TELUS (TSX:T) Q3 2026 Earnings Call

0:01 Good day, everyone. Welcome to the TELUS 2026 Q3 earnings conference call. I would like to introduce your speaker, Ian McMillan. Please go ahead.

0:10 Thank you, Carl. And hello, everyone. Thank you for joining us. Our third quarter of 2026 news release, MD&A financial statement and detailed supplemental investor information were posted on our website earlier this morning, along with the earnings presentation referenced on this webcast. Today's agenda will include opening remarks from Victor Dodig, TELS President and Chief Executive Officer, and Gopi Chande, our Executive Vice President and Chief Financial Officer. After the presentation, there will be a question and answer period where we will be joined by David Fuller, Executive Vice President and Group President, TELS Communications, and Navin Arora, Executive Vice President and Group President, Global Platform Businesses. This will be followed by brief closing remarks by Victor. Turning to slide two. Prepared remarks, slides, and answers to questions contain forward-looking statements. Actual results could vary from these statements.

1:03 The assumptions on which they are based and the material risks that could cause them to differ are outlined in our public filings with securities commissions in Canada and the United States, including our third quarter of 2026 and 2025 annual MD&A. Please note that all reference dollar amounts are in Canadian dollars unless otherwise stated. Additionally, financial performance is compared to prior year periods unless otherwise noted. With that, let me turn the meeting over to Victor.

1:29 Thanks, Ian, and hello, everyone. Thank you for joining us for our third quarter earnings call. As I promised on our second quarter close in July, today we'll provide you with more granularity on our priorities. My remarks will focus on our transformation strategy, while Gopi will provide an overview of our third quarter results and financial details behind our plan. So let's start on slide five. Our transformation strategy has one clear purpose, and that is to solidify Thomas's position as the leading communication and AI infrastructure player in Canada. It's an intentional and a strategic pivot to profitable growth. To achieve this, we're executing against three key priorities that I outlined during our second quarter call result in July.

2:19 The first is to strengthen our financial foundations. We will continue to strengthen our balance sheet by reducing our debt and by focusing our efforts on our core telecom business and pursuing a monetization strategy for our non-core assets. Our second priority is to hone our operational discipline. This means that we're transforming our cost base, how we do business, particularly in our telecommunications business. as well as streamlining and improving processes across our enterprise to deliver a more seamless experience for our TELUS customers and for our TELUS team members. And our third priority is to deploy these resources to drive profitable and sustainable growth and returns. So I want to go through each of these priorities in greater detail beginning on slide six with our first priority, which is strengthening our financial foundation.

3:14 With our second quarter results, we announced three key actions. We reset our dividend-payout ratio to a sustainable level. We terminated the dilutive discount on the dividend reinvestment plan, and we put a moratorium on acquisitions. These decisions were difficult, but they were necessary, and they demonstrate our commitment to financial discipline. We're committed to strengthening our balance sheet and to have a clear path to achieving a net debt adjusted EBITDA leverage ratio of three times or lower by the end of 2028. To that end, we're intentionally pursuing an asset monetization strategy and prioritizing our TELUS health and TELUS agriculture and consumer goods businesses.

4:01 We are advancing this plan with one asset in our health portfolio, which is an advanced stage with a prospective buyer. will manage these engagements on our terms to ensure we maximize the value of our businesses to our shareholders. And as we sign these agreements, we'll share those developments with you. We're also reviewing how we can unlock equity value from our pure fiber network while maintaining control, similar to the successful partnership approach we took with our wireless towers through Terria. Now, we're early in the process, and conversations with potential investment partners are encouraging. So let's turn to slide seven, our second priority, which is to hone our operational discipline. With our new leadership team in place, we conducted a comprehensive assessment of our business. We identified a clear set of levers to simplify our operations, improve our cost structure, and concentrate resources behind profitable growth.

5:03 Zainul Mawji We've already made a number of strategic pivots in our consumer business that prioritize profitability and capital efficiency. Under Dave Fulmer's leadership, we have refocused our consumer internet business on our fiber-built communities and moved both our home security business and our TV offerings to a capital light model that will dramatically improve our return on capital for these businesses.

5:51 Our team has also streamlined our organizational structure and simplified our product portfolio by winding down unprofitable and capital-intensive initiatives. These actions will deliver approximately $250 million in structural cash savings, predominantly capital, with the full run rate benefit expected beginning in 2027. These savings are also captured within the $900 million target that I just referred to. Let me now detail the initiatives that underpin these additional benefits. I'll start with our core telecom business. This program will be executed across five key areas. The first is focused on streamlining our customer experience, reducing customer pain points and reasons to call us, and leveraging AI to automate and ensure that TELUS is the easiest provider to do business with, all in the name of improving our net promoter score and ensuring that our customers are happy customers.

6:53 The second is focused around driving higher revenue per customer and enhancing our already industry-leading customer retention metrics. The third stream is to optimize our sales mix toward lower cost channels and digital onboarding. The fourth is procurement enhancement across both operating and capital spend while the fifth is focused on network and field force effectiveness and capital optimization. We know how to do this and we're going to get it done.

7:24 In our global platform business, we're focused on three things.

