TELUS Corporation
Q4 2022 Earnings Call Transcript

Published: 9 Feb 2023

[Operator:]

Good day, everyone. Welcome to the TELUS 2022 Q4 Earnings Conference Call. I would like to introduce your speaker, Mr. Robert Mitchell. Please go ahead.

[Robert Mitchell:]

Thanks, Carl. Hello, everyone. Thanks for joining us today. Our fourth quarter and year end 2022 results news release, MD&A and financial statements and detailed supplemental investor information were posted on our website this morning at telus.com/investors. On our call today, we will begin with remarks by Darren and Doug. For the Q&A portion of our call, we will be joined by Zainul Mawji, President, Consumer Solutions; Navin Arora, President, Business Solutions; Jim Senko, our Chief Product Officer; Tony Geheran, our Chief Operating Officer; Jeff Puritt, President and CEO of TELUS International; John Raines, President of TELUS Agriculture and Consumer Goods; and Michael Dingle, Chief Operating Officer at TELUS Health. Briefly, this discussion and answers to questions contain forward-looking statements. Actual results could vary materially from those statements, the assumptions in which they are based and the material risks that could cause them to defer are outlined in our public filings with Securities commissions in Canada and the U.S. including in our 2022 annual MD&A. With that, over to you, Darren.

[Darren Entwistle:]

Thanks, Diego and hello everyone. Throughout 2022, TELUS achieved strong operational and financial results across our business, leading our North American peer group with respect to 2022 operating revenue, adjusted EBITDA and free cash flow growth, along with most operating metrics. This is a trend that TELUS team has consistently demonstrated over the longer term. Our robust performance in the fourth quarter and for the full year reflects the chemistry of our globally leading broadband networks and customers first culture, driving our hallmark combination of profitable customer growth alongside strong financial results. Industry leading telecom net additions of 301,000 represented our best fourth quarter on record and concluded another year of industry leading expansion of our customer base. Indeed in 2022, we delivered all-time record customer growth, surpassing total annual net additions of more than 1 million for the first time. This included another best every year for fixed subscriber growth of 274,000 and the highest mobile phone net additions for our organization since 2010 with 401,000 net new customers. Our industry leading growth reflects the consistent potency of our operational execution unmatched by those product offerings across mobile and home and team member culture focused on delivering exceptional customer experiences over our globally leading PureFibre and 5G networks. Our team’s passion for delivering customer experience excellence, once again contributed to strong client loyalty across our key product lines, including blended mobile phone, PureFibre Internet, Optik TV, security, and voice churn, all below 1% for the year. Also for the full year, operating revenue growth of 8.6% came in above our revised guidance of approximately 8%, while EBITDA growth of 9.5% landed comfortably in the midpoint of our revised guidance range. Moreover, we achieved strong free cash flow growth of 64% for the year, exceeding our original free cash flow target. In addition, CapEx was in line with our target and reflected the final year of our accelerated broadband build program that has been considerably successful. Strength in our core telecom operations continues to be bolstered by continued strong operating momentum in our highly differentiated technology oriented businesses

[Douglas French:]

