By Ahmad Hathout
Telus has had early but “really positive” discussions to sell a minority stake in its fibre network, executives said Friday.
Proceedings from the sale will allow Telus to pay down debt and eventually lay down more fibre to serve over one million customers in Ontario and Quebec – provinces it has been fighting to serve — and does — on a mandated wholesale basis.
“We’re in the early stages but we’re encouraged,” Telus President and CEO Victor Dodig said about discussions to monetize the asset on a third-quarter earnings conference call. “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 delever and which is to deploy.
“And we know that there are over a million homes in Ontario and Quebec with line of sight to fibre that we can build for them. It costs money … If we can free up more resources, we can grow faster and manage our free cash flow growth, which is also important to our investor base.”
Executives didn’t elaborate on the details of any prospective deal but said Telus will maintain control of the asset. And unlike Terrion – the company that homes the telco’s wireless tower portfolio and that La Caisse has a 49.9-per-cent stake in – it is not focused on wholesaling capacity.
“This is about monetizing a very valuable portion of our fibre assets to allow us then to continue to invest in building out that fibre asset,” added David Fuller, executive vice president and group president of Telus Communications.
“Our current shares don’t even reflect the value of that fibre,” Dodig said. “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, you can redeploy it, and that’s exactly how we’re thinking about it.”
The sale of a portion of its fibre network is part of a broader $900-million annualized cash-savings program – monthly savings of $75 million – which includes monetizing non-core assets.
It’s also a strategy Telus’s peers have adopted to pay down debt. Last week, Bell announced that it is also selling a 49.9-per-cent stake in its wireless tower portfolio to La Caisse. Last year, Rogers finalized an agreement to sell for $7 billion a 49.9 per cent stake in a portion of its wireless traffic transport infrastructure through a subsidiary.
Also Friday, Telus announced two new board members: Marc Allera and Bill Thomas, who will take their posts on January 1. Having been based in London, U.K., Allera’s career spans more than three decades of executive leadership in global telecom and network operators, including as CEO of EE and BT Group’s consumer division, according to a release. Thomas, meanwhile, is a former global chair and CEO of KPMG International.
“Marc and Bill have exactly the experience our Board needs as TELUS invests in its networks and sharpens its focus on customers and disciplined capital allocation,” John Manley, chair of the board, said in a release. “Marc has led major consumer telecom businesses through large-scale transformation with fibre and 5G builds, and Bill has led one of the world’s largest professional services firms, with deep expertise in audit and risk. We’re delighted to welcome them both.”
Telus reported total revenue of $5.03 billion, down slightly from the $5.1 billion is reported in the same period last year. It suffered a net loss of $660 million, compared to the net income of $431 million it reported against the same period, which was related to a non-cash goodwill impairment in Telus Health.
On the telecom side, revenue was up 1 per cent to $3.3 billion. In the health segment, revenue was up 2 per cent to $528 million. In digital, revenue was down 11 per cent to $731 million.
Service revenue was down 1 per cent to $4.48 billion. Equipment revenue was down 4 per cent to $539 million.
The telco added 395,000 gross mobile phone subscribers, down 6 per cent against the same period last year. Net additions were up 2 per cent to 84,000. Telus does not parse out prepaid and postpaid subscribers.
Monthly average revenue per user (ARPU) was up one cent to $57.22, while churn – the rate of customers switching – was down 10 basis points to 1.01 per cent. The total mobile wireless subscriber base by quarter-end was up 1 per cent to 10.42 million.
Mobile network revenue was up 1 per cent to $1.78 billion. Mobile equipment and other service revenues were down slightly to $516 million.
The telco added 10,000 net new internet subscribers, which was down 75 per cent from the same period last year, for a total base that was up 2 per cent to 2.84 million.
Telus also added 289,000 new connected devices, up 71 per cent year-over-year, for a total base that was up 22 per cent to 5.07 million.