7:28 First, leveraging AI and automation to deliver better results for our customers with less effort. Second is earning more from each customer by deepening the relationship with them across higher margin services and tightening pricing and contract terms. and the third is running leaner by simplifying how we deliver and how we trim overhead. Again, we know how to do this and we'll get this done. These actions target a stronger margin profile across TELUS digital, health and ag and consumer goods. So taken together, our efforts will support achieving our target of $900 million in annualized cash savings exiting 2028. So moving to slide 8, which is our third priority, and that's to deploy the resources that we free up to drive growth and returns in our core business.

8:21 First, we're committed to reducing our leverage, and we'll use proceeds from the dividend reset and asset monetization strategy to achieve our leverage ratio target of three times or lower by the end of 2028. In parallel, we will strategically invest in organic growth in our core telecom assets. will fund this growth through disciplined CapEx with a focus on preserving premium economics. This includes growing our pure fiber footprint, the gold standard for broadband connectivity, delivering capabilities that alternative technologies, including cable and satellite, simply cannot match. We began building our fiber network more than a decade ago, and it now reaches over 3.8 million homes and businesses with strong penetration rates across our footprint.

9:12 We continue to grow this footprint in high return underserved markets in urban and suburban communities where we are quickly driving strong penetration gains and product intensity. Our pure fiber network is a highly valuable asset and a critical differentiator across our business. It strengthens our competitive position in the markets we serve and our AI infrastructure more broadly. Our Pure Fiber Network is also the foundation for an accelerated source of growth, and we're well positioned to meet one of the fastest areas of growing demand in the economy, and that's in AI infrastructure. Slide 9 shows how we're pursuing the AI infrastructure opportunity, something that we mentioned we'd cover with you in the second quarter call.

9:59 and that's to leverage our core strengths and advantages that we have invested in and developed over decades. And those advantages are our pure fiber network, which I've mentioned a couple of times, data centers where we already own and operate them with the scale and technical expertise to operate them, telecom and AI infrastructure offered together and a brand trusted by both businesses and government. Importantly, we're committed to Canadian sovereignty and data residencies. Canadian data stays in Canada, which is the foundation of our sovereign approach. Together, these support a disciplined, capital-efficient strategy built on TELUS's core strengths aimed at sustainable, profitable growth. So in that vein, we have three initiatives, the first two of which are near-term priority.

10:47 That first one is we're using our fiber to connect other data center operators to the grid. This is where a pure fiber network gives us a real edge. Several deals are underway, and the economics of these transactions and our win rate so far are strong. Second, we're building sovereign AI capabilities for Canadian businesses and governments. This is where owning our data centers sets us apart. We'll start with our data centers in Rimouski and Kamloops, both operating today, plus our strategically located central offices. This includes both GPU as a service and ready-to-use wholesale solutions. Across our sites, we've secured 38 megawatts of power, which we plan to bring online steadily through to the end of 2028.

11:36 Our approach is to use the assets we have first, then add GPU capacity as customer demand materializes. We'll do this ourselves or with an investment partner. Whichever delivers the best returns to our shareholders while staying disciplined with how we deploy capital. We're focused on winning more of the opportunities already in front of us and we'll invest carefully while staying committed to reducing debt and growing free cash flow. The demand is strong. I think we all know that. Canada needs more data center capacity than it has today. Canada, I think, represents 1% of compute globally. The EU represents 5%. and you know that the US and China is where most of it is. So we need to build that. We have a pipeline today of more than a billion dollars in total contract value across our digital infrastructure business.

12:25 And over the next three years, we project about $500 million in revenue with healthy margins, depending of course on market factors such as supply chain conditions. And third, we're exploring data center shells with power already secured. This would be done through partnerships, again, capital investment partnerships that protect our balance sheet and our commitment to paying down debt. So it's still early and it's not included in the estimates that I just shared. You can expect to hear more of that on future calls. In closing, our efficiency program will deliver significant cash savings through growth and through cost efficiencies and free up resources and focus management attention on our core business. Our telecom strategy ensures we maintain and grow our core business and our AI infrastructure initiative positions tell us in a high-growth market with strong cash flow benefits where we have the right to win.

13:22 Our monetization strategy alongside the equitization of our pure fiber network, which we will control, will strengthen our balance sheet and enhance our financial flexibility to invest organically in these high-growth, high-return areas. and the result of our efforts to date is clear. We have a seasoned leadership team that is focused and moving swiftly to drive greater efficiency and better position TELUS to deliver sustainable, profitable growth and returns for our shareholders. We expect our actions to gain traction and translate into improved revenue, improved margins and improved cash flow. And now with that, let me turn the call over to Gopi for a detailed review of our results.

14:06 Thank you, Victor. Today, I will cover our third quarter operating and financial performance and provide further financial details for the key progress areas Victor just outlined. Let me begin on slide 11 and our third quarter consolidated results. Consolidated service revenue of $4.5 billion was lower by 1% year over year. Growth in our poor telecom business, including mobile network and fixed data service revenue, was offset by TELUS Digital. Consolidated adjusted EBITDA of $1.8 billion declined by 5%, primarily due to weaker results in TELUS Digital, and from $78 million of one-time items recognized in the third quarter last year, as we shared on our Q2 earnings call. Normalized for those, consolidated adjusted EBITDA was lower by 2%.

15:01 Basic EPS was negative 42 cents due to the Telus Health non-cash impairment, which I'll discuss shortly. Adjusted EPS was 16 cents, down from 24 cents a year ago, reflecting after-tax impacts of lower operating incomes. Cash from operations of $1.5 billion was close to flat, and free cash flow of $396 million was lower by 35%, reflecting lower EBITDA and higher CAPEX, both as expected. Slide 12 outlines our results for our core T-TECH business. T-TECH service revenues of $3.3 billion was higher by 1% and adjusted EBITDA of $1.6 billion was down 5% as expected due to one-time items in Q3 of last year. Normalized T-TECH adjusted EBITDA was lower by 1%.

