanding customer and
community experiences on a global basis. With TELUS retaining a
controlling interest, and a 55 per cent economic stake, we remain
excited for TI’s future as it continues to drive better business
outcomes and grow value for all stakeholders. This success story
reinforces the efficacy of our uniquely diversified and
technology-oriented assets, including TELUS Health and TELUS
Agriculture. Our integrated and broad portfolio of solutions within
these growth verticals, combined with a strong financial growth
profile, further enhances the differentiated value we are creating
for our investors.”
“In a year like no other, our TELUS team continued to support
our communities and each other,” Darren expressed. “In this regard,
we expanded our TELUS Health for Good program with the launch of
seven new mobile health clinics in 2020, and an additional two
clinics in January of 2021, bringing our total to 13 clinics
nationwide. Throughout 2020, our mobile clinics supported 28,000
patient visits, including administering 12,700 COVID-19 assessments
and tests. To further support public healthcare capacity and key
health initiatives across Canada, the TELUS Friendly Future
Foundation contributed $8.9 million to 597 charitable projects in
2020, including directing $2.4 million in emergency response
grants. Overall, our TELUS family contributed $85 million and 1.25
million hours of volunteerism to charitable and community
organizations throughout 2020. Our team's leadership in social
capitalism was once again recognized on a global basis, with TELUS
ranking 54th on the Corporate Knights 2021 Global 100 Most
Sustainable Corporations Index for the 9th time. Impressively,
TELUS is the highest ranking telco in North America.”
Doug French, Executive Vice-president and CFO said, “TELUS’
impressive operational and financial results reflect the strength
of our differentiated asset mix and our commitment to profitable
customer growth. In 2020, we achieved healthy free cash flow growth
of 54 per cent, reflective of positive year-over-year EBITDA
growth, despite an unprecedented operating environment, and lower
capital expenditures as planned.”
Doug added, “Importantly, our results are underpinned by a
strong balance sheet, which has provided the financial flexibility
to pursue our exciting growth strategy, including through the
global pandemic period. Clearly, our strategic acquisitions and
thoughtful capital investments are paying off, as demonstrated by
our consistent financial results and customer growth, and these
investments will enhance our profitability and cash flow generation
over the long-term. Our generational and superior fibre build is
progressing towards completion, providing a solid foundation for
the ongoing expansion of our world-leading wireless network with
5G, particularly as key 3500 MHz spectrum becomes available in
2021.”
“As evidenced by our consolidated 2021 financial targets
announced today, we expect to deliver another year of strong
financial and operational results, including continued robust cash
flow generation alongside stable strategic capital investments.
These financial targets support our leading dividend growth program
where we continue to target seven to 10 per cent annual increases
through 2022. This builds on our commitment and consistent track
record with respect to our transparent dividend growth program over
the past decade. With an unrivalled growth profile, we are
committed to further advancing our proven strategy, while driving a
collective focus on social capitalism, and delivering outstanding
value for all TELUS stakeholders – not only in 2021, but for years
to come” Doug concluded.
In the quarter, we added 253,000 new customer additions, up
77,000 over last year, and inclusive of 87,000 mobile phones,
88,000 mobile connected devices, in addition to 44,000 internet,
20,000 TV and 23,000 security customers. This was partly offset by
low residential voice losses of 9,000. Our total wireless
subscriber base of 10.7 million is up 5.2 per cent over the last
twelve months, reflecting a 2.5 per cent increase in our mobile
phones subscriber base to approximately 9 million, and a 21 per
cent increase to our mobile connected devices subscriber base to
approximately 1.8 million. Additionally, our internet connections
grew by 7.9 per cent over the last twelve months to surpass 2.1
million customers, our TV subscriber base increased by 4.7 per cent
to 1.2 million, and our security customer base expanded by 16 per
cent to 707,000.
Free cash flow of $218 million increased by $83 million or 62
per cent over the same period a year ago, largely from lower
capital expenditures. Excluding cash taxes, free cash flow of $313
million increased by $104 million or 50 per cent.
Consolidated capital expenditures of $613 million decreased by
17 per cent or $129 million over the same period a year ago due to
the timing of our fibre build activities and efficiencies in our 4G
network expenditures. These decreases were partially offset by
increased investments in our 5G network, in addition to investments
to increase system capacity and reliability. With our ongoing
investments, we are advancing wireless speeds and coverage that
enabled our 5G network launch, continuing to connect additional
homes and businesses directly to our fibre-optic technology, and
supporting systems reliability and operational efficiency and
effectiveness efforts. Our capital expenditures allowed us to
achieve strong internet, TV and security customer growth, and
enabled us to deliver greater resiliency, scalability, and
efficiency in IT infrastructure and remote work capability in
response to the COVID-19 pandemic.
At the end of the quarter, our TELUS PureFibre network covered
approximately 2.5 million premises, or approximately 81 per cent of
our high-speed broadband footprint, reflecting an increase of
approximately 300,000 fibre premises over the last twelve months.
Furthermore, at December 31, 2020, our 5G network was available to
over 75 communities and covered over 10.5 million Canadians,
representing more than 28 per cent of the Canadian population.
For the quarter, net income of $271 million decreased by 29 per
cent over the same period last year and Basic earnings per share
(EPS) of $0.20 decreased by 33 per cent. These declines reflect
increased depreciation and amortization from capital assets growth,
including acquisitions; declines in wireline legacy voice and
legacy data services; higher non-labour-related restructuring and
other costs; multiple impacts from the COVID-19 pandemic, which
were partly offset by growth in wireline data service margins,
wireless and wireline subscriber base growth, increased EBITDA
contribution from TELUS International, and enhanced cost efficiency
programs; 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 non-controlling interests, adjusted net
income of $289 million decreased by 28 per cent compared to the
prior year, while adjusted basic EPS of $0.22 was down 31 per
cent.
COVID-19 updateIn September 2020, shortly
before the beginning of the fourth quarter, Canada’s Prime Minister
declared that a second wave of COVID-19 was already underway. On
December 9, 2020, Health Canada authorized the first COVID-19
vaccine, and, the following week, health authorities began
administering the vaccine. On December 26, 2020, Canada’s first
known case of a coronavirus variant was confirmed. In order to curb
the increasing rate of new infections, provinces across the country
reinstated varying levels of restrictions to ensure physical
distancing. Although much uncertainty remains concerning the
magnitude and length of the pandemic, TELUS continues to focus
relentlessly on keeping Canadians connected and on ensuring the
health, safety and well-being of our team members, customers, and
communities. Our Executive Team continues to be guided by advice
from our Emergency Management Operating Committee (EMOC) and the
TELUS Medical Advisory Council (MAC).
The pandemic has impacted our operations and financial condition
and we expect many of these trends to continue well into 2021. We
expect that the availability, distribution and effectiveness of
COVID-19 vaccinations to the general population will occur by the
second half of 2021, which will allow for the gradual re-opening of
the global economy and areas where we conduct business. As we
navigate through the pandemic, we continue to take various steps to
mitigate the negative effects, including pursuing cost savings
initiatives and margin accretion opportunities.
