JULY 31, 2020

TELUS reports operational and financial results for second quarter 2020

  • Continuing to provide critical support to Canadians and our communities during the COVID-19 pandemic; responding dynamically through exceptional operational execution, providing innovative services and solutions for our customers
  • Consolidated revenue growth of 3.6 per cent and EBITDA decline of 2.9 per cent, combined with healthy free cash flow growth of more than 57 per cent to $511 million, reflective of our team’s resiliency in a challenging and rapidly changing operating environment
  • Delivered industry-leading customer growth of 141,000 net additions while maintaining the safety and well-being of our customers and team members; leveraging our digital capabilities and demonstrating the efficacy of our longstanding strategic focus on providing the best-in-class customer experience over our world-leading network, buttressed by our leading culture
  • 61,000 high-quality mobile phone net additions, and total wireless net additions of 94,000; low blended mobile phone churn of 0.80 per cent
  • Robust wireline results, including double-digit revenue growth and 47,000 net additions, driven by Internet net additions. Declaring quarterly dividend of $0.29125 share, supported by strong free cash flow growth, robust liquidity, and balance sheet strength
  • Building on positive momentum achieved in the first half of the year, TELUS expects strong 2020 free cash flow within the lower half of our original target range of $1.4 to $1.7 billion.

Vancouver, B.C. – TELUS Corporation today released its unaudited results for the second quarter of 2020. For the quarter, consolidated operating revenue of $3.7 billion increased by 3.6 per cent over the same period a year ago. Earnings before interest, income taxes, depreciation and amortization (EBITDA) decreased by 1.0 per cent to $1.4 billion while Adjusted EBITDA was down 2.9 per cent. This decline reflects the financial impacts arising from the COVID-19 pandemic, primarily from lower wireless roaming revenue, partly offset by growth in wireline data service margins resulting from business acquisitions, expanded services and subscriber base growth, an increased EBITDA contribution from our organic TELUS International (TI) business, and numerous enhanced cost efficiency programs. 

“TELUS achieved resilient financial and operational results in the second quarter, characterized by strong customer growth of over 141,000 net new additions, despite the challenges we faced in the quarter with respect to the COVID-19 pandemic”, said Darren Entwistle, President and CEO. “This accomplishment, realized against the backdrop of an unprecedented operating environment, is reflective of our longstanding and consistent focus on creating a world-leading culture, enabled by our highly engaged team. Importantly, our strong first quarter results were attained as 95 per cent of our domestic team members embraced a work-from-home environment, while continuing to provide best-in-class customer service. Leveraging our strong digital capabilities, in concert with our team’s characteristic adaptability, we achieved healthy customer growth in the quarter, including 61,000 high-quality mobile phone net additions, comprised entirely of higher-value postpaid customers, and 47,000 wireline customer additions, driven by 37,000 internet and 12,000 security net additions, both up year-over-year. This was supported by strong and enhanced customer loyalty across our key growth product lines, including historically low postpaid churn of 0.59 per cent, backed by the TELUS team’s longstanding dedication to delivering premium customer experiences over a world leading network.” 

Mr. Entwistle added, “TELUS’ broadband network has continued to perform exceedingly well throughout the health crisis, inclusive of the resulting significant changes in usage patterns and added demands on our network. The efficacy of our ongoing broadband technology investments is also reflected in numerous recent awards from leading independent network authorities across both wireline and wireless. Notably, U.S.-based PCMag ranked TELUS as the fastest internet service provider in Canada. In addition, Tutela recognized our wireless network as best in consistent quality, lowest latency, and fastest download speeds for the second consecutive time. Furthermore, in early July, TELUS won U.S.-based Ookla’s 2020 Speedtest Fastest Mobile Award – marking the sixth consecutive year that TELUS has won this award – as well as the 2020 Best Mobile Coverage Award for the third time. Moreover, in “The State of Rural Canada’s Mobile Network Experience – May 2020 Report”, UK-based Opensignal found that rural Canadians benefit from some of the fastest download speeds in the G7. It noted that the rural experience on TELUS’ network is better and faster than in any location within G7 nations, with the exception of Japan, a significantly smaller country than Canada, which at 49 Mbps was only slightly faster than TELUS’ 48 Mbps. Consistently earning these prestigious, third-party accolades is particularly gratifying as our entire team focuses relentlessly on ensuring robust reliability and world-leading performance across all of our services, in rural as well as urban areas, enabling Canadians to work and learn remotely, apply for critical government resources, receive vital medical care, and stay connected to family and friends.” 

“In June, we announced the first wave of our 5G network roll-out in Vancouver, Montreal, Calgary, Edmonton, and the Greater Toronto Area, with expansion to an additional 26 markets across Canada planned throughout the remainder of the year,” Mr. Entwistle continued. “Our 5G network will profoundly enhance the way our customers will connect to information and one another, and is available at no additional cost on TELUS Peace of Mind plans with endless data and no overage fees. Building on our consistently world-leading technology, our 5G network will bridge digital divides and drive innovation across businesses, government, healthcare, education and social pursuits, whilst creating an estimated 250,000 jobs and contributing an anticipated $40 billion annually to Canada’s economy. This critical development in our 5G ecosystem is a testament to our team’s skill and dedication to building a world-leading 5G experience in Canada from coast to coast, and from urban to rural.” 

