TELUS (TU) Q3 2026 Earnings Call Transcript

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DATE

Friday, Nov. 6, 2026

CALL PARTICIPANTS

• Investor Relations - Ian McMillan
• President and Chief Executive Officer - Victor Dodig
• Executive Vice President and Chief Financial Officer - Gopi Chande
• Executive Vice President and Group President, TELUS Communications - David Fuller
• Executive Vice President and Group President, Global Platform Businesses - Navin Arora

TAKEAWAYS

• Efficiency Program -- targeting $900 million in annualized cash savings exiting 2028, driven by operational cost improvements, margin enhancements, and capital expenditure efficiencies.
• Consolidated Service Revenue -- $4.5 billion, representing a 1% decline as growth in core telecom was offset by lower performance in the TELUS Digital segment.
• Adjusted EBITDA -- $1.8 billion, a 5% decrease reflecting weaker results in digital services and the non-recurrence of $78 million in onetime gains from the previous year.
• Goodwill Impairment -- $800 million, recorded as a non-cash charge against the TELUS Health business due to updated growth expectations and current market valuation perspectives.
• Mobile Phone Net Additions -- 84,000, supported by improved blended churn of 1.01% and postpaid churn of 0.87%, representing the company's lowest quarterly result in three years.
• Internet Net Additions -- 10,000, a decrease of 30,000 from the prior year as management shifted priority toward sustainable margins and capital efficiency over subsidized volumes.
• AI Infrastructure Revenue -- $500 million, projected cumulatively over the next three years from connectivity deals and sovereign compute capabilities.
• Leverage Ratio -- 3.6x net debt to adjusted EBITDA, with a stated target to reach 3.0x or lower by the end of 2028 through asset monetization and cash flow growth.
• Transformation Investment -- $150 million, planned for deployment across efficiency initiatives to unlock long-term structural cash savings.
• Mobile Phone ARPU -- $57.22, remaining flat year over year as the company focused on stabilizing economics through premium plan adoption.
• Free Cash Flow -- $396 million, a 35% decline driven by lower EBITDA and a planned 8% increase in capital expenditures.
• Connected Device Net Additions -- 289,000, an increase of 120,000 driven by demand from the transportation and connectivity sectors.
• PureFibre Footprint -- 3.8 million homes and businesses, providing a foundation for expanding digital infrastructure and AI connectivity solutions.
• Restructuring Costs -- $900 million, revised upward from $500 million for the full year to support expanded operational effectiveness programs.
• Cash Income Tax Payments -- $190 million to $290 million, a downward revision from the previous range of $540 million to $620 million due to higher refunds and lower taxable income.
• TTech Service Revenue -- $3.3 billion, up 1% as growth in mobile network and fixed data services outweighed a 7% decline in legacy voice revenues.
• TELUS Digital Service Revenue -- $637 million, an 11% decline resulting from ramp-downs in volume from two hyperscale clients.
• Healthcare Lives Covered -- 154.5 million, a decrease of 6.1 million year over year due to churn in employee and family assistance programs.
• Capital Expenditures -- $701 million, an 8% increase driven by investments in new facilities and network infrastructure to meet growing demand.

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RISKS

• Gopi Chande stated that consolidated adjusted EBITDA was lower due to "weaker results in TELUS Digital," which were impacted by client volume ramp-downs.
• Management reported an $800 million non-cash goodwill impairment for TELUS Health, reflecting "updated growth expectations, broader market conditions and current valuation perspectives."
• The company reported a net loss of $660 million for the quarter, primarily attributed to the non-cash impairment charge and higher financing costs.

SUMMARY

TELUS Corporation (NYSE:TU) reported a strategic focus on its core telecommunications assets while launching a multiyear efficiency program designed to reduce debt and improve margins. Management stated that the company is advancing an asset monetization strategy for its non-core Health and Agriculture units and is exploring a partnership model to unlock equity from its PureFibre network. The company is also expanding into the Canadian AI infrastructure market, leveraging its existing data center footprint and secured power capacity. These initiatives aim to restore the leverage ratio to 3.0x or lower by the end of 2028 while funding organic growth in the domestic telecom market.

• CEO Victor Dodig stated, "Our transformation strategy has one clear objective, and that is to solidify TELUS' position as the leading communications and AI infrastructure player in Canada."
• Management confirmed that the company has secured 38 megawatts of power for its data centers in Rimouski and Kamloops to support sovereign AI compute capabilities.
• The company reported that its PureFibre network is a primary differentiator, and it is pursuing deals to connect other data center operators to its grid.
• CFO Gopi Chande indicated that approximately 80% of the targeted $900 million in annualized cash savings will be derived from the core telecom business.
• The company is moving its home security and television offerings to a capital-light model to improve return on capital for those businesses.
• Management noted that it has placed a moratorium on acquisitions and terminated the dividend reinvestment plan discount to preserve financial flexibility.

INDUSTRY GLOSSARY

• ARPU: Average Revenue Per User, a key metric for measuring the financial performance of telecommunications service plans.
• PureFibre: The brand name for the company's fiber-to-the-home and business broadband network.
• Hyperscale: Large-scale cloud service providers that require significant data center and networking resources.
• GPU as a Service: A cloud-based offering that provides access to Graphics Processing Units for compute-intensive tasks like AI.
• DRIP: Dividend Reinvestment Plan, which allows shareholders to automatically reinvest cash dividends into additional shares.
• TTech: The reporting segment for the company's core technology and telecommunications solutions.
• Sovereign AI: AI infrastructure and data processing that resides within a specific country's borders to ensure data residency and security.

Full Conference Call Transcript

Operator: Good day, everyone. Welcome to the TELUS 2026 Q3 Earnings Conference Call. I would like to introduce your speaker, Ian McMillan. Please go ahead.

Ian McMillan: Thank you, Carl, and hello, everyone. Thank you for joining us. Our third quarter 2026 news release, MD&A, financial statements and detailed supplemental investor information were posted on our website earlier this morning, along with the earnings presentation referenced on this webcast. Today's agenda will include opening remarks from Victor Dodig, TELUS President and Chief Executive Officer; and Gopi Chande, our Executive Vice President and Chief Financial Officer. After the presentation, there will be a question-and-answer period where we will be joined by David Fuller, Executive Vice President and Group President, TELUS Communications; and Navin Arora, Executive Vice President and Group President, Global Platform Businesses. This will be followed by brief closing remarks by Victor. Turning to Slide 2.

