Telus Earnings: Struggles in Peripheral Businesses Overshadow Solid Telecom Performance

Telus again posted good results, with the acceleration in customer additions not unexpected considering the market tailwinds in Canada. However, Telus struggled with costs, and some of its side businesses performed poorly, particularly Telus International, or TI, in which Telus owns a 55% economic interest. The firm announced a workforce reduction program of about 6,000 employees, which we estimate to be about 5% of the company’s total, including TI. The struggles and restructuring led to management materially reducing its sales, EBITDA, and free cash flow guidance for 2023. The stock did not decline on the news, making us think a lot of bad news is already anticipated. However, we’re maintaining our CAD 33 fair value estimate and believe the 20% decline in the shares over the past year is overdone.