As of the end of 2020, following the closures that took place in
second quarter, almost all retail stores had reopened, although the
reopening remained subject to some restrictions (such as the number
of people permitted in our retail stores). While the health
emergency has had a negative impact on overall store traffic, our
net additions for the fourth quarter of 2020 – across wireless,
internet, TV, residential voice, and security – all experienced
year-over-year improvements as we continued to evolve our
operations and support our customers virtually. We experienced
increased utilization of our digital assets in both our wireless
and wireline segments, including telus.com and the
My TELUS mobile app – for example: to support the purchase of new
devices and the addition of new services, and to facilitate
customer payments and migrations to electronic billing – making
transactions easier for our customers. Entering 2021, we will
continue to thoughtfully provide our customers with flexibility in
terms of where and how they shop – a strategy enabled by our
steadfast focus on providing a seamless customer experience across
all sales channels, both in-person and virtually.
With land borders remaining closed and official travel
advisories in effect instructing Canadians to avoid all
non-essential travel, we continued to experience lower wireless
roaming revenue. We expect that reduced roaming revenue will
persist for as long as travel remains limited. Additionally, with
respect to the small and medium sized businesses (SMBs), we expect
that many SMBs will be forced to reduce the scope of their
operations and/or shut down, resulting in lower contributions from
certain customers.
In TELUS Health, we continue to see increased demand for our
virtual care solutions, with accelerated adoption of both Akira by
TELUS Health and Babylon by TELUS Health. We are also seeing
increased demand for Home Health Monitoring solutions and our
LivingWell Companion™ by TELUS Health, enabling Canadians to access
24/7 emergency support. Our virtual care offerings were augmented
by the fourth-quarter acquisition of EQ Care. In addition, certain
TELUS Health Care Centres, which re-opened in July, remained open
for in-clinic services, while also providing virtual consultations.
However, due to restrictions in place to protect patients during
the pandemic, the clinics are still unable to offer their full
suite of core services.
TELUS International was impacted by temporary operating
restrictions of certain delivery centres, however its ability to
quickly enable team members to work and support customers from home
and in other modified work locations has helped to mitigate these
impacts. Certain TELUS International clients also continue to
experience challenges, in particular those clients in travel and
hospitality-related businesses; however, the decline in business
from these clients was offset by increases in business from clients
in the games, media and ecommerce food delivery industries. While
some delivery centres have begun to welcome back more team members,
TELUS International is planning for the majority of its team to
make a gradual return to its centres provided it has been deemed
safe to do so by local government and health authorities, in
addition to guidance from the TELUS MAC and its own best
practices.
In the second half of 2020, cash receipts steadily recovered
from earlier declines experienced in the second quarter of 2020. We
believe government assistance programs designed to support
individuals and businesses, as well as the resumption of
collections activities, were key contributing factors to the
improvement in cash receipts in the second half of the year.
In addition to the financial impacts described above, we
continued to take various steps to support our community during
these challenging times. As the global leader in social capitalism,
TELUS made a $20 million commitment to help build public healthcare
capacity and support vulnerable communities through the COVID-19
pandemic and beyond. Below are select highlights of the steps we
are taking through this commitment:
- Donating over 14,200 devices and free rate plans - valued at
over $14 million - to over 340 organizations, helping hospitalized
COVID-19 patients connect virtually with loved ones, while also
enabling isolated seniors and other vulnerable Canadians to sustain
contact with health practitioners and social support services.
- Further expanding Mobility for Good to include 2.2 million
low-income seniors across Canada who are receiving the guaranteed
income supplement (GIS), providing access to the technology they
need to stay connected to loved ones and address feelings of
isolation, and obtain important healthcare resources and
information.
- Engaging more than 90,000 Canadians to participate in our TELUS
Wise workshops this year. Our workshops are free of charge and help
foster the safe and responsible use of technology in our digital
world.
- Expanding our TELUS Health for Good program with the launch of
seven new mobile health clinics in 2020, and an additional two
clinics in January, 2021, bringing our total to 13 clinics
nationwide. Since inception, our mobile health clinics have
supported over 50,000 patient visits.
- Supporting 548 community-based health programs by investing
$6.5 million through our 13 Canadian TELUS Community Boards to help
vulnerable Canadians access virtual mental health programs, food
and pandemic related sanitization supplies and meet the needs of
isolated seniors. Our International TELUS Community Boards further
allocated US$505,000 in support of 71 international projects.
- Enabling Canadians to stay safe through the sale of 79,000
TELUS Critter Masks with $535,000 in proceeds supporting the work
of the TELUS Friendly Future Foundation.
- Driven by our passionate social purpose to connect all
Canadians for good, our deeply meaningful and enduring philosophy
to give where we live has inspired our team members and retirees to
contribute more than $820 million to charitable and community
organizations and volunteer 12 million hours since 2000.
For further discussion on the effect of the COVID-19 pandemic on
the environment in which we operate, refer to Section 1.2 The
environment in which we operate in our 2020 annual Management’s
discussion and analysis (MD&A).Consolidated Financial
Highlights
C$
millions, except footnotes and unless noted otherwise |
Three months ended December 31 |
Per cent |
|
(unaudited) |
2020 |
2019 |
change |
|
Operating revenues and Other income |
4,060 |
3,858 |
5.2 |
|
Operating expenses before
depreciation and amortization |
2,724 |
2,490 |
9.4 |
|
EBITDA(1) |
1,336 |
1,368 |
(2.3) |
|
Adjusted EBITDA(1)(2) |
1,409 |
1,413 |
(0.2) |
|
Net income |
271 |
379 |
(28.5) |
|
Adjusted net income(1) |
289 |
400 |
(27.8) |
|
Net income attributable to common
shares |
260 |
368 |
(29.3) |
|
Basic EPS(3) ($) |
0.20 |
0.30 |
(33.3) |
|
Adjusted basic EPS(1)(3) ($) |
0.22 |
0.32 |
(31.3) |
|
Capital expenditures(4) |
613 |
742 |
(17.4) |
|
Free cash flow(1) |
218 |
135 |
61.5 |
|
Total subscriber connections(5)
(thousands) |
15,972 |
15,166 |
5.3 |
|
(1) |
EBITDA, Adjusted EBITDA, Adjusted net income, Adjusted basic EPS
and Free cash flow are non-GAAP measures and do not have any
standardized meaning prescribed by IFRS-IASB. For further
definitions and explanations of these measures, see ‘Non-GAAP and
other financial measures’ in this news release. |
(2) |
Adjusted EBITDA for the fourth quarters of 2020 and 2019 excludes
restructuring and other costs of $71 million and $40 million
respectively, and other equity losses related to real estate joint
ventures of $2 million and $5 million respectively. |
(3) |
On March 17, 2020, TELUS shareholders received one additional share
for each share owned on the record date of March 13, 2020. All
information pertaining to shares outstanding and per-share amounts
in this news release for periods before March 17, 2020, reflects
retrospective treatment of the two-for-one share split. |
(4) |
Capital expenditures include assets purchased, excluding
right-of-use lease assets, but not yet paid for, and consequently
differ from Cash payments for capital assets, excluding spectrum
licences, as reported in the interim consolidated financial
statements. Refer to Note 31 in our 2020 annual consolidated
financial statements for further information. |
(5) |
The sum of active mobile phone subscribers, mobile connected device
subscribers, internet subscribers, residential voice subscribers,
TV subscribers and security subscribers, measured at the end of the
respective periods based on information in billing and other source
systems. December 31, 2019 security subscriber connections have
been increased to include approximately 490,000 subscribers related
to our acquisition of ADT Security Services Canada, Inc. (ADT
Canada) (acquired on November 5, 2019). During the third quarter of
2020, we adjusted cumulative subscriber connections to add
approximately 31,000 security subscribers as a result of a business
acquisition. For additional information on our subscriber
definitions, see Section 11.2 Operating indicators in our 2020
annual MD&A. |
Fourth Quarter 2020 Operating Highlights
As noted in Section 1.2 of our 2020 annual MD&A, the
COVID-19 pandemic, which emerged in the first quarter of 2020,
continued to have a pervasive global impact throughout the balance
of 2020. The nature of the pandemic and the uncertainty of its
magnitude, length and the time to recovery are not currently able
to be estimated. Therefore, results described below may not be
indicative of future trends, as the COVID-19 pandemic prevents us
and our customers from operating in the normal course of business
in certain areas while we continue to adjust our mode of operations
to continue delivering on our customers first priorities and social
purpose.