Prepared remarks, slides and answers to questions contain forward-looking statements. Actual results could vary from these statements. The assumptions on which they are based and the material risks that could cause them to differ are outlined in our public filings with securities commissions in Canada and the United States, including our third quarter 2026 and 2025 annual MD&A. Please note that all reference dollar amounts are in Canadian dollars unless otherwise stated. Additionally, financial performance is compared to prior year period unless otherwise noted. With that, let me turn the meeting over to Victor.

Victor Dodig: Thanks, Ian, and hello, everyone. Thank you for joining us for our third quarter earnings call. As I promised on our second quarter call in July, today we'll provide you with more granularity on our priorities. My remarks will focus on our transformation strategy, while Gopi will provide an overview of our third quarter results and financial details behind our plan. So let's start on Slide 5. Our transformation strategy has one clear objective, and that is to solidify TELUS' position as the leading communications and AI infrastructure player in Canada. It's an intentional and a strategic pivot to profitable growth.

To achieve this, we're executing against 3 key priorities that I outlined during our second quarter call and results in July. The first is to strengthen our financial foundation. We will continue to strengthen our balance sheet by reducing our debt and by focusing our efforts on our core telecom business and pursuing a monetization strategy for our noncore assets. Our second priority is to hone our operational discipline. This means that we're transforming our cost base, how we do business, particularly in our telecommunications business as well as streamlining and improving processes across our enterprise to deliver a more seamless experience for our TELUS customers and for our TELUS team members.

And our third priority is to deploy these resources to drive profitable and sustainable growth and returns. So I want to go through each of these priorities in greater detail, beginning on Slide 6 with our first priority, which is strengthening our financial foundation. With our second quarter results, we announced 3 key actions. We reset our dividend payout ratio to a sustainable level. We terminated the dilutive discount on the dividend investment -- reinvestment plan, and we put a moratorium on acquisitions. These decisions were difficult, but they were necessary, and they demonstrate our commitment to financial discipline.

We're committed to strengthening our balance sheet and have a clear path to achieving a net debt to adjusted EBITDA leverage ratio of 3x or lower by the end of 2028. To that end, we're intentionally pursuing an asset monetization strategy and prioritizing our TELUS Health and TELUS Agriculture & Consumer Goods businesses. We are advancing this plan with one asset in our health portfolio, which is in an advanced stage with a prospective buyer. We'll manage these engagements on our terms to ensure we maximize the value of our businesses to our shareholders. And as we sign these agreements, we'll share those developments with you.

We're also reviewing how we can unlock equity value from our PureFibre network while maintaining control, similar to the successful partnership approach we took with our wireless towers through Terrion. Now we're early in the process and conversations with potential investment partners are encouraging. So let's turn to Slide 7, our second priority, which is to hone our operational discipline. With our new leadership team in place, we conducted a comprehensive assessment of our business, and we identified a clear set of levers to simplify our operations, improve our cost structure and concentrate resources behind profitable growth.

Today, we are announcing a program that targets $900 million in annualized cash savings exiting 2028, driven by operational cost and margin improvement as well as CapEx efficiencies. Up to 80% of these run rate savings are expected to come from telecom with the balance coming from the global platform businesses. Within telecom, we've already made a number of strategic pivots in our consumer business that prioritize profitability and capital efficiency. Under Dave Fuller's leadership, we have refocused our consumer Internet business on our fiber built communities and moved both our home security business and our TV offerings to a capital-light model that will dramatically improve our return on capital for these businesses.

Our team has also streamlined our organizational structure and simplified our product portfolio by winding down unprofitable and capital-intensive initiatives. These actions will deliver approximately $250 million in structural cash savings, predominantly capital with the full run rate benefit expected beginning in 2027. These savings are also captured within the $900 million target that I just referred to. Let me now detail the initiatives that underpin these additional benefits. I'll start with our core telecom business. This program will be executed across 5 key areas.

The first is focused on streamlining our customer experience, reducing customer pain points and reasons to call us and leveraging AI to automate and ensure that TELUS is the easiest provider to do business with, all in the name of improving our Net Promoter Score and ensuring that our customers are happy customers. The second is focused around driving higher revenue per customer and enhancing our already industry-leading customer retention metrics. The third stream is to optimize our sales mix toward lower-cost channels and digital onboarding. The fourth is procurement enhancement across both operating and capital spend, while the fifth is focused on network and field force effectiveness and capital optimization.

We know how to do this, and we're going to get it done. In our Global Platform business, we're focused on 3 things: first, leveraging AI and automation to deliver better results for our customers with less effort. Second is earning more from each customer by deepening the relationship with them across higher-margin services and tightening pricing and contract terms. And the third is running leaner by simplifying how we deliver and how we trim overhead. Again, we know how to do this, and we'll get this done. These actions target a stronger margin profile across TELUS Digital, Health and Ag & Consumer Goods.

So taken together, our efforts will support achieving our target of $900 million in annualized cash savings exiting 2028. So moving to Slide 8, which is our third priority, and that's to deploy the resources that we free up to drive growth and returns in our core business. First, we're committed to reducing our leverage, and we'll use proceeds from the dividend reset and asset monetization strategy to achieve our leverage ratio target of 3x or lower by the end of 2028. In parallel, we will strategically invest in organic growth in our core telecom assets. We'll fund this growth through disciplined CapEx with a focus on preserving premium economics.

This includes growing our PureFibre footprint, the gold standard for broadband connectivity, delivering capabilities that alternative technologies, including cable and satellite, simply cannot match. We began building our fiber network more than a decade ago, and it now reaches over 3.8 million homes and businesses with strong penetration rates across our footprint. We continue to grow this footprint in high-return underserved markets in urban and suburban communities where we are quickly driving strong penetration gains and product intensity. Our PureFibre network is a highly valuable asset and a critical differentiator across our business. It strengthens our competitive position in the markets we serve and our AI infrastructure more broadly.