16:00 Digging deeper into the components of T-TECH, mobile network revenue of $1.8 billion was up 1%, reflecting our disciplined operational execution and Evidenced by our focus and ability to preserve premium economics and stabilized ARPU year-over-year. Mobile phone net additions of 84,000 reflected strong base management, as demonstrated by the 10 basis points improvement to blended mobile phone churn, landing at 1.01% for the quarter, our lowest quarterly result in three years, while post-paying churn also improved to below .9%. Fixed data revenue of $1.2 billion increased by 2%, supported by steady growth in consumer from a higher Internet subscriber base and security and automation revenues.

16:54 Our Internet net additions totaled $10,000 due to lower growth floating, reflecting a deliberate shift to prioritize sustainable margins and capital efficiency over subsidized volume partially offset by lower churns. Turning to our global platform businesses on slide 13. Service revenue at TELUS Digital was $637 million and it declined 11% while adjusted EBITDA of $62 million was lower by 9%. These results reflected the impacts from hyperscale client volume ramp downs as we discussed last quarter. In TELUS Health, we saw an improvement in year-over-year growth in service revenue, up 2%, and adjusted EBITDA declined by 5% due to lower other income.

17:44 As outlined in our disclosure today, we recorded a non-cash goodwill impairment of $800 million for our TELUS Health business, reflecting updated growth expectations, broader market conditions, and current valuation perspectives from ongoing strategic processes. It does not change our commitment to TELUS Health or our focus on strengthening open operating performance, optimizing our portfolio, and unlocking long-term shareholder value. We remained disciplined and deliberate in advancing these opportunities for our teams with a clear focus on maximizing value for shareholders while continuing to position TELUS Health for sustainable, profitable growth.

18:30 Turning to slide 14. Let me provide the financial details supporting our strategic priorities, specifically honing our operational discipline. As we've shared today, we have embarked upon a multi-year efficiency program targeting annualized cash savings of approximately $900 million exiting 2028. This will be achieved through operational costs and margin improvements, as well as CapEx efficiencies. We are already seeing this discipline in action through several key initiatives driving significant capital efficiencies, giving us confidence in our ability to reduce our core capital expenditure profile in 2027. In order to achieve the $900 million target, we expect to invest approximately $150 million across the various focus areas Victor outlined.

19:22 Our comprehensive transformation strategy is designed to deliver a durable impact, building a more focused, efficient, growth-oriented organization positioned for sustainable profitability. Now, let me review our balance sheet on slide 15. We remain well capitalized, with total available liquidity of $3 billion and a net debt to adjusted EBITDA leverage ratio as of September 30th of 3.6 times. As expected, this was up modestly from 2.5 times a year ago due to higher debt levels and lower EBITDA, consistent with our updated outlook provided on the Q2 policy. Our operational execution, improving capital intensity over the longer term, free cash flow growth, and asset monetization strategy will continue to strengthen our balance sheet.

20:17 Let me review our capital allocation framework on slide 16. To reiterate, we are committed to paying down debt to achieve a leverage ratio target of three times or lower by the end of 2028 and are fully committed to maintaining our investment grade credit rating profile. Our enterprise-wide mandate is clear. We are only deploying capital through initiatives that generate strong, sustainable returns that exceed our cost of capital. We also remain committed to ongoing shareholder return through a sustainable quarterly dividend of 18.75 cents per share. Looking ahead, this disciplined approach ensures we remain focused on driving greater capital efficiency and maintaining disciplined investment in our core telecom and AI infrastructure businesses to deliver attractive financial returns and sustainable shareholder value.

21:13 Turning to our annual financial guidance on slide 17. For the full year 2026, we are reaffirming our consolidated guidance as updated with our Q2 results in July. This includes service revenue of flat to negative 2%, adjusted EBITDA of negative 2% to negative 4%, capital expenditures of approximately $2.6 billion, and free cash flow of approximately $1.8 billion. In closing, we have a clear line of sight to deliver on our transformation strategy. We are moving swiftly and with conviction and commit to communicating our progress with transparency. We are confident that our actions will position us for stronger performance as we head into 2027 and beyond. Now, let me pass the call back to Ian to begin questions next.

22:04 Thank you, Gopi. Carl, please proceed with questions. For those on the phone, if you'd like to queue up to ask a question at this time, please dial star 1 on your phone's keypad. If ever you wish to withdraw from the queue, press star 2. The first question is from Mayor Yagi from Scotiabank. Please go ahead.

22:25 Great. Thank you for taking my question. Victor, I wanted to follow up. I mean, you guys have laid out a very strong plan for Reducing the operational and capex cost of the company going forward and the results will hit in the coming years. I wanted to follow up on that beyond the cost savings and this goes to a conversation we had when you joined early on is to figure out the revenue opportunity for TELUS going forward and where do you see the company Growing into in the next couple of years, where the growth could come from mostly, and if you can maybe just give us an idea what you think the company can grow at on a more normalized basis now that the wireless business seems to be stabilizing.

23:28 Thank you.