TELUS wireless
- External wireless operating revenue and other income decreased
by $42 million or 1.9 per cent due to lower network revenue and
lower equipment and other service revenues as discussed below.
- Network revenue decreased by $16 million or 1.0 per cent, due
to declining mobile phone ARPU from reduced roaming revenue related
to travel restrictions and lower chargeable data usage revenue,
partly offset by a 5.2 per cent increase in the subscriber base
over the last 12 months, in addition to growth in monthly recurring
charges reflecting a greater mix of high-value customer additions
and selection of higher-tier plans.
- Equipment and other service revenues decreased by $20 million
or 3.2 per cent, as customers reduced their shopping habits in
retail outlets due to the pandemic, resulting in lower contracted
volume and accessory sales, partly offset by higher-value
smartphones in the sales mix.
- Mobile phone ABPU was $70.07, reflecting a decrease of 3.7 per
cent. This decrease reflects the impacts caused by the COVID-19
pandemic including: (i) significantly reduced roaming revenue from
changing customer behaviour related to travel restrictions; (ii)
the temporary closure of approximately 90 per cent of our
conventional retail stores from March 2020 through a majority of
the second quarter which hindered customer opportunities for device
upgrades and the upgrade or selection of higher-tier plans; and
(iii) decreases in chargeable data usage as more people work from
home and offload their mobile devices onto Wi-Fi networks. Mobile
phone ABPU was also impacted by the impact of the competitive
environment putting pressure on base rate plan prices in the
current and prior periods. The decline in mobile phone ABPU was
partly offset by growth resulting from our combined TELUS Easy
Payment device financing, Peace of Mind endless data plans and
TELUS Family Discount offerings, with customers selecting plans
with endless data or larger data buckets and higher-value
smartphones in the sales mix.
- Mobile phone ARPU was $57.29 in the fourth quarter of 2020, a
decrease of 3.4 per cent. Mobile phone ARPU was impacted by the
same items noted above for Mobile Phone ABPU, with the exception
of: (i) our TELUS Easy Payment device financing program; (ii) prior
to the launch of our TELUS Easy Payment device financing program,
devices with subsidies; (iii) contracted device upgrades; and (iv)
higher value smartphones in the sales mix.
- Mobile phone gross additions were 374,000, reflecting a
decrease of 8,000 compared to the same period a year ago. This
decline is reflective of fewer activations from travelers due to
border restrictions and customers reducing their shopping habits in
retail outlets. The decline more than offset growth in high-value
customer additions, successful promotions and expanded channels,
including enhancing the capabilities of our digital footprint.
- Mobile phone churn rate was 1.09 per cent as compared to 1.20
per cent in the same period a year prior, reflecting the impacts of
changing customer behaviour due to travel restrictions and the
reduction of shopping habits in retail outlets due to the COVID-19
pandemic. This decline also reflects the successful utilization of
our TELUS Easy Payment device financing program, Peace of Mind
endless data plans, Bring-It-Back™ and TELUS Family Discount
offerings, our successful bundling of mobility and home services,
our focus on executing customers first initiatives and retention
programs, and our leading network quality.
- Total subscriber net additions were 175,000, an increase of
45,000. Mobile phone net additions were 87,000 in the fourth
quarter of 2020 as compared to 70,000 in the fourth quarter of
2019, due to our strong execution in our digital sales channels and
successful efforts in driving high-value customer additions. Mobile
connected device net additions were 88,000 as compared to 60,000 in
the fourth quarter of 2019, due to increased demand for Internet of
Things solutions, partly offset by tablet net losses of
approximately 9,000, reflecting an increase in tablet net losses of
6,000.
- EBITDA of $893 million decreased by $3 million or 0.2 per cent,
while Adjusted EBITDA of $898 million was lower by $13 million or
1.1 per cent over last year, reflecting the impacts of the COVID-19
pandemic, including lower roaming revenue resulting from restricted
travel, customers reducing their shopping habits in retail outlets,
and decreases in chargeable usage as more people work from home and
offload their mobile devices onto Wi-Fi networks. This was
partially offset by enhanced cost efficiency programs, higher
equipment margins, growth in monthly recurring charges, and
increases in our subscriber base.
TELUS wireline
- External operating revenues and other income increased by $244
million or 14 per cent, primarily driven by data services revenue
growth as discussed below.
- Data services revenues growth of 22 per cent was driven by a
combination of higher revenues from our diverse portfolio of
solutions, including our TELUS International customer care and
business services which included contribution from our first
quarter 2020 acquisition of Competence Call Center (CCC) and
expanded services for existing customers and customer growth. The
increased revenues were also from growth in our home and business
smart technology (including security and agriculture) which
included contribution from our fourth quarter 2019 acquisition of
ADT Canada, internet and third wave data services. Additionally,
this growth was driven by increased revenues from our virtual care
solutions. This growth was partly offset by impacts resulting from
the COVID-19 pandemic, including the recovery of our TELUS Health
Care Centres and health benefit claims services, which administers
processing of in-person claims. Data services revenues growth was
also impacted by the ongoing decline in legacy data service
revenues and lower revenues from our business customers as they
redeploy their resources.
- Internet net additions of 44,000 increased by 16,000, as a
result of continued net new demand from consumers and businesses
for our PureFibre services as we continued to keep our customers
connected through offering a range of installation options, as well
as lower customer churn resulting from our customers first
initiatives and retention programs, the success of our bundled
product offerings, and reduced switching activity between providers
due to the COVID-19 pandemic. Additionally, we continued our focus
on connecting more homes and businesses directly to fibre.
- TV net additions were 20,000 increased by 5,000, due to lower
customer churn from strong retention efforts, the success of our
bundled product offerings, and reduced switching activity due to
the pandemic.
- Security net additions of 23,000 reflected an increase of
8,000, which was driven by strong organic growth as we keep our
customers connected and protected through offering a range of
installation options and demand from our bundled product
offerings.
- Residential voice net losses were limited to only 9,000, down
3,000 compared to the same period a year ago. The residential voice
subscriber losses continue to reflect the trend of substitution by
wireless and internet-based services, partially mitigated by our
expanding fibre footprint and bundled product offerings and our
strong retention efforts, including lower-priced offerings.
- EBITDA of $443 million decreased by $29 million or 6.1 per cent
while Adjusted EBITDA of $511 million increased by $9 million or
1.5 per cent. This increase reflects the following trends:
increased contribution from TELUS International as a result of the
acquisition of CCC and expanded services for existing customers and
customer growth; growth from our home and business smart technology
(including security), driven by business acquisitions and expanded
services; and higher internet margins. This growth was partially
offset by higher employee benefits expense, as well as higher
operating and administrative costs associated with business
acquisitions and TELUS International growth, a decline in TV
margins as a result of lower revenue per customer and higher
content costs, and a decline in the EBITDA contribution from our
legacy voice and data services. Our health business saw growth from
our virtual care solutions, which was mostly offset by higher
product costs in support of growth, lower contribution from our
TELUS Health Care Centres, and reduced health benefit claims due to
the lingering COVID-19 pandemic impacts on business recovery.