Our PureFibre network is also the foundation for an accelerated source of growth, and we're well positioned to meet one of the fastest areas of growing demand in the economy, and that's in AI infrastructure. So Slide 9 shows how we're pursuing the AI infrastructure opportunity, something that we mentioned we covered with you in the second quarter call. And that's to leverage our core strengths and advantages that we have invested in and developed over decades.

And those advantages are our PureFibre network, which I've mentioned a couple of times, data centers where we already own and operate them with the scale and technical expertise to operate them, telecom and AI infrastructure offered together and a brand trusted by both businesses and government. Importantly, we're committed to Canadian sovereignty and data residency. Canadian data stays in Canada, which is the foundation of our sovereign approach. Together, these support a disciplined, capital-efficient strategy built on TELUS' core strengths aimed at sustainable, profitable growth. So in that vein, we have 3 initiatives, the first 2 of which are near-term priority. And that first one is we're using our fiber to connect other data center operators to the grid.

This is where our PureFibre network gives us a real edge. Several deals are underway and the economics of these transactions and our win rates so far are strong. Second, we're building sovereign AI capabilities for Canadian businesses and governments. This is where owning our data centers sets us apart. We'll start with our data centers in Rimouski and Kamloops, both operating today, plus our strategically located central offices. This includes both GPU as a service and ready-to-use wholesale solutions. Across our sites, we've secured 38 megawatts of power, which we plan to bring online steadily through to the end of 2028. Our approach is to use the assets we have first, then add GPU capacity as customer demand materializes.

We'll do this ourselves or with an investment partner, whichever delivers the best returns to our shareholders while staying disciplined with how we deploy capital. We're focused on winning more of the opportunities already in front of us, and we'll invest carefully while staying committed to reducing debt and growing free cash flow. The demand is strong. I think we all know that. Canada needs more data center capacity than it has today. Canada, I think, represents 1% of compute globally. The EU represents 5%, and you know that the U.S. and China is where most of it is. So we need to build that.

We have a pipeline today of more than $1 billion in total contract value across our digital infrastructure business. And over the next 3 years, we project about $500 million in revenue with healthy margins, depending, of course, on market factors such as supply chain conditions. And third, we're exploring data center shells with power already secured. This would be done through partnerships, again, capital investment partnerships that protect our balance sheet and our commitment to paying down debt. So it's still early, and it's not included in the estimates that I just shared. You can expect to hear more of that on future calls.

In closing, our efficiency program will deliver significant cash savings through growth and through cost efficiencies and free up resources and focus management attention on our core business. Our telecom strategy ensures we maintain and grow our core business and our AI infrastructure initiative positions TELUS in a high-growth market with strong cash flow benefits where we have the right to win. Our monetization strategy alongside the equitization of our PureFibre network, which we will control, will strengthen our balance sheet and enhance our financial flexibility to invest organically in these high-growth, high-return areas. And the result of our efforts to date is clear.

We have a seasoned leadership team that is focused and moving swiftly to drive greater efficiency and better position TELUS to deliver sustainable, profitable growth and returns for our shareholders. We expect our actions to gain traction and translate into improved revenue, improved margins and improved cash flow. And now with that, let me turn the call over to Gopi for a detailed review of our results.

Gopi Chande: Thank you, Victor. Today, I will cover our third quarter operating and financial performance and provide further financial details for the key progress areas Victor just outlined. Let me begin on Slide 11 and our third quarter consolidated results. Consolidated service revenue of $4.5 billion was lower by 1% year-over-year. Growth in our core telecom business, including mobile network and fixed data service revenue was offset by TELUS Digital. Consolidated adjusted EBITDA of $1.8 billion declined by 5%, primarily due to weaker results in TELUS Digital and from $78 million of onetime items recognized in the third quarter last year as we shared on our Q2 earnings call. Normalized for those, consolidated adjusted EBITDA was lower by 2%.

Basic EPS was negative $0.42 due to the TELUS Health noncash impairment, which I'll discuss shortly. Adjusted EPS was $0.16, down from $0.24 a year ago, reflecting after-tax impacts of lower operating income. Cash flow from operations -- cash from operations of $1.5 billion was close to flat and free cash flow of $396 million was lower by 35%, reflecting lower EBITDA and higher CapEx, both as expected. Slide 12 outlines our results for our core TTech business. TTech service revenues of $3.3 billion was higher by 1% and adjusted EBITDA of $1.6 billion was down 5% as expected due to onetime items in Q3 of last year. Normalized TTech adjusted EBITDA was lower by 1%.

Digging deeper into the components of TTech, mobile network revenue of $1.8 billion was up 1%, reflecting our disciplined operational execution, evidenced by our focus and ability to preserve premium economics and stabilized ARPU year-over-year. Mobile phone net additions of 84,000 reflected strong base management as demonstrated by the 10 basis point improvement to blended mobile phone churn landing at 1.01% for the quarter, our lowest quarterly result in 3 years, while postpaid churn also improved to below 0.9%. Fixed data revenue of $1.2 billion increased by 2%, supported by steady growth in consumer from a higher Internet subscriber base and security and automation revenues.

Our Internet net additions totaled 10,000 due to lower gross loading, reflecting a deliberate shift to prioritize sustainable margins and capital efficiency over subsidized volume, partially offset by lower churn. Turning to our global platform businesses on Slide 13. Service revenue at TELUS Digital was $637 million, and it declined 11%, while adjusted EBITDA of $62 million was lower by 9%. These results reflected the impacts from hyperscale client volume ramp-downs as we discussed last quarter. In TELUS Health, we saw an improvement in year-over-year growth in service revenue, up 2% and adjusted EBITDA declined by 5% due to lower other income.

As outlined in our disclosure today, we recorded a noncash goodwill impairment of $800 million for our TELUS Health business, reflecting updated growth expectations, broader market conditions and current valuation perspectives from ongoing strategic processes. Importantly, it does not change our commitment to TELUS Health or our focus on strengthening our operating performance, optimizing our portfolio and unlocking long-term shareholder value. We remain disciplined and deliberate in advancing these opportunities for our teams with a clear focus on maximizing value for shareholders while continuing to position TELUS Health for sustainable, profitable growth. Turning to Slide 14. Let me provide the financial details supporting our strategic priorities, specifically honing our operational discipline.

