Summary

  • TELUS is a dynamic, world-leading communications technology company with $16 billion in annual revenue and 16 million customer connections.
  • In September 2021, the company acquired 100% ownership of Blacksmith Applications Holdings Inc
  • TELUS Health is Canada’s leader in digital health technology, TELUS Agriculture provides innovative digital solutions throughout the agriculture value chain.
  • TELUS International is a leading digital customer experience innovator that delivers next-generation AI and content management solutions for global brands.

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Company Overview

TELUS (NYSE:TU, TSX:T) 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. The company leverage its global-leading technology and compassion to enable remarkable human outcomes. The company's long-standing commitment to putting its customers first fuels every aspect of its business, making it a distinct leader in customer service excellence and loyalty. TELUS Health is Canada’s leader in digital health technology, TELUS Agriculture provides innovative digital solutions throughout the agriculture value chain and TELUS International is a leading digital customer experience innovator that delivers next-generation AI and content management solutions for global brands.

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Mergers and acquisitions

Blacksmith Applications

On September 22, 2021, the company acquired 100% ownership of Blacksmith Applications Holdings Inc., a provider of management, optimization and analytics to food, beverage and consumer goods providers. The acquisition is complementary to, and was made with a view to growing, its existing smart data solutions business.

Emergis Inc. acquisition

TELUS completed its offer to purchase all of the outstanding common shares of Emergis Inc. on January 17, 2008. If you still hold share certificates for Emergis, you must tender your shares to Computershare Trust Company to receive consideration.1

BC TELECOM and TELUS merger

Registered shareholders, who held certificates dated prior to February 1, 1999, were required to submit those certificates to Computershare Trust Company for exchange into the new TELUS Corporation share certificates before the expiry date of January 31, 2005.

QuébecTel acquisition

The shares of QuébecTel no longer trade on any stock exchange. If you did not exchange your share certificates by the expiry date of June 1, 2006, you ceased to have any claim against TELUS or any entitlement relating to those shares. If you have questions regarding unexchanged share certificates, please contact Computershare Trust Company.

Clearnet Communications Inc. acquisition

If you still hold share certificates of Clearnet Communications Inc., you must tender your shares with a completed Letter of Transmittal to Computershare Trust Company to receive your consideration.

Daedalian eSolutions acquisition

If you still hold share certificates of Daedalian eSolutions, you must tender your shares with a completed Letter of Transmittal to Computershare Trust Company to receive your consideration.

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Operational Resources

TELUS technology solutions (TTech)

Innovation, Science and Economic Development Canada (ISED) held its 3500 MHz auction from June 15, 2021 through July 23, 2021. The company successfully acquired 142 wireless licences in B.C., Alberta, Manitoba, Ontario and Quebec. Combined with the spectrum acquired privately in the first quarter of 2021, the company now hold 25 MHz in the 3500 MHz spectrum band nationally and 40 MHz in its key markets. By securing the critical, mid-band spectrum necessary to bring transformational, next-generation 5G connectivity to Canadians, Telus is able to continue to offer the leading network reliability, speed, coverage and low latency that citizens need to realize improved outcomes in a digital world.

Since mid-2013 through September 30, 2021, Telus has invested more than $5.6 billion to acquire wireless spectrum licences in spectrum auctions and other private transactions, including transactions in the first quarter of 2021 where the company obtained the use of AWS-4 spectrum licences from the original licensees, as well as in the second quarter of 2021 where the company acquired 2500 MHz spectrum, in addition to the above mentioned 3500 MHz acquisitions. These investments have more than doubled its national spectrum holdings in support of its top priority to put customers first.

As at September 30, 2021, its 4G LTE technology covered 99% of Canada’s population, consistent with September 30, 2020. Telus has continued to invest in the roll-out of its LTE advanced technology, which covered over 96% of Canada’s population at September 30, 2021, relatively consistent from one year earlier. Furthermore, its 5G network, launched in June 2020, covered 64% of Canada’s population at September 30, 2021.

As at September 30, 2021, more than 2.6 million households and businesses in B.C., Alberta and Eastern Quebec were covered with fibre-optic cable, which provides these premises with immediate access to its fibre-optic technology. This is up from more than 2.4 million households and businesses in the third quarter of 2020.

As at September 30, 2021, approximately 12% of its TV and internet customers within its PureFibre footprint are serviced by copper, down from 15% at June 30, 2021. The majority of the remaining customers are expected to be substantially migrated to TELUS PureFibre® by the end of 2022.

The company offer a variety of healthcare solutions and services including virtual care, virtual pharmacy, electronic medical records (EMR), pharmacy management systems, claims management solutions, personal health records, remote patient monitoring, personal emergency response services, mental health support, comprehensive primary care and employee wellness, and curation of health content for Canadians.

The company's smart food-chain technology solutions include farm management, precision agronomy, feedlot health management, application programming interface (API) and application integration services, compliance management, food traceability and quality assurance, supply chain management, data management solutions and software solutions for trade promotion management and retail execution.

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TELUS International (DLCX)

The company's DLCX segment offers services that support the full lifecycle of its clients’ digital transformation journeys. The company enable its clients to more quickly embrace next-generation digital technologies to deliver better business outcomes. The solutions and services offered are relevant across multiple markets, including information technology (IT) services for digital transformation of customer experience systems and digital customer experience management.

The company's DLCX segment has built an agile delivery model with global scale to support next-generation, digitally-led customer experiences. Substantially all of the delivery locations are connected through a carrier-grade infrastructure backed by cloud technologies, enabling globally distributed and virtualized teams. The interconnectedness of its DLCX teams and ability to seamlessly shift interactions between physical and digital channels enables its DLCX teams to tailor its delivery strategy to clients’ evolving needs.