Corporate Highlights TELUS makes significant
contributions and investments in the communities where team members
live, work and serve and to the Canadian economy on behalf of
customers, shareholders and team members. These include:
- Paying, collecting and remitting more than $2.1 billion in
taxes in 2020 to federal, provincial and municipal governments in
Canada consisting of corporate income taxes, sales taxes, property
taxes, employer portion of payroll taxes and various regulatory
fees. When including spectrum remittances, we have remitted
approximately $34 billion in taxes and spectrum since 2000.
- Investing approximately $2.8 billion in capital expenditures
primarily in communities across Canada in 2020 and approximately
$44 billion since 2000.
- Spending $8.1 billion in total operating expenses in 2020,
including goods and service purchased of approximately $5.9
billion. Since 2000, we have spent $131 billion and $89 billion
respectively in these areas.
- Generating a total team member payroll of $2.9 billion in 2020,
including payroll taxes of $144 million. Since 2000, total team
member payroll totals $50 billion.
- Returning approximately $1.5 billion in dividends through four
quarterly dividend payments declared in 2020 to individual
shareholders, mutual fund owners, pensioners and institutional
investors. Since 2004, we have returned over $19 billion to
shareholders through our dividend and share purchase programs,
including $14 billion in dividends, representing approximately $15
per share.
TELUS sets 2021 consolidated financial
targetsTELUS’ consolidated financial targets for 2021 are
guided by a number of long-term financial objectives, policies and
guidelines, which are detailed in Section 4.3 of the 2020 annual
MD&A.
In 2021, TELUS plans to continue generating positive financial
outcomes and strong customer growth. Increasing customer demand for
reliable access and fast data services is expected to support
continued customer growth. This growth is supported by our
strategic investments in advanced broadband technologies, including
our PureFibre service and the ongoing roll-out of 5G. Supporting
our growth profile in 2021 are our unique and diversified growth
assets: TELUS International, inclusive of the recently closed
acquisition of Lionbridge AI; TELUS Health, including growing
demand for digital health services and virtual care; and the recent
launch of TELUS Agriculture, which is using technology to drive
better food outcomes. Our growth profile is also underpinned by a
team member culture focused on delivering customer service
excellence and our ongoing focus on operational effectiveness.
In 2021, we expect the COVID-19 pandemic to continue to have
significant impacts on our business, primarily in the first half of
the year, attributed to economic factors such as continued travel
advisories and border restrictions, decreasing business and
consumer travel continuing to impact our roaming revenues and
subsequent business lockdowns, and/or reduced scope of operations
impacting our TELUS Health Care Centers. We expect that the
availability, distribution and effectiveness of COVID-19
vaccinations to the general population will occur by the second
half of 2021, which will allow for the gradual re-opening of the
global economy and areas where we conduct business. We expect that
the COVID-19 pandemic impacts in 2021 will be similar to 2020. Our
assumptions for 2021 are set out in Section 9.3 TELUS assumptions
for 2021 in the 2020 annual MD&A.
|
2020 results($ millions) |
2021 targets($ millions) |
Revenues and other income |
15,463 |
8 to 10 per cent |
Adjusted EBITDA(1) |
5,701 |
6 to 8 per cent |
Free cash flow(2) |
1,435 |
Approximately 1,500 |
Capital expenditures(3) |
2,775 |
Approximately 2,750 |
(1) |
Adjusted EBITDA excludes the following: restructuring and other
costs, and other equity losses related to real estate joint
ventures, as well as retirement of a provision arising from
business acquisition-related written put options within TELUS
International. In 2021, total restructuring and others costs are
expected to be approximately $150 million, as compared to $259
million in 2020. |
(2) |
Before dividends paid. |
(3) |
Excludes expenditures for spectrum licences. |
The preceding disclosure respecting TELUS’ 2021 financial
targets is forward-looking information and is fully qualified by
the ‘Caution regarding forward-looking statements’ in the 2020
annual MD&A filed on the date hereof on SEDAR, especially
Section 10 Risks and Risk Management thereof which is hereby
incorporated by reference, and is based on management’s
expectations and assumptions as set out in Section 9.3 TELUS
assumptions for 2021 in the 2020 annual MD&A.
Dividend Declaration The TELUS Board of
Directors has declared a quarterly dividend of $0.3112 per share on
the issued and outstanding Common Shares of the Company payable on
April 1, 2021 to holders of record at the close of business on
March 11, 2021. This first quarter dividend for 2021 reflects an
increase of 6.8 per cent from the $0.29125 per share dividend
declared one year earlier.
TELUS International closes its Initial Public
Offering On February 5, 2021 TELUS Corporation (TELUS) and
its subsidiary, TELUS International (Cda) Inc. (TELUS
International), announced the closing of the upsized TELUS
International initial public offering (IPO) of 42.55 million
subordinate voting shares at a price of US$25.00 per share, which
includes 5.55 million subordinate voting shares purchased upon the
full exercise of the underwriters’ over-allotment option to
purchase additional subordinate voting shares from TELUS and Baring
Private Equity Asia (Baring), the selling shareholders. The
offering generated aggregate gross proceeds to TELUS International,
TELUS and Baring of U.S. $1.06 billion (CAD$1.36 billion),
including the exercise of the over-allotment option in full. The
net proceeds to TELUS International totaled approximately US$490
million (CAD$627 million), which are expected to be used to repay
outstanding borrowings under its revolving credit facilities. TELUS
International will not receive any proceeds from the subordinate
voting shares sold by the selling shareholders. The subordinate
voting shares began trading on the New York Stock Exchange and the
Toronto Stock Exchange on February 3, 2021 under the ticker
“TIXT.”
Access to Quarterly results
informationInterested investors, the media and others may
review this quarterly earnings news release, management’s
discussion and analysis, quarterly results slides, audio and
transcript of the investor webcast call, supplementary financial
information at telus.com/investors.
TELUS’ fourth quarter 2020 conference call is scheduled for
Thursday, February 11, 2021 at 12:00pm ET (9:00am
PT) and will feature a presentation followed by a question
and answer period with investment analysts. Interested parties can
access the webcast at telus.com/investors. An audio recording will
be available approximately 60 minutes after the call until March
11, 2021 at 1-855-201-2300. Please use reference number 1252832#
and access code 77377#. An archive of the webcast will also be
available at telus.com/investors and a transcript will be posted on
the website within a few business days.Caution regarding
forward-looking statements
This news release contains forward-looking statements about
expected events and the financial and operating performance of
TELUS Corporation. The terms TELUS, we, us and our refer to TELUS
Corporation and, where the context of the narrative permits or
requires, its subsidiaries.
Forward-looking statements include any statements that do not
refer to historical facts. They include, but are not limited to,
statements relating to our objectives and our strategies to achieve
those objectives, our consolidated financial targets, outlook,
updates, our multi-year dividend growth program and our plans and
expectations regarding the impact of the COVID-19 pandemic and
responses to it. Forward-looking statements are typically
identified by the words assumption, goal, guidance, objective,
outlook, strategy, target and other similar expressions, or future
or conditional verbs such as aim, anticipate, believe, could,
expect, intend, may, plan, predict, seek, should, strive and will.
These statements are made pursuant to the “safe harbour” provisions
of applicable securities laws in Canada and the United States
Private Securities Litigation Reform Act of 1995.