As we've shared today, we have embarked upon a multiyear efficiency program targeting annualized cash savings of approximately $900 million exiting 2028. This will be achieved through operational costs and margin improvements as well as CapEx efficiencies. We are already seeing this discipline in action through several key initiatives driving significant capital efficiencies, giving us confidence in our ability to reduce our core capital expenditure profile in 2027. In order to achieve the $900 million target, we expect to invest approximately $150 million across the various focus areas Victor outlined. Our comprehensive transformation strategy is designed to deliver a durable impact, building a more focused, efficient growth-oriented organization positioned for sustainable profitability.

Now let me review our balance sheet on Slide 15. We remain well capitalized with total available liquidity of $3 billion and a net debt to adjusted EBITDA leverage ratio as of September 30 of 3.6x. As expected, this was up modestly from 3.5x a year ago due to higher debt levels and lower EBITDA, consistent with our updated outlook provided on the Q2 call. Our operational execution, improving capital intensity over the longer term, free cash flow growth and asset monetization strategy will continue to strengthen our balance sheet. Let me review our capital allocation framework on Slide 16.

To reiterate, we are committed to paying down debt to achieve a leverage ratio target of 3x or lower by the end of 2028 and are fully committed to maintaining our investment-grade credit profile -- credit rating profile. Our enterprise-wide mandate is clear. We are only deploying capital to initiatives that generate strong, sustainable returns that exceed our cost of capital. We also remain committed to ongoing shareholder returns through a sustainable quarterly dividend of $0.1875 per share. Looking ahead, this disciplined approach ensures we remain focused on driving greater capital efficiency and maintaining disciplined investment in our core telecom and AI infrastructure businesses to deliver attractive financial returns and sustainable shareholder value.

Turning to our annual financial guidance on Slide 17. For the full year 2026, we are reaffirming our consolidated guidance as updated with our Q2 results in July. This includes service revenue of flat to negative 2%, adjusted EBITDA of negative 2% to negative 4%, capital expenditures of approximately $2.6 billion and free cash flow of approximately $1.8 billion. In closing, we have a clear line of sight to deliver on our transformation strategy. We are moving swiftly and with conviction and commit to communicating our progress with transparency. We are confident that our actions will position us for stronger performance as we head into 2027 and beyond.

Now let me pass the call back to Ian to begin questions and answers.

Ian McMillan: Thank you, Gopi. Carl, please proceed with questions.

Operator: [Operator Instructions] The first question is from Maher Yaghi from Scotiabank.

Maher Yaghi: Victor, I wanted to follow up. I mean you guys have laid out a very strong plan for reducing the operational and CapEx cost of the company going forward and the results will hit in the coming years. I wanted to follow up on that beyond the cost savings, and this goes to a conversation we had when you joined early on, is to figure out the revenue opportunity for TELUS going forward? And where do you see the company growing into in the next couple of years? Where is the growth could come from mostly?

And if you can maybe just give us an idea of what you think the company can grow at -- on a more normalized basis now that the wireless business seems to be stabilizing.

Victor Dodig: I'm going to share a couple of comments. I'll also pass it on to Dave on the telecom front as well. Look, the goal here is to capitalize on what we see as a real opportunity in our domestic market in Canada and both the telecom sector and digital infrastructure, broadly speaking. To do that, we need to free up resources within our company. And it has several component parts. The first is that transformation strategy that we outlined that will free up $900 million in net cash savings through exiting 2028. We're going to work really, really hard to get that done.

So a lot of work, a lot of heavy lifting and a lot of change in the way we do business. The second piece is to monetize our noncore assets. All good businesses, and like I said, we're in advanced stages with one. We're going to activate another TELUS Health asset this month so that we can free up those resources. And the third, as I mentioned in my remarks, is to unlock some of the equity value, which is at very early stage in discussions in our PureFibre network. All of those resources will be redeployed to paying down our debt and to organic growth.

When you think about capital allocation at TELUS, you think about those 2 side by side and getting that leverage level to a better place and growing organically, especially in the -- by growing fiber, our fiber presence in Ontario and Quebec and in our Western region. That is the best defense against these technologies that are emerging. That is a real growth opportunity in addition to our data center strategy, and I'm sure you'll hear from Navin as well in a moment on that. So Dave, do you want to talk a little bit about telecom because we're off to a good start in terms of stopping certain things. The results are really strong.

But I think you're going to continue to see us methodically progress into better premium relationships across the telecom spectrum with our customers.

David Fuller: Yes. Thanks, Victor. Yes, Maher, we fundamentally believe that we can continue to grow the telecom business in the low single digits, both top and bottom line going forward. I would say that growth is driven by 3 areas. First of all, in the consumer business, continued strength in our mobility franchise, I think, is something we forecast through '27 and '28, provided that the sensible and stable market that we saw throughout Q3 persists in 2027 and beyond. Plus, we think on the consumer side, there's continued opportunity to progress our PureFibre build in communities across the country. Secondly, moving to B2B.

I would say that there's a significant opportunity, as Victor has already alluded to, around infrastructure build and fiber network builds associated with AI data centers. And more broadly, when you look at the tax changes that the government recently announced around the mega tax donation (sic) [ deduction ], a boom in potential infrastructure spending across the technology space that can benefit us from that increased spend from many of our B2B customers in the enterprise space and the public sector space. And then the third is operational efficiency. Victor outlined kind of the areas that we're focused on.

But when I think you -- when you look at AI and the automation benefits that it can bring, I believe it's a generational opportunity to significantly transform how we support and service our customers to allow them to support and service what they want to do through self-serve tools to automate significant portions of our processes today that are manual and to remove friction and improve the customer experience on a substantive basis. That all has then knock-on second order benefits across continued churn reductions against our already class-leading churn results as well as lower cost of acquisition, lower cost of renewal and lower operational support costs within our organization.