Thank you, Darren and hello everyone. Our fourth quarter results extend our track record of delivering leading operational and financial results supported by our high growth and diversified asset mix. In the quarter, we continue to see strong growth across all areas of our business. In mobility, we delivered network revenue growth and 6.5% driven by strong customer growth and higher ARPU. Furthermore, as compared to the pre-pandemic Q4 2019 period, mobile network revenue is 11% higher, showcasing our strong consistent growth and customer service excellence. We continue to see a steady improvement in roaming revenue with a Q4 amount of approximately 122% as compared to pre-pandemic levels. We remain focused on driving sustainable ARPU growth by maintaining our consistent focus on high-quality customer growth, executing on our 5G monetization strategy, excellent base management, diligent cash management on handsets, and leveraging our leading churn profile within a competitive and dynamic market environment. Fixed data services revenue grew 5.9% year-over-year or nearly 6.8% when considering the divestiture of the financial services business in December 2021. Within fixed data, residential internet revenue grew 8.4% year-over-year as we continue to drive market share alongside higher ARPU. Customers are continuing to move to our high speed tiers recognizing the superior customer excellence on our PureFibre network, while the compelling value of symmetrical speeds and reliability lead in this product set. Health services revenue of $411 million increased by $270 million over the prior period, reflecting the contribution from LifeWorks as well as continued organic growth. As we progress into 2023, we remain very focused on the LifeWorks integration and executing on the significant synergies and health outcomes our combined organizations can unlock together. Early in January 20, we announced the successful acquisition of WillowTree as highlighted by Darren. Together, these transactions represent important steps we are taking to scale our high growth technology-oriented business, further setting us apart from our global peer group, while adding capacity for value creation and diversification of our overall business. At the segment level, TTEC operating revenues were up 13% year-over-year. As a reminder in the fourth quarter of 2021, we recognized a $410 million gain from the sale of our financial services business to flow through other income. TTEC adjusted EBITDA grew 10% for the quarter and capital expenditures declined by 28% reflecting the conclusion of our accelerated capital program. DLCX operating revenues from external customers were higher by 9% year-over-year, primarily for growth in our tech and game clients arising from additional services providing to existing customers and the addition of new customers. DLCX adjusted EBITDA was up 23%, while margins improved 200 basis points to approximately 25%. Consolidated operating revenues increased by 13% year-over-year and adjusted EBITDA growth by over 11%. Furthermore, our annual EBITDA growth in each of 2020, 2021 and 2022, our cumulative EBITDA growth was over $1.3 billion since the pandemic started, while most of our industry peers are still cumulatively negative. We did not go negative in any year. Consolidated income was down 60% year-over-year, while EPS was down 64% due to the disposition of the financial services business I highlighted earlier. Excluding the impacts of our virtual power purchase agreements, financing costs in Q4 were primarily higher due to higher indebtedness over the past 12 months, along with higher interest rate environment. On an adjusted basis, net income was slightly higher, while EPS remained unchanged at $0.23. Free cash flow of $323 million in Q4 increased by $280 million driven by a decline in capital expenditures and higher EBITDA partially offset by higher mobile contracted volumes during a highly competitive Black Friday period and higher cash interest in the period. Looking ahead, we have set leading annual financial targets while advancing our leading growth profile and building on the momentum of strong and consistent operating momentum. In 2023, our operating revenue growth of 11% to 14% and adjusted EBITDA growth of 9.5% to 11%. Our financial outlook reflects continued healthy growth within our telecom business including profitable customer growth and continued demand for our superior bundled products over our broadband networks. In 2023, we anticipate growing contributions from our unique high end businesses, including TELUS International, which is highlighted by Darren, released their targets today as well as TELUS Health and Agriculture and Consumer Goods. Not included in our formal CapEx target of our core capital is $75 million earmarked for real estate development. As we progress through our copper decommissioning program and work to delivering on our strategy of delivering certain surplus real estate assets within the footprint, which we will monetize in the future. Our portfolio in real estate holdings will continue to increase over time with commercial, residential and industrial sites. Lastly, free cash flow for 2023 is forecasted to increase by over $700 million or 60% over 2022 to approximately $2 billion. The increase is industry leading and materially higher than our peers driven by EBITDA and lower CapEx. This is partially offset by a couple of non-operating items such as higher cash flow, cash interest as highlighted, an increase in cash restructuring to drive margin accretion, higher handset investments from the continued loading of our high value customers and higher taxes with our higher operating income. These details are detailed in our 9.3 of our MD&A. We are confident in our ability to continue generating strong free cash flow for years to come benefiting from an industry leading growth profile and consistently showcasing our superior asset mix and operational execution. Our continued strong operational financial performance supports our robust balance sheet and liquidity position. We have a strong debt maturity schedule with average debt to maturity over 12 years and only $500 million of debt maturing in 2023. The average cost of long-term debt remains at a low of 4%, while 86% of the debt is fixed. Additionally, our balance sheet strength will further be enhanced by the strong cash flow as highlighted. The strong position further supports our dividend growth will now be in place till 2025 along with the de-levering of our balance sheet and supporting strategic investments. Robert, over to you.

[Robert Mitchell:]

Thank you, Doug. Carl, please proceed with questions.