23:30 Hey, good morning, Mayor. I'm going to share a couple of comments. I'll also pass it on to Dave on the telecom front as well. Look, the goal here is to capitalize on what we see as a real opportunity in our domestic market in Canada in both the telecom sector and digital infrastructure, broadly speaking. To do that, we need to free up resources within our company, and it has several component parts. The first is that transformation strategy that we outlined that will free up $900 million and net cash savings through exiting 2028. You know, we're going to work really, really hard to get that done. It's a lot of work, a lot of heavy lifting and a lot of change in the way we do business. The second piece is to monetize our non-core assets. All good businesses and, you know, like I said, we're in advanced stages with one. We're going to activate another Telus Health asset this month so that we can free up those resources. And the third, as I mentioned in my remarks, is to unlock some of the equity value, which is at very early stage in discussions in our pure fiber network. All of those resources will be redeployed to paying down our debt and to organic growth. When you think about capital allocation at TELUS, you think about those two side by side and getting that leverage level to a better place and growing organically, especially by growing fiber. Our fiber presence in Ontario and Quebec and in our western region That is the best defense against these technologies

25:05 that are emerging. That is a real growth opportunity in addition to our data center strategy. I'm sure you'll hear from Navin as well in a moment on that. So Dave, do you want to talk a little bit about telecom? Because we're off to a good start in terms of Stopping certain things, the results are really strong, but I think you're going to continue to see us methodically progress into better premium relationships across the telecom spectrum with our customers.

25:34 Yeah, thanks, Victor. Yeah, Meyer, we fundamentally believe that we can continue to grow the telecom business in the low single digits, both top and bottom line going forward. I would say that growth is driven by three areas. First of all, in the consumer business, continued strength in our mobility franchise, I think, is something we forecast through 27 and 28, provided that the sensible and stable market that we saw throughout Q3 persists in 2027 and beyond. Plus, we think on the consumer side, there's continual opportunity to progress our pure fiber build in communities across the country. Secondly, moving to B2B, I would say that there's a significant opportunity, as Victor's already alluded to, around infrastructure build and fiber network builds associated with AI data centers.

26:30 and more broadly, when you look at the tax changes that the government recently announced around the mega tax donation, a boom in potential infrastructure spending across the technology space that can benefit us from that increased spend from many of our B2B customers in the enterprise space and the public sector space. and then the third is operational efficiency. Victor outlined some of the areas that we're focused on, but when I think of you, when you look at AI and the automation benefits that it can bring, I believe it's a generational opportunity to significantly transform how we support and service our customers, to allow them to support and service what they want to do through self-serve tools, to automate significant portions of our processes today that are manual, and to remove friction and improve the customer experience on a substantive basis.

27:26 That all has been rock on second order benefits across continued churn reductions against our already classifying churn results as well as lower cost of acquisition, lower cost of renewal and lower operational support costs within our organization.

27:46 Okay, Mayor. Thank you very much.

27:50 All right, good. Thanks, Mayor. Next question, Carl. The next question is from Drew McReynolds from RBC Capital Markets. Please go ahead, Drew. Yeah, thanks very much. Good morning. Just want to unpack the two numbers that you've thrown out. First on the $900 million cash savings, just trying to understand all the moving parts here. So I think, Victor, if I understand your prepared remarks, of the 900, there's 250 million that you highlighted as CapEx efficiencies that begin run rate in 2027. If I've got that right, so does that imply the rest of it is 650 million in OpEx?

28:37 And then where does the 150 million in investment come in? Thank you.

28:43 Okay, all good questions. We're going to hand that off to Gopi just to take you through that because I think it's important they understand how that all kind of fits together.

28:51 Okay. Good morning, Drew. So the way to think about that $900 million cash, first of all, just defining our nomenclature, think about it as $75 million in December 2028 times 12. And so that's how we get to the $900 million cash. Specifically to your question, really pleased that we have decisions that are made that already give us line of sight into 250 million CapEx. The split is roughly 50-50 CapEx and EBITDA. As you noted, there are investments we need to make, so $150 million, as Victor noted. As these programs typically run, those investments are needed more up front to unlock some of the benefits, and so we'll give the specifics around 2027 when we give our guidance in February. And the last comment I'll make is the split between where those savings will show up, so about 80% in our core telecom business, which, as you know, is more than 90% of our EBITDA and 20% in the global platform businesses. So I'm really pleased with the detailed action plans that both Dave and Navin have to execute on this.

30:00 So we're confident in its delivery. Okay. And thank you, Gopi. And if I could just add one more clarification on the data center or sorry, AI infrastructure piece. You quantified from 100 million over the next three years in revenues and I think those are from the first two buckets. So the existing data center plus the connectivity. Is that 500 million a cumulative revenue recognition over the three years or do you hit run rate 500 million kind of by year three? I'm just trying to understand that. Yeah.

30:36 Navin, you want to go? Yeah, sure. That is a cumulative number, and maybe I'll give a little bit more color on the strategy there. So as Dave mentioned, you know, actually the first thing I'm going to say is that We're not going to boil the ocean around speculative or volatile data center type decisions. We're really going to be executing on two immediate high return, low risk priorities where we have a competitive advantage. Dave mentioned the first one around our fiber connectivity of other developers' data centers. Our incumbent territory of BC and Alberta has large campus style data centers that are coming in and we're going to be plugging them into our pure fiber network and these are high margin long-term transport deals and what we really like about them is that customers fund the network build capital right up front so that is a big part of Our growth and as part of that 500 million dollar number and then the second is the sovereign Canadian AI compute and We're using our existing data center facilities, Rimouski, Kamloops, and the central offices that Victor mentioned.