Operator: The next question is from Drew McReynolds from RBC Capital Markets.

Drew McReynolds: Just want to unpack just 2 numbers that you thrown out. First, on the $900 million cash savings. Just trying to understand all the moving parts here. So I think, Victor, if I understand your prepared remarks, of the $900 million, there's $250 million that you highlighted as CapEx efficiencies that begin run rate in 2027. If I've got that right, so does that imply the rest of it is $650 million in OpEx? And then where does the $150 million in investment come in?

Victor Dodig: Okay. All good questions. I'm going to hand that off to Gopi just to take you through that because I think it's important they understand how that all kind of fits together.

Gopi Chande: Perfect. Drew. So the way to think about that $900 million cash, first of all, just defining our nomenclature, think about it as $75 million in December 2028 times 12. And so that's how we get to the $900 million cash. Specifically to your question, really pleased that we have decisions that are made that already give us line of sight into $250 million CapEx. The split is roughly 50-50 CapEx and EBITDA. As you noted, there are investments we need to make. So $150 million, as Victor noted, as these programs typically run, those investments are needed more upfront to unlock some of the benefits.

And so we'll give the specifics around 2027 when we give our guidance in February. And the last comment I'll make is the split between where those savings will show up. So about 80% in our core telecom business, which, as you know, is more than 90% of our EBITDA and 20% in the global platform businesses. So I'm really pleased with the detailed action plans that both Dave and Navin have to execute on this. So we're confident in its delivery.

Drew McReynolds: And if I could just add one more clarification on the data center -- or sorry, AI infrastructure piece, you quantified some $500 million over the next 3 years in revenues, and I think those are from the first 2 buckets, so the existing data center plus the connectivity. Is that $500 million a cumulative revenue recognition over the 3 years? Or do you hit run rate $500 million kind of by year 3? I'm just trying to understand that.

Victor Dodig: Yes. Navin, do you want to go?

Navin Arora: Yes, sure. That is a cumulative number. And maybe I'll give a little bit more color on the strategy there. So as Dave mentioned, actually, the first thing I'm going to say is that we're not going to boil the ocean around speculative or volatile data center type decisions. So we're really going to be executing on 2 immediate high-return, low-risk priorities where we have a competitive advantage. And so Dave mentioned the first one around our fiber connectivity of other developers' data centers. Our incumbent territory of B.C. and Alberta has large campus style data centers that come in -- that are coming in, and we're going to be plugging them into our -- into our PureFibre network.

And these are high-margin, long-term transport deals. And what we really like about them is that customers fund the network build capital right upfront. So that is a big part of our growth and as part of that $500 million number. And then the second is the sovereign Canadian AI compute and we're using our existing data center facilities, Rimouski, Kamloops and the central offices that Victor mentioned. We already own them. We have the power. We have the talent. We have the expertise, and we're going to be thoughtful about how we expand that from the current 2 megawatts to the 38 megawatts of secured power that we have.

And we'll be really matching the demand build-out of the GPU capacity with signed customer contracts. And we'll be thoughtful about how we fund that within the debt commitments that Gopi and Victor talked about. The business case is really strong with high IRR, and we're excited about those expansions.

Operator: The next question is from Stephanie Price from CIBC World Markets.

Stephanie Price: I was hoping to get a little bit more color on the potential equitization of the fiber assets. You noted in the prepared remarks, it will be like similar to the Terrion deal and that there was an opportunity for fiber expansion in Ontario and Quebec. So just hoping you could share a little bit more color on how you're thinking about the potential deal in terms of retaining control and how to think about footprint expansion and whether FiberCo would target wholesale opportunities as well.

Victor Dodig: Stephanie, so let me start, and I'll pass it on to Gopi. So again, 3 component parts in terms of freeing up resources, right? One is our transformation strategy. Two is the monetization of noncore assets; and three is this -- the PureFibre network that you've alluded to in your question, Stephanie. Obviously, there's a couple of things. First of all, we're in the early stages, but we're encouraged. 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 1 million homes in Ontario and Quebec with line of sight to fiber that we can build for them. It costs money. We're mindful of where our leverage is. Those things got to work hand in hand. Think of it as a bit of an accordion, right? 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. What gets included in that is something that I'd say we leave to a future call. Although Gopi, there may be something you want to add as well. It's a large asset, that's for sure.

Gopi Chande: Yes. And picking up on that, Victor, Stephanie, we're excited to surface the significant value in our own assets and use it to, as Victor mentioned, strengthen our balance sheet. So some of it will be for deleveraging. Some of it will go towards the fiber expansion, which we've got good experience in and supports the growth that Dave spoke about. And then some of it will go to, again, the initiatives that Navin spoke about. And ultimately, we look forward to being in a position to return capital to shareholders and potentially even stock buybacks.

But as Victor mentioned, it's early stages, really positive discussions with potential partners, and we look forward to talking to you more about it as it proceeds. And maybe before I wrap, I'll pass it over to Dave.

David Fuller: Yes. Just 2 clarifications on comments you made, Stephanie. Whatever we do in this space, we are going to absolutely maintain control, right? So we are not contemplating and would never contemplate selling off the entirety of that asset. Secondly, it is not -- unlike Terrion, is not focused on the wholesale side of the business. This is about monetizing a very valuable portion of our fiber assets to allow us then to continue to invest in building out that fiber asset.

Operator: The next question is from Vince Valentini from TD Securities.

Vince Valentini: Let me start trying to clarify a couple of things you've already mentioned. First, Gopi, the $150 million cost to get these savings, you're already incurring $900 million of restructuring costs this year. I assume the $150 million is incremental to that and kicks in after this year. Also for you, the 50-50 split, thanks very much for that on OpEx, CapEx. Just want to make sure, does that apply to the 80% of the cash savings that are supposed to be in the telecom or TTech segment? Is the 50-50 ratio makes sense there as well? I'll pause before I do my other ones.

Gopi Chande: Okay. So maybe I'll start with the first. So the $150 million is primarily CapEx, and we're going to invest that more upfront, so in '27 versus '28, we'll give you that specific split in February. And then with regards to restructure bucket, we're watching very carefully. So what I can say for now, Vince, is we do expect restructuring expense to be lower next year. There are some investments related to this program, but this program is more focused on changing processes and the way we work. And so there will be some natural efficiencies that come from how Dave has reorganized his group and so some severance associated with that.