[Operator:]

Certainly. [Operator Instructions] So the first question is from Maher Yaghi from Scotiabank. Please go ahead.

[Maher Yaghi:]

Thank you for taking my question. Maybe I will start with the question on health, by my calculation I am getting around 5% organic growth on the business on the revenue side and 2% on LifeWorks. You discussed in your MD&A that demand for health and well-being services has never been higher than it is right now. So I am trying to figure out is this a pricing issue that you guys are having that is pressuring the top line from growing faster and when you talk about your expectation for 2023 with the integration with LifeWorks. Can you talk a little bit on what do you expect this business to look like in 2023? Thank you.

[Darren Entwistle:]

Okay, Doug, will kick it off and then Michael will do the follow-up.

[Douglas French:]

As you could see in our KPIs, yes there is significant demand for our products. As you can see, our KPIs continue to grow. There was a re-rate in one of our more material customers as we renewed for a long period of time. That is generating significant long-term value. And I think the opportunity in front of us as Michael will highlight will be the integration in cross-selling that is in its infancy with LifeWorks at the moment. So Michael, maybe I can have you talk about that.

[Michael Dingle:]

Thank you, Doug and thank you for the question. That’s right. While Q4 did see a slight slowdown in respect of one segment in the health business as a result of a customer reprice on a renewal, Q4 also saw our team laser focused on two priorities, the first being servicing our global customer base and the second being increasing the pace of our post-acquisition integration activities with respect to LifeWorks. In addition to our post-acquisition integration efforts, the TELUS Health team has been hard at work partnering across TELUS to seize opportunities for collaboration as highlighted by our substantial partnership with TELUS International, which is focused on customer experience and digital transformation, including bringing AI to TELUS Health’s market leading digital health solutions. In Q4, we deepened our partnership with TI by partnering on over $100 million in business, which affords us the opportunity to deliver increased customer value through increased customer service levels across our business units. And we are ahead of our integration plans which sets us up very well for ‘23 and beyond. As Darren shared earlier, 2023 sees us going to market under one brand, TELUS Health underpinned by our strategic intent to be the most trusted wellbeing company in the world, expect strong contributions from TELUS Health in 2023 and beyond. Combining the skills and capabilities of TELUS Health and LifeWorks creates a globally leading end-to-end digital first employee wellness platform that now covers better than 68 million lives. Our teams continue to drive strong growth fueled by the LifeWorks acquisition, as evidenced by cross-selling and upselling velocities across our global customer base today. We are focused on the pursuit of our unparalleled opportunity in TELUS Health to become a global leader in EFAP alongside with data-driven preventative healthcare, wellness and mental health. Finally, I will say we work tirelessly to extend our social purpose everyday. Our recent collaboration with TELUS Agriculture and Consumer Goods is a good example of this, as we partnered to bring mental health services to Canadian farmers in a partnership with the Canadian Center for Agriculture and Wellbeing.

[Darren Entwistle:]

Thank you, Maher. Next question, please, Carl.

[Operator:]

The next question is from Jerome Dubreuil from Desjardins. Please go ahead, Jerome.

[Jerome Dubreuil:]

Yes, thanks. Thanks very much for taking my question. Mine is on the strategy update you gave us a year ago. Wonder if you can update us on this. Basically, the points you were making is that we are looking to maintain tech leadership resurrecting B2B and reducing cost as well as scaling the tech ventures. I wonder if there is any tilt or shift in these strategic priorities or will sail on the same roadmap basically? Thank you.

[Darren Entwistle:]

We are on the same roadmap, Jerome, explicitly in that regard. Navin, maybe given the improving EBITDA trajectory of our B2B operations given that was referenced in the question, why don’t you provide a succinct response to that component?