By their nature, forward-looking statements are subject to
inherent risks and uncertainties and are based on assumptions,
including assumptions about future economic conditions and courses
of action. These assumptions may ultimately prove to have been
inaccurate and, as a result, our actual results or events may
differ materially from our expectations expressed in or implied by
the forward-looking statements.
Our general outlook and assumptions for 2021 are presented in
Section 9 General trends, outlook and assumptions, and regulatory
developments and proceedings in our 2020 annual MD&A. Our key
assumptions for 2021 include the following:
- Estimated economic growth rates in
Canada, B.C., Alberta, Ontario and Quebec of 4.5%, 4.5%, 4.4%, 4.8%
and 4.6%, respectively.
- Estimated annual unemployment rates in
Canada, B.C., Alberta, Ontario and Quebec of 7.8%, 6.9%, 9.9%, 8.0%
and 6.9%, respectively.
- Estimated annual rates of housing
starts on an unadjusted basis in Canada, B.C., Alberta, Ontario and
Quebec of 202,000 units, 35,000 units, 24,000 units, 77,000 units
and 48,000 units, respectively.
- No material adverse regulatory rulings
or government actions.
- Continued intense mobile products and
services competition and fixed products and services competition in
both consumer and business markets.
- Continued increase in mobile phone
industry penetration of the Canadian market.
- Ongoing subscriber adoption of, and
upgrades to, data-intensive smartphones, as customers seek more
mobile connectivity to the internet at faster speeds. We estimate
there will be higher device upgrade volumes closer to pre-pandemic
levels in 2021.
- Mobile products and services revenue
growth resulting from improvements in subscriber loading, with
continued competitive pressure on blended ARPU. Roaming revenue
will remain at levels similar to the latter half of 2020 as
continued travel advisories and border restrictions, including
those in Canada and the U.S., impact business and consumer travel
in the first half of 2021, with recovery expected to begin with the
re-opening of the economy in the last half of the year, but will
not reach a full recovery until 2022 at the earliest.
- Continued pressure on mobile products and services acquisition
and retention expenses, arising from gross loading and customer
renewal volumes including potential impacts related to deferred
device upgrades during the global health pandemic, competitive
intensity and customer preferences. Continued mobile connected
devices growth, as our IoT offerings diversify and expand.
- Continued growth in fixed products and services data revenue,
reflecting an increase in internet, TV and security subscribers,
speed upgrades, rate plans with larger data buckets or endless data
usage, and expansion of our broadband infrastructure, healthcare
solutions, and home and business security offerings.
- Continued erosion of residential voice revenue resulting from
technological substitution and greater use of inclusive long
distance.
- Continued growth of TI revenue and EBITDA generated by expanded
services for existing and new clients and strategic business
acquisitions.
- Continued focus on our customers first initiatives and
maintaining our customers’ likelihood-to-recommend.
- Employee defined benefit pension plans: current service costs
of approximately $107 million recorded in Employee benefits expense
and interest expense of approximately $25 million recorded in
Financing costs; a rate of 2.50% for discounting the obligation and
a rate of 2.70% for current service costs for employee defined
benefit pension plan accounting purposes; and defined benefit
pension plan funding of approximately $51 million.
- Restructuring and other costs of approximately
$150 million for continuing operational effectiveness
initiatives, with margin enhancement initiatives to mitigate
pressures related to intense competition, technological
substitution, repricing of our services, increasing subscriber
growth and retention costs, and integration costs associated with
business acquisitions.
- Net cash Interest paid of approximately $755 million to $805
million.
- Depreciation and Amortization of intangible assets of
approximately $3.25 billion to $3.35 billion.
- Income taxes: Income taxes computed at an applicable statutory
rate of 25.3 to 25.9% and cash income tax payments of
approximately $540 million to $620 million (2020 –
$397 million).
- Participation in ISED’s wireless spectrum auction for 3500 MHz
spectrum band, with auction bidding expected to start on June 15,
2021.
- Continued stabilization in the average Canadian dollar: U.S.
dollar exchange rate ($1.28 in 2020).
- Continued deployment of access-agnostic technology in our
network.
- SMB will continue to be negatively impacted by lockdown
measures primarily during the first half of the year, and that they
will continue to feel the effects through the rest of the year,
with access to continued government support easing in the latter
half of 2021.
- Government funding programs to support consumers’ ability to
pay bills will ease in the latter half of 2021.
- We expect that we will be able to operate our retail stores as
effectively as we had in the second half of 2020, reflecting the
additional safety measures in place but still allowing us to serve
our customers in-person, in addition to the digital capabilities
that have enabled us to continue serving our customers through the
pandemic.
- Continued impacts on our TELUS Health Care Centres as a result
of lockdown and stay-at-home measures resulting in cancellations of
appointments, reduced capacity or closure of clinics. We expect
recovery to begin in the second half of 2021 through effective
deployment of value-added services and optimizing efficiency within
the clinics.
- Our international operations will be impacted by the recoveries
in other global economies based on vaccine availability,
distribution and effectiveness on their respective populations and
regional lockdown measures.
Risks and uncertainties that could cause actual performance or
events to differ materially from the forward-looking statements
made herein and in other TELUS filings include, but are not limited
to, the following:
- The COVID-19 pandemic including its
impacts on our customers, suppliers and vendors, our team members
and our communities, as well as changes resulting from the pandemic
to our business and operations including to the demand for and
supply of the products and services that we offer and the channels
through which we offer them.
- Regulatory decisions and developments
including: changes to our regulatory regime (the timing of
announcement or implementation of which are uncertain) or the
outcomes of proceedings, cases or inquiries relating to its
application, including but not limited to those set out in Section
9.4 Communications industry regulatory developments and proceedings
in our 2020 annual MD&A, such as the potential for government
intervention to further increase competition, for example, through
mandated wholesale access; the potential for additional government
intervention on pricing, including the March 2020 announcement by
the federal government (reiterated in June 2020) targeting a 25%
price reduction over a two-year period by the national wireless
carriers in wireless plans using between two to six GB of data;
federal and provincial consumer protection legislation and
regulation including the introduction by the federal government of
Bill C-11, the Digital Charter Implementation Act, 2020, which,
aims to give consumers new rights and imposes new monetary
penalties for non-compliance; amendments to existing federal
legislation; potential threats to unitary federal regulatory
authority over communications in Canada; potential threats to the
CRTC’s ability to enforce the Wholesale Code, which aims to ensure
the fair treatment by vertically integrated firms of rival
broadcasting distributors and programming services; regulatory
action by the Competition Bureau or other regulatory agencies;
spectrum and compliance with licences, including our compliance
with licence conditions, changes to spectrum licence fees, spectrum
policy determinations such as restrictions on the purchase, sale,
subordination and transfer of spectrum licences, the cost,
availability and timing of spectrum, and ongoing and future
consultations and decisions on spectrum licensing and policy
frameworks, auctions and allocation; the impact on us and other
Canadian telecommunications carriers of government or regulatory
actions with respect to certain countries or suppliers, including
U.S. federal regulations pertaining to certain technology
transactions deemed to constitute national security risks and the
imposition of additional licence requirements on the export,
re-export and transfer of goods, services and technology to Huawei
Technologies Co. Ltd. and its non-U.S. affiliates, and decisions of
other foreign governments, which could result in a general shortage
of chip sets and other equipment; restrictions on non-Canadian
ownership and control of the common shares of TELUS Corporation
(Common Shares) and the ongoing monitoring of and compliance with
such restrictions; unanticipated changes to the current copyright
regime; and our ability to comply with complex and changing
regulation of the healthcare and medical devices industry in the
jurisdictions in which we operate, including as an operator of
health clinics. The jurisdictions in which we operate, as well as
the contracts that we enter into (particularly those of TELUS
International (Cda) Inc.’s (TELUS International or TI) business),
require us to comply with or facilitate our clients’ compliance
with numerous, complex and sometimes conflicting legal regimes,
both domestically and internationally. See TELUS International
financial performance which impacts our financial performance.
