By Ahmad Hathout
GATINEAU – On Friday Telus made public the board resolution its CEO Darren Entwistle cited during the CRTC’s wireless hearing earlier this year, which says the company will need to free up $1.1 billion if the CRTC carries forward any plan to mandate mobile virtual network operators (MVNOs) – companies which ride on incumbent networks without necessarily having their own infrastructure.
The regulator had already expressed a preliminary view prior to the hearing that MVNOs would be appropriate to induce competition in the industry and the federal government has strongly signalled its support for the same.
Telus used audit firm PricewaterhouseCoopers to do the projections, which found the company will need to reduce investments in infrastructure, specifically in fibre build-outs in tier 2 and 3 areas in Alberta and British Columbia; scale back 5G plans, close retail operations in smaller communities, and cut jobs if it is to maintain its shareholder dividends. The financial plan quoted in the board resolution is for the period between 2019 and 2022.
The resolution, however, doesn’t mention the number of jobs that are claimed could be lost, which Entwistle said during the hearing would be around 5,000. The document also provides for a shorter projection period — from 2020 to 2023. Entwistle noted that investment spending cuts of about $1 billion as well as the employment reductions would occur over a five-year period.
“The free cash flow impacts of certain regulatory scenarios are such that, to continue paying dividends in accordance with its dividend growth policy to millions of Canadians who hold the Company’s shares, including the Company’s employees who collectively make team members the Company’s fourth largest shareholder, the Company would be forced to find reductions in free cash flow of up to $1.1 billion in cash savings,” the resolution says.
The resolution also notes reductions in “third party expenditures.” While not explained in the document, Entwistle said during the hearing in February the company, which aggressively pushes a “social capitalism” agenda, would decrease its philanthropic spending, too, should the regulatory change come to pass.
In May 2019, Telus also announced it intended to target “ongoing semi-annual dividend increases, with the annual increase in the range of 7 to 10 per cent from 2020 through to the end of 2022,” which would be assessed regularly to ensure it is financially viable to commit to that goal. The company’s dividend sits at $0.29125 per share, which hasn’t changed since the fourth quarter of 2019. “Given the uncertain magnitude, duration and potential outcomes of the Covid-19 pandemic,” Telus says on its website, “the Board determined that it would be prudent at this time to sustain the current dividend per share and defer any dividend increase until the release of our third quarter 2020 results in November.”
During the hearing, Entwistle also took aim at other regulations that could impact this spending outlook, including the Liberal government’s order for the telecoms to reduce wireless prices by 25% within two years.
“I would ask that as we look holistically on the eve of 5G what is the right thing to do for Canada that we include quantitatively all of these factors and reach a net conclusion as to what is the best way forward. Is it the continuation of facilities-based competition or is it a divergence thereof?” Entwistle asked the panel of CRTC commissioners at the hearing.
The CRTC asked the company earlier this month to either make the board resolution public or withdraw it from the public record. Entwistle initially said the company would go public with the board resolution, but didn’t until the CRTC ordered it.
The hearing happened less than a month before a global pandemic was declared, which has since altered or eliminated workplaces and jobs around the world, although the telecom industry has been much less affected than many others. It’s unclear how or if the pandemic will factor into future government or regulatory decisions, including the future of the wireless industry, or how it may impact Telus’ or any other company’s dividend policies or other expenditures.