[Navin Arora:]

Yes, thank you, Darren. So as you said, Darren, the B2B has had a very strong 2022. And we expect that trend to not only continue but accelerate in 2023. And what you know, what I think is notable, especially as we look across other global B2B communication service providers is that TELUS’s B2B team delivered strong growth not only on an EBITDA basis, but also revenue, margin and cash. And another key highlight is that this profitable growth came from across all B2B segments, right from small business through to enterprise and public sector. So looking ahead, we feel quite bullish on where the business is going. And we expect strong and consistent growth over the next several years. And underpinning that growth are a few important contributors. So first, digitization and automation is really helping to concurrently improve our cost structure, remove non-value at work, all while improving the customer experience. TELUS International will play a very important role in enabling this digitization capability. And we look to the recent WillowTree acquisition to help further both their capabilities and our digitization efforts in B2B. Next, leveraging our significant investments and coverage in both PureFibre and 5G, which both reduce costs and improve service quality, we feel we’ve got a lot of opportunity to continue to drive further penetration and growth in these core connectivity areas. Also tied to 5G we’re very keen to see new revenue growth through vertical and horizontal based industry solutions, as well as the data monetization opportunities. And as part of this industry solutions capabilities we see some really strong adjacencies with both health and agriculture in terms of how we go to market and those adjacencies also drive some very significant differentiation in the market. And then lastly, really strong geographic segment and product diversity which gives us several levers to drive growth with significant market share upside. So all this to say we expect strong cash contribution as well as accelerating revenue margin EBITDA growth in in 2023 and beyond. And we expect that trend to accelerate not only in ‘23, but for several years beyond that. So I will pass back you Darren.

[Darren Entwistle:]

Thanks, Navin. Thanks, Jerome. Carl, next question, please.

[Operator:]

The next question is from [indiscernible]. Please go ahead.

[Unidentified Analyst:]

Thanks. Thanks for taking my question. I wanted to focus a little bit on TELUS Health. Thanks for the color early on, but leave aside the synergies and I recognize that’s material with LifeWorks. I wanted to get a sense of how we should think about the shape back towards perhaps stronger organic growth that TELUS Health and what the construct of that would be? And then connected to that, I know that 12 to 18 months from now you are looking at prospect of an IPO, maybe a strategic partnership on the latter option, maybe a little bit of definition around what kind of partnership you are looking for, which areas, what criteria to the extent that you can disclose right now? Thank you.

[Darren Entwistle:]

Okay. So firstly, 12 months to 18 months is not the IPO time cycle, but it could be the time cycle for bringing in a strategic partner. If you are wanting color on what that model looks like, I think the example that we said in 2016 with Baring coming into TELUS International as a precursor to what we would eventually do on the IPO front, is a very good model to draw inference from. The one area of important differentiation that we would be looking for is a partner coming in not just from a cash and evaluation point of view, but what they could add to the business strategically and commercially. And in that regard, there are two key things that matter to us in terms of potentially seeking a partner. What can they do to assist us in the area of products and technology, and what can they do to assist us in the area of distribution channels, and global reach in terms of scaling, our customer penetration and our global customer growth. Those are the attributes that we would be seeking if we chose to strike the partnership. It would be fair to say that we do like the two-step model, establish a partnership first, creating a semblance of independence of the business. Whilst, of course still integrated in terms of the operations with both TELUS and TELUS International, we think it’s a good discipline in terms of getting the business to stand on its own two feet, in a run up to eventually earning the way to the IPO. And one of the things that we implemented with TELUS International that we would again emulate with TELUS Health is that we had a TI, a pre-flight IPO checklist of things that needed to be achieved by TELUS International, if they were going to earn their way to the right of IPO in the business, in servitude to the strategy. And so the other thing that we would be looking at, which gets to the first part of your question, is a business where we deliver very strong organic growth, double digit organic growth at the revenue level, and at the EBITDA level. And that of course, allows us to earn our way to the M&A opportunities, because when you have a strong organic underpinning from a growth profile, you make better acquisition decisions, because they are discretionary, rather than necessities. Also, when you have stronger organic growth, you integrate those acquisitions significantly more effectively. And if you look at some of the choices that TELUS International has made, in terms of its acquisition path, and how well those choices were and how well those acquisitions were integrated, that of course is going to be indicative of the etiology with TELUS Health. And then lastly, if we are going to do an IPO, it’s going to be for a high valuation, because clearly an organization like TELUS, we are going forward, the sources of cash are going to significantly and chronically exceed the uses of cash. It’s not for a need of money, it’s to establish a great valuation and a transaction currency that increases or amplifies the addressable market of acquisition opportunities that we can pursue. Given the multiple that we have established with our transaction currency, we are only going to realize that high level of multiple if we have great execution results with TELUS Health in 2023, 2024 and 2025. And those will be underpinned by excellence in organic growth, but also the harvesting of the synergies with LifeWorks. And those synergies are deeply significant. We have given you lots of color on those on $200 million plus holistically and $60 million in the near-term on the cost front. But the strength of what we can do on the cross-selling side of things, the strength of combining EAP with virtual care, the strength of what we can do on new product development. And of course, underscored by the significant efficiency opportunity, I think that that’s going to buttress the growth profile that we want to have in terms of the TELUS Health IPO.

