Telus Earnings: Business Looks Pretty Good as the Firm Navigates Higher Competition

Our takeaway from Telus’ T third-quarter results was strikingly similar to peer BCE’s report a day earlier. Telus posted good telecom results that saw it continuing to add broadband customers to its fiber network and a near-record number of mobile phone subscribers. But Telus’ results also showed signs of increasing wireless competition after Quebecor entered the national market in the spring. Customer churn took a notable tick up, and average revenue per user, or ARPU, declined. The competitive environment and limited ability to expand ARPU have been part of our thesis for the Big Three Canadian wireless carriers. We’re maintaining our projections and our CAD 33 fair value estimate for Telus. We see each of the Big Three as undervalued.

Telus added 160,000 net mobile phone customers, the best result of any quarter since 2008. Like BCE, Telus accomplished this despite a rise in churn, to 1%. Competition was also a factor in the 0.5% ARPU decline, the first year-over-year drop since early 2021. We don’t expect ARPU to rise very much throughout our forecast because of the competitive environment. However, the ongoing robust level of new customer additions each quarter, which should have legs due to Canada’s expansive immigration policy, should continue to drive solid sales growth.

We still believe fixed-line services are where Telus has a bigger advantage, with its fiber network and lack of legacy satellite television customers. Telus added another 37,000 net broadband customers, continuing to steadily increase the subscriber base by about 1.5% every quarter. It also added another 20,000 net television customers. These drove 5% year-over-year growth in fixed data services revenue. Apart from the value we believe Telus’ fiber network has for directly driving fixed-line subscribers and sales, it is also key to giving Telus an attractive bundling offer that can differentiate it for some wireless customers and is leading to other cost efficiencies.