But we do expect to come down next year. Now you know this, but I'll remind you that our free cash flow calculation is off of the disbursement of restructure. So that can vary, but expense coming down. And then in terms of the split between the 2 groups, a little bit more investment on the telecom side than in the growth platform businesses. Again, we'll give more specific details exactly how that splits out in February of next year.

Vince Valentini: Second clarification, then I'll throw one question. The fiber-to-the-home monetization you're contemplating, ballpark like ranges, are you -- do you think these assets get similar type of EBITDA multiples or cap rates, however you want to think about it versus what you achieved for Terrion? Or is the fiber-to-the-home worth a lot less to potential infrastructure partners than what the towers were? And then just on the results themselves. Dave, welcome aboard and great first quarter, especially on the wireless metrics. I just want to make sure these numbers are so good on sub adds and churn. There's nothing unusual here of accounting for government subs or any other programs to get 84,000 sub adds.

And as part of -- given you've seen all the numbers now, you know how much better you did than your incumbent peers this quarter. Are you thinking that your price discipline is good enough? Or is there room to tweak even further? I'm thinking more specifically about Public Mobile that still seems to be the most aggressive offer from an incumbent and pretty much matches Freedom all the time. Is that perhaps some of the loading you're seeing?

Victor Dodig: Vince, why don't we start with you, Dave, just work backwards in terms of the business overall and the results, which are good. They're strong, and they're actually rooted in a strategy of focusing on our premium brands, knowing full well that we can -- we have our flankers and we use them when we need them. But it's about building deeper, better relationships with our customers. So over to you, Dave.

David Fuller: Yes. Thanks, Vince. Good to hear your voice again, and happy to be back. Stepping back, I would want to emphasize that for TELUS, Q3 was actually a very restrained approach to promotional intensity throughout Q3. So our success on net adds was entirely driven by our success in churn. If you look at our gross add number, it was actually down year-over-year by about 24,000. So the entirety of the slight increase you saw year-over-year in our net adds was driven off the fact that we had substantive declines in both postpaid churn and prepaid churn, frankly, down to numbers that we haven't seen for more than 3 years at 0.87% and 1.01% in terms of blended churn.

So -- it was definitely not price-based. In fact, we were focused on the opposite. If you look at our prepaid to postpaid, specifically to your question around Public, our loading swing and our mix shift was substantively towards postpaid loading. So in fact, our postpaid net add number was up markedly year-over-year. Our prepaid number declined pretty substantially as well. And so a big swing towards postpaid, not prepaid. So it was not driven by Public loading at all. And the other point I would make is even within that postpaid loading, pretty strong bias towards TELUS versus our flanker Koodo brands.

So our focus was very disciplined and very focused around our higher-value plans and will continue to be like that throughout Black Friday. We also saw other positive economics across the board. I mean you saw our ARPU number. I would say that was just continued trend. If you look at the ARPU numbers over the last several quarters, the declines have been getting lower and lower and lower, and we kind of got back to the point this quarter where it was kind of flat year-over-year.

That was driven off strong success in -- across pretty much all of our segments, as I said, mix shift towards plans in value -- higher value plans in the T-brand side, migrations within our brands kind of up the value stack. On the B2B side, we saw strong sequential growth across both SMB and enterprise. And to answer your other question, no, there wasn't anything done funny with the numbers. Those were kind of legitimate numbers on our side. And I think you can see it in our service revenue growth at 1% year-over-year.

I think the final point I'll just say around kind of discipline is we also took a very disciplined approach to subsidy throughout the quarter in Q3 and made sure as we will do through Black Friday, that if we were participating in a subsidy promotion, it was only on ones where we were backed up and supported by our device partners, device OEM partners. So that would be it. Victor, do you want to make any comments on that?

Victor Dodig: I might make a few comments on the PureFibre. I'll hand it off to Gopi then briefly as well. I mean, in the end, when you listen to Dave speak and hopefully from all of our remarks, you get this sense that there's an intentional strategic pivot to profitable growth with a good return on capital. I mean that's the way we're thinking about our business and serving our customers with their needs in mind and making sure that they're happy being served by TELUS. When it comes to fiber-to-the-home, Vince, it's worthwhile reemphasizing control is important to us. That is table stakes, foundational.

When it comes to valuation, we do think that the current shares don't even reflect the value of that fiber. 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. So Gopi, maybe just shed a little light on perhaps some of the directional numbers of how we think about things.

Gopi Chande: So Victor, I'm going to stay away from anchoring on any valuation. And specifically, that's because we're still defining our perimeter. We have a lot of options in terms of what we can include in that. And so that is good flexibility for us. That will influence the valuation. So we don't want to anchor on that. But again, very excited about the potential on our own balance sheet that echoing Victor's comments, we don't feel are reflected in our share price.

Victor Dodig: Excellent. I think you actually had something in your research report long ago, Vince, you can kind of do the numbers and tell us what you think it's worth one day.

Operator: The next question is from Tim Casey from BMO Capital Markets.

Tim Casey: A few for me. One, just on the PureFibre. I mean, is the structure of this deal akin to kind of a structured equity arrangement similar to what one of your peers have done that essentially becomes long-term money. Is that what you're proposing here?

Gopi Chande: Yes. So Tim, I'll jump in. We're still working through the structure. But in general, no, that isn't what we're looking at. So this is more about structuring this in a way that there's a partnership in terms of the returns between whoever we partner with or groups that we partner with and ourselves and then contemplating whether at which point we put build of future fiber into the structure. So we'll continue to iterate on this and come back, but not similar to what one of our peers do.

Victor Dodig: All about driving organic growth, Tim. Good organic growth with a good return on capital.

Tim Casey: On that, you talked about -- you put one number around your AI strategy that was $500 million in revenues over the next few years. How do we square that with the projections from the previous management team that had a $2 billion number. Could you help us reconcile those? And then second, on the $450 million in OpEx, Dave, can you talk a little bit about what's different? Because monetizing automation on telecom platforms is kind of table stakes. Everyone is doing that. If you're not doing that, you're falling behind.