[Unidentified Analyst:]

Thank you.

[Jeff Puritt:]

Thanks [indiscernible]. Carl, next question please.

[Operator:]

The next question is from Drew McReynolds from RBC Capital Markets. Please go ahead, Drew.

[Drew McReynolds:]

Yes. Thanks very much. Maybe for you, Doug. With respect to free cash flow, obviously a lot of growth year-over-year and nice to see CapEx come down. I don’t know if everyone on this call investor knows, but your free cash flow definition is probably the most conservative among your peers. And I think all the analysts understand that. So, when you think about the low EBITDA free cash flow items, my question is, when you think about the $2 billion in 2023, with respect to your earmark CapEx, your taxes, the contract assets, all kind of the moving parts. Is that $2 billion, in your view kind of more of a normalized level, or are these things still kind of swinging back and forth, a little bit more volatile, with a little bit more volatility than usual?

[Darren Entwistle:]

Less back and more forth, over to you, Douglas.

[Douglas French:]

Exactly. There is definitely a few one items in there. The restructuring cash that we anticipate for 2023, we would assume would be a decline over time. So again, that would be more accretive outside the 2023 timeframe. I think what handsets, and thank you for pointing that out on we buy. On the handsets, we have assumed that intensity levels we saw in Q4, first part of 2023. And including an investment in high quality loading is exactly what we should be doing. And we were transparent in our assumptions around that. I think because the COVID was a bit of a lull, that once we get over 2023, we should see a normal run rate or more of a normal run rate on handsets. So, I think the climb back out of COVID, again, would be limiting a little bit this year, but 2024 and beyond, again, would be a year-over-year neutral basis. And then when you look at our CapEx continuous and the growth we have talked about in EBITDA, I would say we are going to have nothing, but accelerated growth on free cash flow in the future.

[Darren Entwistle:]

And interest.

[Douglas French:]

Oh, and interests as we de-lever, you are right. Thank you, Darren. We are at a bit of that peak after the WillowTree acquisition. You will see us de-lever over the next few quarters and as the year progresses into the next few years. And with that, the interest amount also will be more managed or more reduced.

[Drew McReynolds:]

Understood. Thank you.

[Jeff Puritt:]

Thanks Drew. Carl, our next question please.

[Operator:]

The next question is from Vince Valentini from TD Securities. Please go ahead, Vince.

[Vince Valentini:]

Yes. Thanks very much. Question on connected devices and the impact they are having. The first time you gave us disclosure was 2018, there was about 1.2 million devices and now it’s more than doubled to 2.47 million devices. Is that starting to have a meaningful impact on your service revenue and ARPU? And maybe you could just clarify or verify for me that you include that in service revenue, but it’s not counted as subscribers. So, it should be inflating ARPU with the extent that line gets bigger.

[Darren Entwistle:]

[Ambu 4912:]

[Navin Arora:]