- Competitive environment including: our
ability to continue to retain customers through an enhanced
customer service experience that is differentiated from our
competitors, including through the deployment and operation of
evolving wireless and wireline infrastructure; intense wireless
competition, including the ability of industry competitors to
successfully combine a mix of internet services and, in some cases,
wireless services under one bundled and/or discounted monthly rate,
along with their existing broadcast or satellite-based TV services;
the success of new products, services and supporting systems, such
as home automation security and Internet of Things (IoT) services
for internet-connected devices; wireline voice and data
competition, including continued intense rivalry across all
services among wireless and wireline telecommunications companies,
cable companies, other communications companies and over-the-top
(OTT) services, which, among other things, places pressures on
current and future mobile phone average billing per subscriber per
month (ABPU), mobile phone average revenue per subscriber per month
(ARPU), cost of acquisition, cost of retention and churn rate for
all services, as do customer usage patterns, increased data bucket
sizes or flat-rate pricing trends for voice and data, such as our
Peace of Mind™ plans and comparable plans, inclusive rate plans for
voice and data and availability of Wi-Fi networks for data; mergers
and acquisitions of industry competitors; pressures on internet and
TV ARPU and churn rate resulting from market conditions, government
actions and customer usage patterns; residential voice and business
network access line losses; subscriber additions and retention
volumes, and associated costs for wireless, TV and internet
services; our ability to obtain and offer content on a timely basis
across multiple devices on wireless and TV platforms at a
reasonable cost as content costs per unit continue to grow;
vertical integration in the broadcasting industry resulting in
competitors owning broadcast content services, and timely and
effective enforcement of related regulatory safeguards; TI’s
ability to compete with professional services companies that offer
consulting services, information technology companies with digital
capabilities, and traditional contact center and business process
outsourcing companies that are expanding their capabilities to
offer higher-margin and higher-growth digital services; in our
TELUS Health business, our ability to compete with other providers
of electronic medical records and pharmacy management products,
claims adjudicators, systems integrators and health service
providers including those that own a vertically integrated mix of
health services delivery, IT solutions, and related services,
global providers that could achieve expanded Canadian footprints,
and in the provision of virtual healthcare services, preventative
health services and personal emergency response services; and in
our TELUS Agriculture business, while we maintain a broad solution
set as compared to other agriculture technology providers, our
ability to compete with focused software and IoT competitors.
- Technological substitution including:
reduced utilization and increased commoditization of traditional
wireline voice services (local and long distance) resulting from
impacts of OTT applications and wireless substitution; a declining
overall market for TV services, including as a result of content
piracy and signal theft, a rise in OTT direct-to-consumer video
offerings and virtual multichannel video programming distribution
platforms; the increasing number of households that have only
wireless and/or internet-based telephone services; potential
declines in mobile phone ABPU and ARPU as a result of, among other
factors, substitution by messaging and OTT applications;
substitution by increasingly available Wi-Fi services; and
disruptive technologies, such as OTT IP services, including
software-defined networks in the business market, that may displace
or cause us to reprice our existing data services.
- Challenges to our ability to deploy
technology including: high subscriber demand for data that
challenges wireless networks and spectrum capacity levels and may
be accompanied by increases in delivery cost; our reliance on
information technology and our ability to streamline our legacy
systems; the roll-out and evolution of wireless broadband
technologies and systems, including video distribution platforms
and telecommunications network technologies (broadband initiatives,
such as fibre-to-the-premises (FTTP), wireless small-cell
deployment, 5G wireless and availability of resources and our
ability to build out adequate broadband capacity); our reliance on
wireless network access agreements, which have facilitated our
deployment of wireless technologies; our choice of suppliers and
those suppliers’ ability to maintain and service their product
lines, which could affect the success of upgrades to, and evolution
of, technology that we offer; supplier limitations and
concentration and market power for products such as network
equipment, TELUS TV® and wireless handsets; our expected long-term
need to acquire additional spectrum capacity through future
spectrum auctions and from third parties to address increasing
demand for data and our ability to utilize spectrum we acquire;
deployment and operation of new wireline broadband network
technologies at a reasonable cost and the availability and success
of new products and services to be rolled out using such network
technologies; network reliability and change management; and our
deployment of self-learning tools and automation that may change
the way we interact with customers.
- Capital expenditure levels and
potential outlays for spectrum licences in auctions or purchases
from third parties, affect and are affected by: our broadband
initiatives, including connecting more homes and businesses
directly to fibre; our ongoing deployment of newer wireless
technologies, including wireless small cells to improve coverage
and capacity; investments in network resiliency and reliability,
including to address changes in usage resulting from restrictions
imposed in response to COVID-19; the allocation of resources to
acquisitions and future wireless spectrum auctions held by
Innovation, Science and Economic Development Canada (ISED),
including the 3500 MHz spectrum auction scheduled to take
place in June 2021 and the millimetre wave spectrum auction, which
the Minister of Innovation, Science and Industry stated is expected
to commence in 2021, but we believe may not take place until 2022
or later, and the announcement of a formal consultation on the
auctioning of the 3800 MHz spectrum, expected to take place in
2023. Our capital expenditure levels could be impacted if we do not
achieve our targeted operational and financial results or by
changes to our regulatory environment.
- Operational performance and business
combination risks including: our reliance on legacy systems and
ability to implement and support new products and services and
business operations in a timely manner; our ability to manage the
requirements of large enterprise deals; our ability to implement
effective change management for system replacements and upgrades,
process redesigns and business integrations (such as our ability to
successfully complete and integrate acquisitions into our
operations and culture, complete divestitures or establish
partnerships in a timely manner and realize expected strategic
benefits, including those following compliance with any regulatory
orders); our ability to identify and manage new risks inherent in
new service offerings that we may provide, including as a result of
acquisitions, which could result in damage to our brand, our
business in the relevant area or as a whole, and additional
exposure to litigation or regulatory proceedings; and our ability
to effectively manage our infrastructure and team member
expansion.
- Data protection including risks that
malfunctions or unlawful acts could result in unauthorized access
to, change, loss, or distribution of data, which may compromise the
privacy of individuals and could result in financial loss and harm
to our reputation and brand.
- Security threats including intentional
damage or unauthorized access or attempted access to our physical
assets or our IT systems and networks, which could prevent us from
providing reliable service or result in unauthorized access to our
information or that of our customers.
- Ability to successfully implement cost
reduction initiatives and realize planned savings, net of
restructuring and other costs, without losing customer service
focus or negatively affecting business operations. Examples of
these initiatives are: our operating efficiency and effectiveness
program to drive improvements in financial results; business
integrations; business product simplification; business process
automation and outsourcing; offshoring and reorganizations;
procurement initiatives; and real estate rationalization.
- Foreign operations and our ability to
successfully manage operations in foreign jurisdictions, including
managing risks such as currency fluctuations and exposure to
various economic, international trade, political and other risks of
doing business globally.