31:57 We already own them. We have the power. We have the talent. We have the expertise. And we're going to be thoughtful about how we expand that from the current 2 megawatts to the 38 megawatts of secured power that we have. And we'll be... Really matching the demand build-out of the GPU capacity with signed customer contracts, and we'll be thoughtful about how we fund that within the debt commitments that Gopi and Victor talked about. The business case is really strong with IRR, and we're excited about those expansions.

32:43 Okay, thank you very much. Thanks, Drew. Carl, next question, please. The next question is from Stephanie Price from CIBC World Markets. Please go ahead, Stephanie.

32:53 Hi, good morning. Thanks for the question. I was hoping to get a little bit more color on the potential equitization of the fiber assets. You noted in the prepared remarks it would be like the similar to the Tarion deal and that, you know, there was an opportunity for fiber expansion around Tarion, Quebec. So just hoping you could share a little bit more color on, you know, how you're thinking about the potential deal in terms of retaining control and how to think about footprint expansion and whether FiberCo would target wholesale opportunities as well.

33:19 Good morning, Stephanie. So let me start and I'll pass it on to Gopi. So again, three component parts in terms of freeing up resources, right? One is our transformation strategy. Two is the monetization of non-core assets. And three is the pure fiber network that you have alluded to in your question, Stephanie. Obviously, there's a couple of principles. First of all, it's We're in the early stages, but we're encouraged. We know that there's value there to unlock, and we know that those proceeds can be used in our capital allocation strategy, which is to de-lever and which is to deploy. And we know that there are over a million homes in Ontario and Quebec with line of sight to fiber that we can build for them. It costs money. We're mindful of where our leverage is. Those things got to work hand in hand. Think of it as a bit of an accordion, right?

34:07 Zainul Mawji There may be something you want to add as well. It's a large asset, that's for sure.

34:26 Yeah, and picking up on that, Victor, Stephanie, we're excited to surface the significant value in our own assets and use it to, as Victor mentioned, strengthen our balance sheet. So some of it will be for deleveraging. Some of it will go towards the fiber assets. Expansion, which we've got good experience in and supports the growth that Dave spoke about. And then some of it will go to, again, the initiatives that Navin spoke about. And ultimately, we look forward to being in a position to return capital to shareholders and potentially even stock buybacks. But as Victor mentioned, it's early stages, really positive discussions with potential partners, and we look forward to talking to you more about it as it proceeds. and maybe before I'll wrap, I'll pass it over to Dave.

35:13 Yeah, just two clarifications on comments you made. Stephanie, whatever we do in this space, we are going to absolutely maintain control. So we are not contemplating and would never contemplate selling off the entirety of that asset. Secondly, it is not, unlike Tarion, it is not focused on the wholesale side of the business. This is about monetizing Thank you for the call. Thank you, Stephanie. Carl, next question, please. The next question is from Vince Valentini from DD Securities. Please go ahead, Vince.

35:58 Hey, thanks very much. Let me start trying to clarify a couple things you've already mentioned. First, Gopi, they have 150 million costs to get these savings. You're already incurring 900 million restructuring costs this year. I assume the 150 is incremental to that and kicks in after this year. Also for you, the 50-50 split, thanks very much for that on OPEX, CAPEX. Just want to make sure, does that apply to the 80% of the cash savings that are supposed to be in the telecom or T-TECH segment? Is the 50-50 ratio make sense there as well? I'll pause before I do my other ones.

36:32 Okay, so maybe I'll start with the first. So the $150 million is primarily CapEx, and we're going to invest that more up front. So in 27 versus 28, we'll give you that specific split in February. and then with regards to restructure, Bucket, we're watching very carefully so what I can say for now, Vince, is we do expect restructure expense to be lower next year. There are some investments related to this program but this program is more focused on changing processes and the way we work and so there will be some natural efficiencies that come from how Dave has reorganized his group and so some severance associated with that but we do expect expense Thank you.

37:44 Second clarification, then I'll throw one question. The fiber-to-the-home monetization you're contemplating, in ballpark-like ranges, do you think these assets get similar type of EBITDA multiples or cap rates, however you want to think about it, versus what you achieved for Tarion, or is the fiber-to-the-home worth a lot less to potential infrastructure partners than what the towers were? And then just on the The results themselves, Dave, welcome aboard and great first quarter, especially on the wireless metrics. I just want to make sure, I mean, these numbers are so good on sub ads and churn. There's nothing unusual here of accounting for government subs or any other programs to get 84,000 sub ads. And as part of, given how you've seen all the numbers now, you know how much better you did than your incumbent peers this quarter. Are you thinking that your price discipline is good enough or is there room to tweak even further?

38:45 I'm thinking most specifically about public mobile that still seems to be the most aggressive offer from an incumbent and pretty much matches freedom all the time. Is that perhaps some of the loading you're seeing? Thank you.

38:58 Vince, why don't we start with you, Dave, just work backwards in terms of the business overall and the results, which are good, they're strong, and they're actually rooted in a strategy of focusing on our premium brands, knowing full well that we have our flankers and we use them when we need them. But it's about building deeper, better relationships with our customers. So over to you, Dave.