So can you give us an idea of things that you're not going to do that were being done under previous management to help us understand how you're going to surface that $450 million?

Victor Dodig: All right. Tim, that's a good question. So why don't we answer the first one, which talks about what the previous target was, what the current target is. And I will say that there's been a refinement to our strategic narrative so it's much more focused on our core domestic market and revenues that we have line of sight to in businesses that we're good at and understand. The previous target was maybe a little more ambitious and a little more global in perspective when you actually think about our overall strategy of going back to our core, that fits tightly within that.

So maybe, Navin, you can shed a little bit of light on that, and I'll hand it off to Dave for the other part of the question.

Navin Arora: Yes. I think, Victor, you hit it at a high level, and it is the refined strategy that we're moving ahead with, which is very much focused on 3 key pillars in our AI digital infrastructure play. So the first -- just to kind of summarize them again. The first is our PureFibre network connectivity to the data centers that are being built across Canada and mostly in our incumbent zones. The second is the expansion of our existing data center facilities and bringing in the sovereign AI compute as well as turnkey wholesale capabilities. And then the third part of our infrastructure strategy is to look at powered shell data structure or data center infrastructure.

And so on the powered shell piece, that's not in the number that Victor shared, the $500 million. We are looking at it and we'll consider that as part of our AI number going forward. And I would say the original number that we shared included a lot of the TELUS digital elements. And we've now removed the TELUS Digital elements, and we'll be focused on these 3 pillars, specifically within Canada and specifically on our infrastructure play.

Victor Dodig: Thanks, Navin. Dave?

David Fuller: Yes. So I would focus first on -- I mean, the $450 million, it's actually slightly more than that. It's closer to 55% of the $900 million by the time we get to the run rate savings at the end of '28 are coming on EBITDA-enhancing initiatives, primarily through OpEx reductions. It's kind of driven across 4 areas, right? So it's not just simply AI automation. And I'm sorry if I confused things by using that automation word. It starts on the care side of the business, right? So we have, we believe, significant opportunity to basically reduce the friction points and the reason customers call us today. So I think that's across everything from rate plan simplification.

Like a big part of this focus is around simplification of our rate plans of our products, trying to reduce the number of unprofitable products that we're taking into the marketplace, our service offerings and bill simplification, right? A huge percentage of calls we get today are questions around bill. You've seen across the board, we've moved to Shock-Free plans on both mobility and on our wireline side. So again, there's less reasons to call. So a large part of it is reducing pain points and reasons to call.

Then in the calls that still have to happen, that's where AI comes in, in terms of enabling self-serve options more easily for our customers to be able to answer their questions or answer or make whatever change they want to make with our service offerings themselves through our web portals and our apps. And then eventually, if you do need to speak to an agent, Agentic AI can help in that regard as well. And by no means are we going to be in a world where there's never a chance to talk to someone at TELUS.

That will happen at kind of the tail end of that journey if we've not been able to answer your questions and help you out prior to that. The second area is channel optimization, right? I think there's a big opportunity, and we've really focused the team in on focusing on profitable loading, right, and profitable gross adds. And that's across not just the profitability of the product, which we're also looking at enhancing, but it's also around cost of acquisition, right, and streamlining our cost of acquisition, and we think there's a substantial opportunity in that regard. Third is reliability.

So using AI to be proactive about reliability across our networks, across our products, across our services, across our systems and again, streamlining repair calls, reducing repair calls, reducing reasons to roll trucks. And then the last area is around field force efficiency where we think there's another significant opportunity for us there. So it's not just simply AI-based automation and table stakes as you termed it, but it's kind of across transforming how we support service our customers today.

Operator: The next question is from Jerome Dubreuil from Desjardins.

Jerome Dubreuil: I'd like to dive into your efficiency program. It's good to see the $900 million in savings that you expect. But can you share if there's a benchmark against what this objective is set maybe in terms of a certain absolute level of OpEx or CapEx so we can track the process and start to think of a pro forma TELUS, for example, is the half of the $900 million CapEx savings, including or excluding the Ontario and Quebec opportunity, just because we've had a few synergy numbers in the past in the industry and was something that was difficult to reconcile those.

Victor Dodig: Yes. So Gopi is going to answer that question. I'll just remind you that the $900 million number of deals with our core business footprint as it currently stands. As we -- and you have to think about our growth also very, very much connected to the resources that we free up not only from that program, but from the monetization of assets as well as from the equitization of PureFibre. All of that will create a different growth profile that we'll continue to update you on as those numbers become clear. But your number -- your question is specifically on the $900 million. Gopi, do you want to address that?

Gopi Chande: Sure. Yes. And I want to pick up, Jerome, on Victor's transparency comment. You will get from us next year how to track this through exactly for the year. We will continue to report on the $900 million. And because there is an active asset monetization strategy, that is why we have carved out how much is telecom, how much -- versus how much is in the other businesses. I want to reinforce as well what Victor said around what we're using this for, it is going to be for a balance of delevering as well as investment in growth across what we'll do in fiber as well as AI and monetization of our fiber while maintaining control complements this.

So it will be the combination of both of these. And as Victor mentioned earlier in the call, it is always going to be a balance between delevering and getting us flexibility on our balance sheet, but also stoking the growth that we see for the future of TELUS.

David Fuller: Yes. My only top-up would be, Gopi, this was not the result of a top-down, let's just do a benchmarking exercise. This was the result of 2 months of detailed involvement from many team members across TELUS to do a bottoms-up review around how we can change our processes, where we need to invest in our systems and our digital capabilities to make sure that we can drive these cost savings out of our business. And that's what gives us confidence in the number as we move forward, right?

So there are detailed initiatives across each of these levers that we strongly believe in and are starting to work on already to make sure that we drive these efficiencies in our business.

Operator: The next question is from Matthew Griffiths from Bank of America.