Yes. Thanks Darren. So, I agree fully. We are very bullish on IoT connected devices and actually the industry solutions, capabilities that will ride on top of that connected device and connectivity capabilities. So, as I mentioned previously, this is a meaningful nine figure business for us. It has double-digit growth on the IoT and industry solutions side. And we are getting some good traction in the market across several key verticals and horizontals. Just before I give some examples, we are really liking how 5G IoT, and PureFibre are driving some nice adjacencies across our health and agriculture business units, again, providing some important market differentiation. One example would be really how we are taking advantage of our Western incumbency and the logical linkage to key natural resource industries. So, TELUS was selected to help build one of the largest private wireless network solutions for a mining operation in Canada. Another key area where we are focused is on transportation. And so recently, TELUS was selected as the exclusive 5G connectivity partner for Project Arrow [ph], which is Canada’s electric vehicle manufacturing initiative. And maybe one other example of where we are partnering with academia and industry is we just announced a $5 million investment with the University of Windsor to accelerate the development of 5G technology applications in agriculture, advanced manufacturing, cybersecurity, and connected vehicles. And as Darren said, we were not only bullish on the revenue growth in this space, but we really liked the margin profile. And that’s mainly driven by a high volume business with a lot of automation, a lot of self-served, and end-to-end digital capabilities. So, in terms of scaling that revenue growth, huge potential, but at very little cost increases. So, we definitely like the economics of this business. So with that, I will pass it back to you Darren.

[Darren Entwistle:]

Also with sticky churn in terms of client retention, another attractive feature, which helps you achieve attractive lifetime revenues out of the IoT sector. And then secondly, the biggest opportunity going forward is milking the data analytics over all those data volumes. Okay. Let’s go to the – thanks Vince for the question.

[Jeff Puritt:]

Next question please, Carl.

[Operator:]

The next question is from Stephanie Price from CIBC World Markets. Please go ahead, Stephanie.

[Stephanie Price:]

Hi. Good afternoon. I was curious if you could think about this strategy around the acquisition of two small internet service providers in Ontario, just curious to be interested to know wireless plus wireline offering in Ontario. And maybe more broadly, how you think about the growth sectors in telecom post the potential Rogers-Shaw merger?

[Darren Entwistle:]

Thanks Stephanie. Zainul, do you want to take that question?

[Zainul Mawji:]

Sure. So Stephanie, we have been doing small tuck-in acquisitions in specific areas where we have competed for a number of years that these are no different. We have a very significant and growing smart home security business as an example. These particular acquisitions are helping to advance our capabilities in that area. And so they are relatively consistent with these types of acquisitions we are done in the past in Ontario and nationally.

[Stephanie Price:]

Great. Thank you.

[Jeff Puritt:]

Thanks Stephanie. Next question please, Carl.

[Operator:]

The next question is from David Barton from Bank of America. Please go ahead, David.

[Unidentified Analyst:]

Hi. It’s Matt sitting in for Dave. Thanks for taking the question. I was wondering just on two points, if I could. I know you just released 2023 guidance. But if I look ahead a little bit, can you talk about what your expectations are for maybe improving flow through of your EBITDA growth to free cash flow as you move forward with some of these acquisitions in your plan? And secondly, on the $75 million of CapEx for the kind of real estate opportunity, can you touch on whether or not this includes also a partner? I know that’s been a discussion in the past, you might bring in a partner to observe these things. And then also on the lag between when you would make these investments and when you might see a return, like how many years is the right measure should we expect to kind of allow for this type of activity? Thanks.

[Darren Entwistle:]

Doug why don’t you take that?

[Douglas French:]

Yes. So, we will start the second question first. So, on the real estate when the $75 million does not include a partner at the moment, we have assumed we would get potentially partners on individual real estate opportunities where appropriate, and bring in high quality partners to get things up and running. But it really is to start to build a portfolio so that over the timeframe you are thinking, we would have something of substance that could be monetized probably in the 3-year period is probably the appropriate ramp on that one. But we absolutely intend to bring in partners and that number could go down, the more we do that. On the flow through, I think it is and even Darren highlighted that it’s for the direction up on free cash flow and margins. If you look at the integration costs, we are currently doing for LifeWorks, our margins are going to continue to enhance. The double-digit growth we have in health is going to continue to contribute to that. I would say that some of the acquisitions we did for J-curves, and the double-digit growth on both revenue and EBITDA and both ag are now going to contribute, in addition to what Navin had highlighted. And so I think you are going to continue to see more and more flow through on an ongoing basis, both in 2023 and beyond on all of those fronts in addition to the strength of our core business.

[Darren Entwistle:]

And if you look at that EBITDA flow through and the cash flow trajectory over ‘23, ‘24 and ‘25, also calculate what the dividend payout ratio is of free cash flow, and the headroom that we are creating as it relates to our dividend growth model. I think those figures are very interesting.