39:18 Yeah, thanks, Vince. Good to hear your voice again and happy to be back. Stepping back, I would want to emphasize that for TELUS, Q3 was actually a very restrained approach to promotional intensity throughout Q3. So our success on net ads was entirely driven by our success in churn. If you look at our gross ad number, it was actually down year over year by about 24,000. So the entirety of the slight increase you saw year over year in our net ads was driven off the fact that we had Substantive declines in both postpaid churn and prepaid churn, frankly, down to numbers that we haven't seen for more than three years at .87 and 1.01 in terms of blended churn.

40:05 So it was definitely not price-based. In fact, we were focused on the opposite. If you look at our prepaid to postpaid, specifically to your question around public, our loading swing and our mix shift was substantively towards postpaid loading. So, in fact, our postpaid net ad number was up markedly year over year. Our prepaid number declined pretty substantially as well. And so, you know, big swing towards postpaid, not prepaid, so it was not driven by public loading at all. and, you know, the other point I would make is even within that post-paid loading, pretty strong bias towards TELUS versus our flanker KUDO brands.

40:50 So our focus was very disciplined and very focused around our higher value plans and will continue to be like that throughout Black Friday. You know, we also saw, you know, other positive economics across the board. I mean, you saw our ARPU number, I would say that was just, you know, continued growth If you look at the ARPU numbers over the last several quarters, the declines have been getting lower and lower and lower, and we kind of got back to the point this quarter where it was kind of flat year over year. That was driven off strong success across pretty much all of our segments, as I said, in a mix shift towards higher value plans in the T-brand side, migrations within our brands, kind of up the value stack. On the B2B side, we saw strong sequential growth across both SMB and enterprise.

41:46 And to answer your other question, there wasn't anything done funny with the numbers. Those were legitimate numbers on our side, and I think you can see it in our service revenue growth at 1% year-over-year. I think the final point I'll just say around discipline is we also took a very disciplined approach to to subsidy throughout the quarter in Q3 and made sure, as we will do through Black Friday, that if we were participating in a subsidy promotion, it was only on ones where we were backed up and supported by our device OEM partners. So that would be it.

42:26 Victor, do you want to make any comments on that? I might make a few comments on the pure fiber. I'll hand it off to Gopi then briefly as well. I mean, in the end, you know, when you listen to Dave speak and hopefully from all of our remarks, you get this sense that there's an intentional strategic pivot to profitable growth with a good return on capital. I mean, that's the way we're thinking about our business and serving our customers with their needs in mind and making sure that they're happy being served by TELUS. When it comes to fiber to the home, Vince, it's worthwhile reemphasizing control is important to us. That is table stakes, foundational. When it comes to valuation, we do think that the current shares don't even reflect the value of that fiber. It is very valuable. We know that from investors that have already knocked on our door to say, look, We can unlock some value here for you.

43:17 You can redeploy it. And that's exactly how we're thinking about it. So, Gopi, maybe just shed a little light on perhaps some of the directional numbers of how we think about things.

43:26 So, Victor, I'm going to stay away from anchoring on any valuation, and specifically that's because we're still defining our perimeter. We have a lot of options in terms of what we can include in that, and so that is good flexibility for us. That will influence the valuation, so we don't want to anchor on that. But, again, very excited about the potential on our own balance sheet that echoing Victor's comments, we don't feel are reflected in our share price.

43:51 Excellent. I think you actually had something in your research report long ago, Vince. You can kind of do the numbers and tell us what you think it's worth one day. Thank you. Thanks, Vince. Carl, next question, please. The next question is from Tim Casey from BMO Capital Markets. Please go ahead, Tim.

44:08 Yeah, thanks. Good morning. A few for me. One, just on the pure fiber, I mean, is the structure of this deal akin to kind of a structured equity deal? Arrangement similar to what one of your peers have done that essentially becomes long-term money. Is that what you're proposing here?

44:30 Yeah, so Tim, I'll jump in. We're still working through this structure, but in general, no, that isn't what we're looking at. So this is more about structuring this in a way that there's partnership in terms of the returns between whoever we partner with or groups that we partner with and ourselves, and then contemplating at which point we build a future fiber into the structure. So we'll continue to iterate on this and come back, but not similar to what one of our peers did.

45:04 I'll try the organic growth template. Good organic growth with a good return on capital.

45:12 On that, you talked about you put one number around your AI strategy that was $500 million in revenues over the next few years. How do we square that with the projections from the previous management team that had a $2 billion number? Could you help us reconcile those? And then second, on The $450 million in OpEx, Dave, can you talk a little bit about what's different? Because, you know, monetizing automation on telecom platforms is kind of table stakes. Everyone's doing that. If you're not doing that, you're falling behind. So can you give us an idea of things that you're not going to do that were being done under previous management to help us understand how you're going to surface that $450 million? Thank you.

46:03 All right, Tim, that's a good question. So why don't we answer the first one, which talks about what the previous target was, what the current target is. And I will say that there's been a refinement to our strategic narrative so that it's much more focused on our core domestic market and revenues that we have line of sight to in businesses that we're good at and understand. The previous target was maybe a little more ambitious, a little more global, In perspective, when you actually think about our overall strategy, going back to our core, that fits tightly within that. So maybe, Navin, you can shed a little bit of light on that, and we'll hand it off to Dave for the other part of the question.

46:41 Yeah, I think, Victor, you hit it at a high level, and it is the refined strategy that we're moving ahead with. which is very much focused on three key pillars in our AI digital infrastructure play. So the first, just to kind of summarize them again, The first is our pure fiber network connectivity to the data centers that are being built across Canada and mostly in our incumbent zones. The second is the expansion of our existing data center facilities and bringing in the sovereign AI compute as well as turnkey wholesale capabilities.

