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Growing Sales Continue to Buck Canadian Telco Trend for Telus, but Margins Weak in Q4

Matthew Dolgin, CFA Equity Analyst

Analyst Note

| Matthew Dolgin, CFA |

Telus reported mixed fourth-quarter results, with sales slightly beating FactSet consensus estimates but EBITDA missing. Telus has not been immune to the telecom struggles that have pervaded the Canadian industry amid the pandemic, particularly in wireless sales as roaming and overage revenue have been severely depressed. However, even excluding revenue from recent acquisitions, we estimate the company grew the top line in the fourth quarter and for the full year due to its diversified wireline segment. While we don’t think Telus will see the same business and stock turnaround as peers when the pandemic ends as the firm has held up better than the others, we still see the stock as mildly undervalued relative to our CAD 29 fair value estimate.

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Company Profile

Business Description

Telus is one of the big three wireless service providers in Canada, with its 9 million mobile phone subscribers nationwide constituting about 30% of the total market. It is also the ILEC (incumbent local exchange carrier; the legacy telephone provider) in the western Canadian provinces of British Columbia and Alberta, where it provides Internet, television, and landline phone services. It also has a small wireline presence in eastern Quebec. In recent years Telus has moved to bring fiber to the home over most of its wireline footprint as it upgrades its legacy copper network, leaving it able to compete on more equal footing with cable providers. Telus' other businesses participate in the international business services, health, security, and agriculture industries.

510 West Georgia Street, 23rd Floor
Vancouver, BC, V6B 0M3, Canada
T +1 604 697-8044
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type
Employees 78,100