[Unidentified Analyst:]

Thanks so much.

[Jeff Puritt:]

Thanks Matt. Carl, we have time for one more question, please.

[Operator:]

The final question is from Simon Flannery from Morgan Stanley. Please go ahead, Simon.

[Simon Flannery:]

Great. Thanks for the question. Can you talk a little bit about the market environment for 2023? I think looking through your discussion, you are assuming a slower macro growth rate next year. We have obviously had a lift from COVID in terms of pent-up demand. It sounds like you think that will continue. But how should we think about the overall industry KPIs across wireless and across broadband? Do you think we can sustain the pacing across the industry that we have seen in 2022 and 2023, given continued immigration, etcetera? Are you expecting some sort of moderation overall?

[Darren Entwistle:]

Okay. Jim, why don’t you kick that off? Zainul, why don’t you do the part two?

[Jim Senko:]

Okay. So, first, for sure, we are seeing persistent promotional activity in the low end of the market. But that said industry best ARPU growth at 2.2% really good underlying domestic ARPU characteristics coming from the high value subscriber mix and also the base management and the step up to 5G. We are also seeing industry best churn on the back of our product intensity and our customer experience. In fact, our postpaid churn continued to be really strong, very similar to pre-pandemic levels. Our prepaid churn is elevated, but due to travelers, but over 200 basis points better than our competitors. And when you look at our nets, Q4 nets were up 80,000 versus pre-pandemic 2019. So a lot of the focus we have gone on distribution like mobile clinic, digital, direct-to-consumer are driving benefits. And so when we look into next year, we would expect that, that promotional activity is going to continue at the low end of the market, but our strength is really on the premium side of the market and bundling and we feel that’s very robust. So we expect consistent trajectory from where we are on ARPU. We see upside in business roaming. We are already seeing that in Q1. We will continue to see that high value subscriber mix washing through the base. Our base management around 5G and Koodo Pick Your Perk step-ups is working really well. The growth in our IoT subscriber base is now contributing meaningfully to our network revenue growth and we are not as reliant on the low-end flanker promotions, which is good. So, I feel really good on the wireless side that, that will continue this trajectory and we will see that kind of consistent growth. On the home solutions side and Zainul, maybe you want to top up, but we are seeing similar characteristics, especially around the bundling. And with the bringing together of mobility and home solutions in the consumer organization that presents tremendous opportunities for us to drive further efficiencies and even better bundling. But Zainul, maybe you want to say a couple of words on the home solutions side?

[Zainul Mawji:]

Sure. Thanks, Jim. And I think you gave a really great summary. And one thing I would top up on as well is that we have been the lion’s share of the net porting winner. So I think we demonstrate across the board that clients are choosing TELUS. We are getting the larger premium share of the market. We have a higher level of product intensity, a lower level of churn and a higher ARPU position. So, the delta between us and our peers on customer lifetime value is significant. And there is an opportunity for growth and continued growth there on the back of our completion largely of the fiber to the prem build in the west. So if you take those characteristics and extend them out, we see a higher margin per household at over 20% increase. We see a significantly lower churn of 16 points. We see higher product intensity, 25% less cost and 70% less, fewer outside plant repairs. So we have an incredible margin accretion opportunity. And we also have a significant level of digitization and product development taking place, so that we can continue to grow our share and to develop new products under Jim’s leadership as well as leverage TI and WillowTree in terms of driving margin accretion across our segments, so that even in the lower end of the market, where we see significant immigration growth, we can come to the table with value props that are more margin accretive than our competitors. So we are quite excited about the growth potential in the market. And we think that we are positioned incredibly well across segments and across the demographics. We absolutely do see some customers characterized as looking for value in their bundle, value – higher levels of value in their purchase patterns. But because we provide solutions at every end of the market, we are really poised well for that growth.

[Simon Flannery:]

Thanks a lot.

[Robert Mitchell:]

Thanks, Simon and thank you everyone for joining us today. Please feel free to reach out to the IR team with any follow-up questions you may have.

[Operator:]

This concludes the TELUS 2022 Q4 earnings conference call. Thank you for your participation and have a nice day.