Telus reveals dividend plan, hints at plans for health and agriculture after IPO

·4 min read

Telus Corp. hinted at the future of its health and agriculture ventures on Thursday, as well as its plans for dividends.

After spin-off Telus International went public last week, chief executive Darren Entwistle suggested Bay Street and Wall Street read between the lines on other Telus Corp. divisions like Telus Health and Telus Agriculture, ahead of plans to pull back the curtain on the businesses this year.

"It's also perhaps maybe helpful to the Street, that you can draw inference from what's happened with Telus International ... and then what we're going to do, prospectively, to support significant future growth," said Entwistle during a conference call with analysts, declining to reveal growth targets for the subdivisions but saying that they are "specific and ambitious."

"Whilst there are some differences between TI and health and (agriculture and security), there's a tremendous number of similarities," he said, later reiterating: "I think you can draw inference from what's transpired at TI" in terms of what it portends for our emerging growth businesses."

The telecom provider has been investing in new revenue streams through enterprise technology, as the industry races to invest and compete over fiber interest and 5G phone service.

In addition to its remaining stake in customer-service company Telus International, Telus Corp. also offers electronic medical records and virtual care services for doctors and soil sampling and weather tracking for farmers. Executives said these businesses will benefit from expanded broadband investments, and that the company will provide analysts with more details on these businesses as part of a new financial reporting plan.

"I would really like to complete the fibre and the 5G journey," said Entwistle, when asked about his succession plans. "That would let me rest easy, because with that broadband infrastructure, in place at a near-ubiquitous level, it really does institutionalize our competitive advantage at Telus."

Telus executives also told analysts that its dividend program was targeting growth of seven per cent to 10 per cent through 2022, even as the company reported lower fourth-quarter profit compared with a year earlier.

The announcement comes amid increased media scrutiny on companies' dividends as the government has also offered wage subsidies and other aid during the COVID-19 pandemic. Telus said on Thursday it has been trying to avoid job cuts by having customer support staff move to virtual installation helplines.

The telecommunications company said its net income attributable to common shares totalled $260 million or 20 cents per share for the quarter ended Dec. 31, down from $368 million or 30 cents per share a year earlier.

Operating revenues and other income totalled $4.06 billion, up from $3.86 billion, amid growing mobile and internet customers. In the quarter, the company said it added 253,000 new customers including 87,000 mobile phones, 88,000 mobile connected devices in addition to 44,000 internet, 20,000 TV and 23,000 security customers.

The gains were partly offset by the loss of 9,000 residential voice customers. The company also said its profit margins in its TV business were slimmer amid higher content costs, and that fewer customers were shopping in Telus stores with COVID-19 limiting retailers.

Customers were also racking up fewer roaming fees with COVID-19 limiting travel, and mobile phone users were using less data as more people spent time on their home wi-fi connections, Telus said. These new pandemic habits came as more and more people are also signing up for unlimited data plans, executives noted.

Executives also said that as the internet-of-things requires more devices to connect to the internet, those devices will generate less in the way of fees. On the upside, they will have better profit margins since refrigerators and home security "smart" devices aren't subsidized like smartphones.

On an adjusted basis, Telus says it earned 22 cents per share in the quarter, down from an adjusted profit of 32 cents per share in the same quarter a year earlier. Analysts on average had expected an adjusted profit of 25 cents per share, according to financial data firm Refinitiv.

In its outlook for 2021, Telus said it expects to increase its revenue and other income by eight to 10 per cent, while adjusted earnings before interest, taxes, depreciation and amortization are expected to rise six to eight per cent. Capital expenditures for 2021 are expected to be $2.75 billion compared with $2.775 billion in 2020.

Chief financial officer Doug French said that he expected some consumers deferred upgrading their phones in 2020 but there is "potential for heightened wireless consumer activity in 2021."

This report by The Canadian Press was first published Feb. 11, 2021.

Companies in this story: (TSX:T, TSX: TIXT)

Anita Balakrishnan, The Canadian Press