- Business continuity events including:
our ability to maintain customer service and operate our network in
the event of human error or human-caused threats, such as
cyberattacks and equipment failures that could cause various
degrees of network outages; technical disruptions and
infrastructure breakdowns; supply chain disruptions, delays and
economics, including as a result of government restrictions or
trade actions; natural disaster threats; extreme weather events;
epidemics; pandemics (including the ongoing COVID-19 pandemic);
political instability in certain international locations;
information security and privacy breaches, including data loss or
theft of data; and the completeness and effectiveness of business
continuity and disaster recovery plans and responses.
- TELUS International’s financial
performance which impacts our financial performance. Factors that
may affect TI’s financial performance are described in TI’s public
filings available on SEDAR and EDGAR and may include: intense
competition from companies offering similar services; TI’s ability
to grow and maintain its profitability as changes in technology and
client expectations outpace service offerings and internal tools
and processes; TI maintaining its culture as it grows; effects of
economic and geopolitical conditions on its clients’ businesses and
demand for its services; a significant portion of TI’s revenue
being dependent on a limited number of large clients; continued
consolidation in many of the verticals in which TI offers services
could result in the loss of a client; attracting and retaining
qualified team members to support its operations; adverse impacts
of COVID-19 on TI’s business and financial results; TI’s
acquisition of Lionbridge AI remaining subject to review by the
Committee on Foreign Investment in the United States; TI’s business
being adversely affected if certain independent contractors were
classified as employees, and the costs associated with defending,
settling or resolving any future lawsuits (including demands for
arbitration) relating to the independent contractor classification;
TI’s ability to successfully identify, complete, integrate and
realize the benefits of acquisitions and manage associated risks;
cyberattacks or unauthorized disclosure resulting in access to
sensitive or confidential information and data of its clients or
their end customers could have a negative impact on its reputation
and client confidence; business development not developing in ways
it currently anticipates due to negative public reaction to
offshore outsourcing, proposed legislation or otherwise; ability to
meet client expectations regarding its content moderation services
being adversely impacted due to factors beyond its control and its
content moderation team members may suffer adverse emotional or
cognitive effects in the course of performing their work; and TI’s
lack of history operating as a separate, publicly traded company.
The price of the subordinate voting shares of TI (TI Subordinate
Voting Shares) may be volatile and is likely to fluctuate due to a
number of factors beyond its control, including actual or
anticipated changes in profitability; general economic, social or
political developments; changes in industry conditions; changes in
governance regulation; inflation; the general state of the
securities markets; and other material events. TI may choose to
publicize targets or provide other guidance regarding its business
and it may not achieve such targets. Failure to do so could also
result in a reduction in the trading price of the TI Subordinate
Voting Shares. A reduction in the trading price of the TI
Subordinate Voting Shares due to these or other factors could
result in a reduction in the fair value of TI multiple voting
shares held by TELUS.
- Human resource matters including:
recruitment, retention and appropriate training in a highly
competitive industry (including retention of team members leading
recent acquisitions in emerging areas of our business), the level
of our employee engagement, our ability to maintain our unique
culture as we grow, the risk that certain independent contractors
of TI’s Lionbridge AI business could be classified as employees,
and the health of our team.
- Financing and debt requirements
including: our ability to carry out financing activities, refinance
our maturing debt, lower our net debt to EBITDA ratio to our
objective range given the cash demands of spectrum auctions and/or
maintain investment grade credit ratings in the range of BBB+ or
the equivalent. Our business plans and growth could be negatively
affected if existing financing is not sufficient to cover our
funding requirements.
- Lower than planned free cash flow could
constrain our ability to invest in operations, reduce leverage or
return capital to shareholders, and could affect our ability to
sustain our dividend growth program through 2022. This program may
be affected by factors such as the competitive environment,
economic performance in Canada, our earnings and free cash flow,
our levels of capital expenditures and spectrum licence purchases,
acquisitions, the management of our capital structure, regulatory
decisions and developments, and business continuity events.
Quarterly dividend decisions are subject to assessment and
determination by our Board of Directors based on our financial
position and outlook. Common Shares may be purchased under a normal
course issuer bid (NCIB) if and when we implement one and if we
consider it opportunistic, based on our financial position and
outlook, and the market price of our Common Shares. There can be no
assurance that our dividend growth program or that any NCIB will be
implemented, maintained, unchanged and/or completed.
- Taxation matters including:
interpretation of complex domestic and foreign tax laws by the
relevant tax authorities that may differ from our interpretations;
the timing and character of income and deductions, such as tax
depreciation and operating expenses; tax credits or other
attributes; changes in tax laws, including tax rates; tax expenses
being materially different than anticipated, including the
taxability of income and deductibility of tax attributes;
elimination of income tax deferrals through the use of different
tax year-ends for operating partnerships and corporate partners;
and changes to the interpretation of tax laws, including those
resulting from changes to applicable accounting standards or the
adoption of more aggressive auditing practices by tax authorities,
tax reassessments or adverse court decisions impacting the tax
payable by us.
- Litigation and legal matters including:
our ability to successfully respond to investigations and
regulatory proceedings; our ability to defend against existing and
potential claims and lawsuits (including intellectual property
infringement claims and class actions based on consumer claims,
data, privacy or security breaches and secondary market liability),
or to negotiate and execute upon indemnity rights or other
protections in respect of such claims and lawsuits; and the
complexity of legal compliance in domestic and foreign
jurisdictions, including compliance with competition, anti-bribery
and foreign corrupt practices laws.
- Health, safety and the environment
including: lost employee work time resulting from illness or
injury; public concerns related to radio frequency emissions;
environmental issues affecting our business, including
climate-related risk (such as extreme weather events and other
natural hazards), waste and waste recycling, risks relating to fuel
systems on our properties, changing government and public
expectations regarding environmental matters and our responses; and
challenges associated with epidemics or pandemics, including the
COVID-19 pandemic and our response to it, which may add to or
accentuate these factors.
- Economic growth and fluctuations
including: the state of the economy in Canada, which may be
influenced by economic and other developments outside of Canada,
including potential outcomes of yet unknown policies and actions of
foreign governments and the ongoing COVID-19 pandemic as well as
public and private sector responses to the pandemic; expectations
of future interest rates; inflation; unemployment levels; effects
of fluctuating oil prices; effects of low business spending (such
as reducing investments and cost structure); pension investment
returns, funding and solvency discount rates; fluctuations in
foreign exchange rates of the currencies in the regions in which we
operate; sovereign credit ratings and effects on the cost of
borrowing; the impact of tariffs on trade between Canada and the
U.S.; and global implications of the trade dynamic between major
world economies.
These risks are described in additional detail in Section 9
General trends, outlook and assumptions, and regulatory
developments and proceedings and Section 10 Risks and risk
management in our 2020 annual MD&A. Those descriptions are
incorporated by reference in this cautionary statement but are not
intended to be a complete list of the risks that could affect
TELUS.
Many of these factors are beyond our control or our current
expectations or knowledge. Additional risks and uncertainties not
currently known to us or that we currently deem to be immaterial
may also have a material adverse effect on our financial position,
financial performance, cash flows, business or reputation. Except
as otherwise indicated in this document, the forward-looking
statements made herein do not reflect the potential impact of any
non-recurring or special items or any mergers, acquisitions,
dispositions or other business combinations or transactions that
may be announced or that may occur after the date of this
document.
Readers are cautioned not to place undue reliance on
forward-looking statements. Forward-looking statements in this
document describe our expectations and are based on our assumptions
as at the date of this document and are subject to change after
this date. Except as required by law, we disclaim any intention or
obligation to update or revise any forward-looking statements. The
forward-looking statements in this news release are presented for
the purpose of assisting our investors and others in understanding
certain key elements of our expected 2021 financial results as well
as our objectives, strategic priorities and business outlook. Such
information may not be appropriate for other purposes.