47:29 and then the third part of our infrastructure strategy is to look at PowerShell data structure and so on. The PowerShell piece, that's not in the number that Victor shared, the 500 million. We are looking at it and we'll consider that as part of our AI number going forward. And I would say the original number that was shared included a lot of the TELUS digital elements and we've now removed the TELUS digital elements and we'll be focused on these three pillars specifically within Canada. and specifically on our infrastructure play.

48:11 Thanks, Navin. Dave?

48:14 Yeah. So I would focus first on, I mean, the 450 is actually slightly more than that. It's closer to 55% of the 900 million by the time we get to the run rate. Savings at the end of 28 are coming on EBITDA enhancing initiatives primarily through OPEX reductions. It's kind of driven across four areas, right? So it's not just simply AI automation, and I'm sorry if I confuse things by using that automation word. It starts on the care side of the business, right? So we have, we believe, significant opportunity to basically reduce the friction points and the reason customers call us today. So I think that's across everything from rate plan simplification, like a big part of this focus is around simplification, right?

49:01 Thank you for joining us. plans on both mobility and our wireline side. So again, there's less reasons to call. So a large part of it is reducing pain points and reasons to call. Then in the calls that still have to happen, that's where AI comes in in terms of enabling self-serve options more easily for our customers to be able to answer their questions or make whatever change they want to make with our service offerings.

49:48 themselves through our web portals and our apps. And then eventually, if you do need to speak to an agent, Agentic AI can help in that regard as well. And by no means are we going to be in a world where there's never a chance to talk to someone at TELUS. That will happen at kind of the tail end of that journey if we've not been able to answer your questions and help you out prior to that. The second area is channel optimization. I think there's a big opportunity, and we've really focused the team in on focusing on profitable loading and profitable gross ads. And that's across not just the profitability of the product, which we're also looking at enhancing, but it's also around cost of acquisition and streamlining our cost of acquisition. And we think there's substantial opportunity in that regard. Third is reliability. So using AI to be proactive about reliability across our networks, across our products, across our services, across our systems.

50:54 And again, streamlining repair calls, reducing repair calls, reducing reasons to roll trucks. And then the last area is around fuel force efficiency. where we think there's another significant opportunity for us there. So it's not just simply AI based automation, you know, table stakes as you termed it, but it's kind of across transforming how we support service for our customers today.

51:23 Thank you.

51:25 Thanks, Tim.

51:26 Carl, next question, please. The next question is from Jérôme Dubré from Dijon Lane. Please go ahead. Kyle, thanks for taking my question. I'd like to dive into your efficiency program. It's good to see the $900 million in savings that you expect, but can you share if there's a benchmark against what this objective is set, maybe in terms of a certain absolute level of OPEX or CAPEX so we can track the process? Let's start to think of a pro forma TELUS, for example, if the half of the $900 million in CAPEX savings, including or excluding the Ontario and Quebec opportunity, Just because we've had a few synergy numbers in the past in the industry and was something that was difficult to reconcile. Thank you.

52:11 Yeah, so Gopi's going to answer that question. I'll just remind you that the $900 million number deals with our core business footprint as it currently stands. And you have to think about our growth also very, very much connected to the resources that we free up not only from that program but from the monetization of assets. as well as from the equitization of Pure Fiber. All of that will create a different growth profile that will continue to update you on as those numbers become clear. But your question is specific then, and Gopi, do you want to address that?

52:44 Sure, yeah, and I want to pick up, Jerome, on Victor's transparency comment you will get from us next year. and how to track this through exactly for the year. We will continue to report on the $900 million and because there is an active asset monetization strategy that is why we have carved out how much is telecom versus how much is in the other businesses. I want to reinforce as well what Victor said around what we're using this for. It is going to be for a balance of delivering as well as investment in growth across what we'll do in fiber as well as AI and monetization of our fiber while maintaining control complements this. So it will be the combination of both of these and and as Victor mentioned earlier in the call, it is always going to be a balance between delivering and getting us flexibility on our balance sheet but also stoking the growth that we see for the future of TELUS.

53:40 Yeah, my only top-up would be Gopi. This was not the result of a top-down, you know, let's just do a benchmarking exercise. This was the result of two months of detailed involvement from many team members across TELUS to do a bottoms-up review around, you know, how we can change our processes, where we need to invest in our systems and our digital capabilities to make sure that we can drive these cost savings out of our business. And that's what gives us confidence in the number as we move forward. So there are detailed initiatives across each of these levers that we strongly believe in and are starting to work on already to make sure that we drive these efficiencies in our business. Excellent.

54:24 Thank you. Thanks, Jerome. Carl, we've got time for two more questions, please. The next question is from Matthew Griffiths from Bank of America. Please go ahead, Matthew.

54:34 Great. Thanks for taking my question. Maybe the first one is just on the wireless business. I think in the MD&A you guys referenced or there is a reference to kind of lower equipment margins, and so I just wanted to hear your thoughts on whether, you know, I guess, The Better Net Ad Performance, how that might be linked to the lower equipment margins that you were reporting. And then, secondly, on the AI kind of opportunity, just trying to break out here, you laid out these three buckets.