Matthew Griffiths: Maybe the first one is just on the wireless business. I think in the MD&A, you guys referenced or there is a reference to kind of lower equipment margins. And so I just wanted to hear your thoughts on whether, I guess, the better net add performance, how that might be linked to the lower equipment margins that you're reporting? And then secondly, on the AI kind of opportunity, just trying to break out here the -- you've laid out these 3 buckets. One of them being expanding your current DC and the other is the powered shell opportunity.

So I wanted to understand perhaps that like the 38 megawatts that you referenced kind of links to your expanding of your current DCs. And then if there's an additional ability to secure power, that would link to the powered shell opportunity. And so linked with that, do you have any secured power that could support the powered shell infrastructure opportunity?

Victor Dodig: So why don't we work backwards on that? We get Navin to again answer I think more granularity on the data center side, the 3-pillar strategy. The first 2 pillars are activated. The 3 pillars kind of under development. We'll come back to you with it. Anything you want to add there, Navin? And then Dave will answer the next question on wireless.

Navin Arora: Yes. Maybe I'll just top up that on the expansion to 38 megawatts, we're not only seeing healthy IRRs, but what we are seeing on the GPUs themselves is a payback period of less than 2 years. So we feel very confident around that investment. And in terms of the powered shell, your comment or your question around confirmed power, we're working through that. And when we're ready to announce any projects that we're going to move ahead with, we'll let you all know.

Victor Dodig: Good. And just to add on Navin's point, that second bucket, where we're actually expanding our own data centers, there has been a refinement in our strategic go-to-market approach to not finance all of the GPUs but some of the GPUs and some clients are going to want us to do that. Others will want to do that on their own, and that will be a much -- and both of them are very, very attractive from a return standpoint. We're also mindful of capital intensity when it comes to growing our data center business. And that's going to be very, very much linked to our monetization, equitization and transformation strategies, right?

So Dave, maybe you can answer the question on wireless.

David Fuller: Yes, sure. First thing to remember is equipment margins and equipment revenues are largely hinged actually off renewals, not acquisitions, right? So we have a much bigger base than we have gross adds in any given quarter. And so renewal activity is the predominant driver of that. I would say our equipment revenues were down on lower volumes year-over-year. Our gross adds were down, as I already mentioned, some 32,000 or so year-over-year. And we also focused on being quite disciplined throughout the quarter in terms of subsidy promotions and rate plan promotions. So all of that meant lower volumes across the board, including in renewals. And on the margin front, they were marginally different year-over-year, but not significantly so.

Sequentially, they were up -- but that's a function of the fact that back-to-school is always a heavier loading and renewal period than earlier in the year.

Ian McMillan: Carl, let's take the last question from the queue, please.

Operator: The final question is from David McFadgen from Cormark.

David McFadgen: Just a couple of questions. So given you took the write-down on TELUS Health, I was wondering if you can give us sort of a ballpark as to what you think that business is worth now? And then second question is, what would it take for you to eliminate the DRIP entirely? And is that something that you want to do?

Victor Dodig: Sure. Well, Gopi, maybe you can highlight some of the comments around both of those questions, starting off with the impairment.

Gopi Chande: For sure. So thanks for the question, David. A reminder, the impairment is noncash, driven by the 3 items I mentioned. So some updated growth expectations, market conditions and current valuation perspectives. I'm not going to comment on the specific valuation of TELUS Health. I wouldn't read in too much to this impairment in terms of what that means for each of the assets within it. What you can read into it is how far along we are on parts of the monetization.

So one of the items to think about is, as we go through this monetization process, we're going to have to look at each sale, whether it's the service line or within a business or the business itself. We look at it independently. We assess the likely sales proceeds against the allocated accounting value, and then that's going to give us an impairment or a gain. So you're going to hear us talk about this for a while as we execute our strategy and there's puts and takes. And while we continue to have these businesses, we are going to invest in them, look after our customers and look after our team.

So we'll continue to keep you posted as that progresses. And then with the discount remaining on the DRIP, we're -- it's not something that's on our radar right now. It's a low uptake that we have of people remaining without the discount. So it's something we'll continue to monitor. We're very committed to returning value to our shareholders. So it's an item we'll watch, but not something of major concern right now.

Ian McMillan: Thanks, David. Thank you, everyone. Before we close out the call, let me pass it back to Victor for some brief closing remarks.

Victor Dodig: Well, thank you. Thanks, Ian, and thank you, everyone, for your great questions today. We have -- what we've set out to do here today is to share a transparent update on our transformation strategy and the path forward to achieve TELUS' full potential. And we're in the early innings of what we believe will be full potential. TELUS is building from a foundation of strength. We're an exceptionally well-positioned company backed by industry-leading customer service, our expansive PureFibre and 5G networks, our growing infrastructure capabilities, which we tried to outline to you today and an increasingly collaborative and energized culture. We have the right leaders in the right roles.

We have an executive leadership team that possesses a deep institutional understanding of our business and seasoned experience necessary to navigate change and very, very focused on our strategic pivot to profitable growth and a good accretive return on capital. Our approach is grounded in disciplined execution and clear accountability. We've already demonstrated this through some decisive actions that we've already taken across all 3 strategic priorities. Again, those are to strengthen our financial foundation, hone our operational discipline to free up resources and deploy that capital to areas of sustainable growth in Canadian telecom and digital infrastructure.

We're aggressively pursuing monetization of noncore assets to support further deleveraging and balance sheet strength, and we're exploring the equitization of our PureFibre assets to support strategic investments in our core telecom and Canadian AI infrastructure businesses. It's all underpinned by our $900 million cash savings program. We're building a leaner, we're building a more focused TELUS to better position ourselves to compete, innovate and create long-term value for Canadian consumers and businesses at a time where this sector and TELUS is very much needed. We're moving with clarity, we're moving with urgency, we're moving with purpose. And we're confident that our transformation strategy will position us for stronger performance as we head into 2027 and beyond.

When we report our fourth quarter results in February, we'll provide our full year 2027 outlook and an update on our transformation strategy progress, and I'm sure we'll see many of you between now and then. Thank you for your time today and continued interest in TELUS. And I think that's it, Ian.

Operator: Thank you, Victor. This concludes our Q3 earnings call today. Please reach out to the IR team for any additional follow-ups.

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