This cautionary statement qualifies all of the forward-looking
statements in this document.
Non-GAAP and other financial measuresWe have
issued guidance on and report certain non-GAAP measures that are
used to evaluate the performance of TELUS, as well as to determine
compliance with debt covenants and to manage our capital structure.
As non-GAAP measures generally do not have a standardized meaning,
they may not be comparable to similar measures presented by other
issuers. Securities regulations require such measures to be clearly
defined, qualified and reconciled with their nearest GAAP measure.
Certain of the metrics do not have generally accepted industry
definitions.
Adjusted net income and adjusted basic earnings per
share: These measures are used to evaluate performance at
a consolidated level and exclude items that, in management’s view,
may obscure the underlying trends in business performance. These
measures should not be considered alternatives to Net income and
basic earnings per share in measuring TELUS’ performance.
Reconciliation of adjusted net income
|
Three months ended December 31 |
|
C$ and in millions |
2020 |
|
2019 |
|
Change |
|
Net income attributable to Common Shares |
260 |
|
368 |
|
(108) |
|
Add (deduct): |
|
|
|
Restructuring and other costs, after income taxes |
50 |
|
29 |
|
21 |
|
Income tax-related adjustments |
(23) |
|
(2) |
|
(21) |
|
Other equity losses related to real estate joint ventures |
2 |
|
5 |
|
(3) |
|
Adjusted Net income |
289 |
|
400 |
|
(111) |
|
Reconciliation of adjusted basic EPS
|
Three months ended December 31 |
|
C$ |
2020 |
|
2019 |
Change |
|
Basic EPS |
0.20 |
|
0.30 |
(0.10) |
|
Add (deduct): |
|
|
|
Restructuring and other costs, after income taxes, per share |
0.04 |
|
0.02 |
0.02 |
|
Income tax-related adjustments, per share |
(0.02) |
|
— |
(0.02) |
|
Adjusted basic EPS |
0.22 |
|
0.32 |
(0.10) |
|
EBITDA (earnings before interest, income taxes,
depreciation and amortization): We have issued guidance on and
report EBITDA because it is a key measure used to evaluate
performance at a consolidated level. EBITDA is commonly reported
and widely used by investors and lending institutions as an
indicator of a company’s operating performance and ability to incur
and service debt, and as a valuation metric. EBITDA should not be
considered an alternative to Net income in measuring TELUS’
performance, nor should it be used as a measure of cash flow.
EBITDA as calculated by TELUS is equivalent to Operating revenues
and other income less the total of Goods and services purchased
expense and Employee benefits expense.
We also calculate Adjusted
EBITDA to exclude items of an unusual nature that
do not reflect our ongoing operations and should not, in our
opinion, be considered in a long-term valuation metric or should
not be included in an assessment of our ability to service or incur
debt.
EBITDA reconciliation |
|
|
|
|
Three months ended December 31 |
C$ and in millions |
2020 |
2019 |
|
Net income |
271 |
379 |
|
Financing costs |
190 |
175 |
|
Income taxes |
86 |
136 |
|
Depreciation |
539 |
500 |
|
Amortization of intangible assets |
250 |
178 |
|
EBITDA |
1,336 |
1,368 |
|
Add restructuring and other costs included in EBITDA |
71 |
40 |
|
EBITDA – excluding restructuring and other
costs |
1,407 |
1,408 |
|
Add other equity losses related to real estate
joint ventures |
2 |
5 |
|
Adjusted EBITDA |
1,409 |
1,413 |
|
Free cash flow: We report this measure as a
supplementary indicator of our operating performance, and there is
no generally accepted industry definition of free cash flow. It
should not be considered an alternative to the measures in the
Consolidated statements of cash flows. Free cash flow excludes
certain working capital changes (such as trade receivables and
trade payables), proceeds from divested assets and other sources
and uses of cash, as found in the Consolidated statements of cash
flows. It provides an indication of how much cash generated by
operations is available after capital expenditures (excluding
purchases of spectrum licences) that may be used to, among other
things, pay dividends, repay debt, purchase shares or make other
investments. We exclude impacts of accounting changes that do not
impact cash, such as IFRS 15 and IFRS 16. Free cash flow may be
supplemented from time to time by proceeds from divested assets or
financing activities.
Free cash flow calculation |
|
|
|
Three months ended December 31 |
C$ and in millions |
2020 |
2019 |
EBITDA |
1,336 |
1,368 |
Deduct non-cash gains from the sale of property, plant and
equipment |
(1) |
(8) |
Restructuring and other costs, net of disbursements |
14 |
(1) |
Effects of contract asset, acquisition and fulfilment (IFRS 15
impact) and TELUS Easy Payment device financing |
(112) |
(140) |
Effects of lease principal (IFRS 16 impact) |
(110) |
(119) |
Leases formerly accounted for as finance leases (IFRS 16
impact) |
16 |
69 |
Items from the condensed interim consolidated statements of cash
flows: |
|
|
Share-based compensation, net |
(62) |
(55) |
Net employee defined benefit plans expense |
25 |
19 |
Employer contributions to employee defined benefit plans |
(14) |
(2) |
Interest paid |
(169) |
(180) |
Interest received |
3 |
— |
Capital expenditures (excluding spectrum licences)1 |
(613) |
(742) |
Free cash flow before income taxes |
313 |
209 |
Income taxes paid, net of refunds |
(95) |
(74) |
Free cash flow |
218 |
135 |
(1) Refer to Note 31 of the consolidated
financial statements for further information.
About TELUS TELUS (TSX: T, NYSE: TU) is a
dynamic, world-leading communications technology company with $16
billion in annual revenue and 16 million customer connections
spanning wireless, data, IP, voice, television, entertainment,
video, and security. We leverage our global-leading technology and
compassion to enable remarkable human outcomes. Our longstanding
commitment to putting our customers first fuels every aspect of our
business, making us a distinct leader in customer service
excellence and loyalty. In 2020, TELUS was recognized as having the
fastest wireless network in the world, reinforcing our commitment
to provide Canadians with access to superior technology that
connects us to the people, resources and information that make our
lives better. TELUS Health is Canada’s leader in digital health
technology, improving access to health and wellness services and
revolutionizing the flow of health information across the continuum
of care. TELUS Agriculture provides innovative digital solutions
throughout the agriculture value chain, supporting better food
outcomes from improved agri-business data insights and processes.
TELUS International (TSX and NYSE: TIXT) is a leading digital
customer experience innovator that delivers next-generation AI and
content management solutions for global brands across the
technology and games, ecommerce and FinTech, communications and
media, healthcare, travel and hospitality sectors. TELUS and
TELUS International operate in 25+ countries around the world.
Driven by our passionate social purpose to connect all citizens
for good, our deeply meaningful and enduring philosophy to give
where we live has inspired TELUS, our team members and retirees to
contribute more than $820 million and 1.6 million days of service
since 2000. This unprecedented generosity and unparalleled
volunteerism have made TELUS the most giving company in the
world.
For more information about TELUS, please visit telus.com, follow
us @TELUSNews on Twitter, and @Darren_Entwistle on Instagram.
Investor RelationsRobert Mitchell (647)
837-1606ir@telus.com
Media RelationsSteve Beisswanger(514) 865-2787
Steve.Beisswanger@telus.com
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