55:27 One of them being expanding your current DC and the other is the powered shell opportunity. So I want to understand perhaps that like the 38 megawatts that you referenced kind of links to your expanding of your current DC. And then if there's an additional ability to secure power, that would link to the Powered Shell opportunity. And so linked with that, do you have any secure power that could support the Powered Shell infrastructure opportunity? Thanks.

56:00 So why don't we work backwards on that? We have Navin to, again, answer any more granularity on the data center side, the three-pillar strategy. The first two pillars are activated. The third pillar is kind of under development. We'll come back to you with it. Anything you want to add there, Navin? and then Dave will answer the next question on wireless.

56:16 Yeah, maybe I'll just top up that on the expansion to 38 megawatts. We're not only seeing healthy IRRs, but what we are seeing on the GPUs themselves is a payback period of less than two years. So we feel very confident around that investment. And in terms of the PowerShell, your comment or your question around confirmed power, we're working through that. And when we're ready to... will announce any projects that we're going to move ahead with. We'll let you all know.

56:59 Good. And just to add on Navin's point, that second bucket where we're actually expanding our own data centers, you know, there has been a refinement in our strategic go-to-market approach to not finance all of the GPUs, but, you know, some of the GPUs. And some clients are going to want us to do that. Others will want to do that on their own, and that will be a much – both of them are – Thank you, Dave. Yeah, sure.

57:40 First thing to remember is equipment margins and equipment revenues are largely hind actually off renewals, not acquisitions, right? So, you know, we have a much bigger base than we, you know, have gross ads in any given quarter. And so renewal activity is the predominant driver of that. I would say, you know, our equipment revenues were down on lower volumes year over year. Our gross ads were down, as I'd already mentioned, you know, some $32,000 or so year over year. and we also focused on being quite disciplined throughout the quarter in terms of subsidy promotions and rate plan promotions so all of that meant lower volumes across the board including in renewals and on the margin front they were marginally different year over year but not significantly so. Sequentially they were up but that's a function of the fact that back to school is always a heavier loading and renewal period than earlier in the year. Thank you, Dave. Thank you, Matthew.

58:41 Thanks, Matthew. Carl, let's take the last question from the queue, please. The final question is from David McFadgen from Cormac. Please go ahead, David.

58:49 Great. Thanks for squeezing in. I have just a couple questions. So, given you took the write-down on Tal's House, I was wondering if you can give us sort of a ballpark as to what you think that business is worth now. And then second question is, what would it take for you to eliminate the drip entirely, and is that something that you want to do?

59:09 Sure. Well, Gopi, maybe you can highlight some of the comments around both of those questions, starting off with the impairment.

59:16 For sure. So thanks for the question, David. A reminder, the impairment is non-cash, driven by the three items I mentioned, so some updated growth expectations, market conditions, and current valuations perspective. I'm not going to comment on the specific valuation of TELUS Health. I wouldn't read in too much to this impairment in terms of what that means for each of the assets within it. What you can read into it is how far along we are on parts of the monetization So one of the items to think about is as we go through this monetization process, we're going to have to look at each sale, whether it's the service line or within a business or the business itself. We look at it independently.

1:00:01 We assess the likely sales proceeds against the allocated accounting value, and then that's going to give us an impairment or a gain. So you're going to Hear us talk about this for a while as we execute our strategy and there's puts and takes. And while we continue to have these businesses, we are going to invest in them, look after our customers, and look after our team. So we'll continue to keep you posted as that progresses. And then with the discount remaining on the drip, it's not something that's on our radar right now. It's a low uptick that we have of people remaining without the discounts. So it's something we'll continue to monitor. We're very committed to returning value to our shareholders. So it's an item we'll watch, but not something of major concern.

1:00:48 Okay. All right. Thank you.

1:00:50 Thanks, David. Thank you, everyone. Before we close out the call, let me pass it back to Victor for some brief closing remarks.

1:00:59 Well, thank you. Thanks, Ian, and thank you everyone for your great questions today. What we set out to do here today is to share a transparent update on our transformation strategy and the path forward to achieve TELUS's full potential. And we're in the early innings of what we believe will be full potential. TELUS is building from a foundation of strength. We're an exceptionally well-positioned company, backed by industry-leading customer service, Our expansive pure fiber and 5G networks, our growing infrastructure capabilities, which we tried to outline to you today, and an increasingly collaborative and energized culture. We have the right leaders in the right roles. We have an executive leadership team that possesses a deep institutional understanding of our business and seasoned experience necessary to navigate change and very, very focused on our strategic pivot to profitable growth and a Good Accretive Return on Capital. Our approach is grounded in disciplined execution and clear accountability. We've already demonstrated this through some decisive actions that we've already taken across all three strategic priorities.

1:02:07 Again, those are to strengthen our financial foundation, hone our operational discipline to free up resources and deploy that capital to areas of sustainable growth in Canadian telecom and digital infrastructure. and Zainul Mawji. for Canadian consumers and businesses at a time where this sector and TELUS is very much needed. We're moving with clarity.

1:02:59 We're moving with urgency. We're moving with purpose. And we're confident that our transformation strategy will position us for stronger performance as we head into 2027 and beyond. We report our fourth quarter results in February. We'll provide our full year 2027 outlook and an update on our transformation strategy progress. and I'm sure we'll see many of you between now and then. Thank you for your time today and continued interest in TELUS and I think that's it Ian. Thank you.

1:03:28 Thank you Victor. This concludes our Q3 earnings call today. Please reach out to the IR team for any additional follow-up.