“As we continue to advance our broadband leadership and embrace our winning go-to-market strategy, backed by our globally recognized culture and industry-best customer experience, we remain confident in the long-term outlook for our business and the significant opportunities before us to further elevate the TELUS brand and accelerate our growth strategy. Our robust and consistent performance over the longer- term, coupled with our strong balance sheet, positioned us well to navigate the uncertainty caused by the global health emergency. For 2020, we are driving to flat to modestly positive EBITDA growth, and free cash flow within the lower-half of our original target range. Moreover, we remain hopeful that conditions will permit us to meet or exceed our targeted dividend increase when we report our third quarter results in November. Alongside the incredible innovations we are driving in response to the current crisis, and the tuition value gleaned over the past several months, our strong performance will support the ongoing evolution of our operating model and resiliency of our organization, ensuring we are strongly positioned for anticipated post- pandemic economic challenges and market opportunities,” Mr. Entwistle further commented. 

“Our TELUS team remains committed to ensuring Canadians stay connected to what matters the most,” Mr. Entwistle expressed. “In this regard, our TELUS team continues to deliver on our commitment of $150 million to support COVID-19 relief efforts across Canada. Notably, since the start of the global pandemic, the TELUS Friendly Future Foundation has contributed $5.5 million to 326 charitable health projects. In addition, with the launch of our virtual TELUS Days of Giving, this quarter alone, TELUS team members have participated in 200,000 Acts of Giving, including 450,000 volunteer hours served and 131,000 masks sewn for our communities. As Canadians continue to seek healthcare from the safety of their homes, we are leveraging the unique breadth and scope of our TELUS Health offerings to enable the ongoing expansion of our virtual care solutions, helping to improve health outcomes of our fellow citizens – particularly the most vulnerable among us. In this same vein, we continue to mobilize our Health for Good mobile clinics to support with COVID-19 testing efforts, building on the 36,000 patient visits to our mobile health clinics since the inception of the program. Moreover, during the pandemic, we distributed 14,000 free devices with $0 mobile plans to over 325 organizations that support vulnerable citizens. This is in addition to the 5,300 at-risk youth our team has supported with a free smartphone and free data plan since the start of our Mobility for Good program, ensuring these community members are connected during these unprecedented times.” 

Mr. Entwistle continued, “This past quarter, we expanded our TELUS Internet for Good program to help people living with disabilities access the vital tools and resources they need to live fulfilling lives, from the comfort of their own home. Since introducing our Internet for Good program, we have enabled more than 65,000 Canadians from low income families with low cost, high-speed TELUS internet.” 

Doug French, Executive Vice-president and Chief Financial Officer said, “Our resilient second quarter results are reflective of our leading culture, and the remarkable way our highly engaged team collectively embraced the rapidly evolving environment, carrying forward our first quarter momentum, and delivering strong subscriber growth while managing profitability through a challenging period. Our success is enabled by our intense focus on customer service excellence and network leadership, leveraging our digital capabilities and simplification, and further supported by our continued focus on driving cost efficiency and margin-enhancing initiatives across the business to mitigate the negative impacts of the pandemic.” 

“As we navigated through the unique circumstances this quarter, we successfully took advantage of attractive credit market conditions to refinance early our 2021 maturities at attractive rates, further strengthening our balance sheet and enhancing our liquidity position to more than $3.6 billion. As a result, our weighted average interest rate on long-term debt is 3.86 per cent, with an average term to maturity of 13 years, and no maturities until 2022. This strong financial position continues to support our growth initiatives as well as strategic acquisitions to further enhance our growth trajectory. Our continued network investments further elevate our leadership position, including advancing our world-leading broadband network to drive both near and longer-term revenue and operating efficiency benefits. As a result, we are well-positioned to continue building on our track record of providing investors with the industry’s best multi-year dividend growth program, while also preparing ourselves for important spectrum auctions in the coming years.” 

Mr. French added, “As we progress through the back half of the year, our team will look to carry this operating momentum forward, and sustain our relentless focus on operational efficiency, supported by the unique growth attributes of TELUS International, TELUS Health and TELUS Agriculture. While we recognize that the remainder of the year will present its own set of unique challenges, the TELUS team has consistently demonstrated its remarkable ability to adapt and evolve amid any operational environment. In light of the continued evolving nature and uncertainty of the global COVID-19 health crisis, we remain unable to accurately forecast an exact range of positive and negative impacts of the pandemic on our business and our previously issued, and subsequently withdrawn, annual financial guidance for 2020. For the year, as we strive to achieve EBITDA that is flat to slightly accretive, and spend according to our original capex plan, we are driving toward strong free cash flow within the lower-half of our original target range of $1.4 to $1.7 billion. Our free cash flow objective is not amplified by capex as we continue to anticipate capital investments of approximately $2.75 billion, to support ongoing prudent investments in fruitful opportunities we see to advance the delivery of our leading network technologies.” 
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