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Financial Highlights

Revenues

Consolidated Operating revenues and other income increased by $270 million in the third quarter of 2021 and $983 million in the first nine months of 2021.2

Service revenues increased by $296 million in the third quarter of 2021 and $862 million in the first nine months of 2021, due to growth in internet and third-wave data service revenues, as well as other fixed data services revenues from subscriber base growth, customer internet speed upgrades and expanded services; increased DLCX segment revenues from business acquisitions, and organic growth from both new clients and expanded services for existing customers; growth in its mobile subscriber base; and growth in health services revenues.

Equipment revenues decreased by $11 million in the third quarter of 2021 driven by lower mobile handset upgrade volumes largely due to the non-recurrence of heightened demand for handsets in the third quarter of 2020, in addition to global supply chain challenges including industry-wide mobile handset inventory constraints that began to emerge in the third quarter of 2021, as well as lower fixed equipment revenue. Equipment revenues increased by $235 million in the first nine months of 2021, reflecting higher handset upgrade volumes and a greater sales mix of higher-value smartphones.

Other income decreased by $15 million in the third quarter of 2021, primarily related to lower net gains on the sale of certain assets. Other income decreased by $114 million in the first nine months of 2021, largely related to the non-recurrence of the comparative period’s decrease and subsequent retirement of a provision arising from business acquisition-related written put options within DLCX.

Operating income

Operating income increased by $75 million in the third quarter of 2021 and $87 million in the first nine months of 2021. Excluding the effects of a non-recurring gain on a retirement of a provision arising from business acquisitionrelated written put options within DLCX of $71 million in the second quarter of 2020, Operating income increased by $158 million in the first nine months of 2021. This increase was driven by growth in internet and third-wave data service margins, as well as other fixed data service margins resulting from subscriber base growth and expanded services; growth in network revenue from increases in its mobile phone and connected devices subscriber bases; growth in mobile equipment margins; an increased contribution from DLCX; and lower bad debt expense. This was partly offset by higher employee benefits expense and lower legacy fixed voice and legacy fixed data services. Growth in the first nine months of 2021 also reflects lower non-labour restructuring and other costs related to the pandemic, partly offset by the dilutive lingering impacts of the pandemic, including reduced roaming margins related to travel restrictions.

EBITDA, which includes restructuring and other costs, other equity losses related to real estate joint ventures and a gain on a retirement of a provision arising from business acquisition-related written put options within DLCX, increased by $106 million in the third quarter of 2021 and $250 million in the first nine months of 2021.

Adjusted EBITDA, which excludes restructuring and other costs, other equity losses related to real estate joint ventures and a gain on a retirement of a provision arising from business acquisition-related written put options within DLCX, increased by $103 million or 7.1% in the third quarter of 2021 and $260 million or 6.0% in the first nine months of 2021.

Income before income taxes increased by $68 million in the third quarter of 2021 and $64 million in the first nine months of 2021 as a result of higher Operating income, partly offset by increased Financing costs.

Income tax expense increased by $31 million in the third quarter of 2021 and $18 million in the first nine months of 2021. The effective tax rate increased from 25.4% to 28.1% in the third quarter of 2021, primarily due to greater nondeductible amounts in the current period in addition to tax adjustments recognized in the current period for income taxes of prior periods. The effective tax rate was 27.0% in the first nine months of 2021, which was relatively unchanged compared to the effective tax rate in the first nine months of 2020.

Net income attributable to Common Shares increased by $38 million in the third quarter of 2021 and $64 million in the first nine months of 2021, resulting from the after-tax impacts of higher Operating income and higher Financing costs. Adjusted Net income excludes the effects of restructuring and other costs, income tax-related adjustments, other equity losses related to real estate joint ventures, long-term debt prepayment premium and a gain on a retirement of a provision arising from business acquisition-related written put options within DLCX. Adjusted Net income increased by $36 million or 10.1% in the third quarter of 2021 and $27 million or 2.5% in the first nine months of 2021.

Basic EPS increased by $0.01 or 4.2% in the third quarter of 2021 and $0.01 or 1.3% in the first nine months of 2021, as a result of the after-tax impacts of higher Operating income and higher Financing costs, as well as the effect of a higher number of Common Shares outstanding.

Dividends declared per Common Share were $0.3162 in the third quarter of 2021, reflecting an increase of 8.6% from one year earlier. On November 4, 2021, the Board declared a fourth quarter dividend of $0.3274 per share on its issued and outstanding Common Shares, payable on January 4, 2022, to shareholders of record at the close of business on December 10, 2021.

Cash provided by operating activities increased by $420 million in the third quarter of 2021, primarily driven by the timing of income tax and spectrum licence payments as a portion of the income tax instalments from the first six months of 2020 and spectrum licence payments from the first quarter of 2020 were deferred into the third quarter of 2020, in addition to other working capital changes. Cash provided by operating activities decreased by $30 million in the first nine months of 2021, largely attributable to other working capital changes and higher income taxes paid ated to higher payments in foreign jurisdictions and larger instalments reflecting a higher estimate of taxable income for 2021 compared to 2020

References

  1. ^ https://www.telus.com/en/about/investor-relations/investor-services/mergers-and-acquisitions?linktype=ge-meganav
  2. ^ https://assets.ctfassets.net/rz9m1rynx8pv/3oY1FxggbM4md5FuDVkhoQ/df26330fb5949670b0e0b9bc2fba83a5/TELUS_Q3_2021_MD_A_and_Financial_Statements.pdf
Tags: US:TU CA:T
Created by Asif Farooqui on 2022/01/18 16:36
     

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