Telus Corp Q4 FY2020 Earnings Call

Good morning, ladies and gentlemen. Welcome to the TELUS 2020 Q4 Earnings Conference Call. I would like to introduce your speaker, Mr. Robert Mitchell. Please go ahead. Hello, everyone. Thank you for joining us today. Our fourth quarter 2020 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 have remarks by Darren Entwistle, President and CEO; Jeff Puritt, Executive Vice President and President and CEO of TELUS International; and Doug French, Executive Vice President and CFO. For the Q&A portion of our call, we will be joined by Zainul Mawji, President, Home Solutions; Jim Senko, President, Mobility Solutions; François Gratton, Group President and Chair of TELUS Health and TELUS Quebec; and Tony Geheran, EVP and Chief Customer Officer. Darren will take the lead in the question session and allocate the questions out to our other speakers as appropriate. Briefly on Slide 2; this presentation and answers to questions contain forward-looking statements that are subject to risks and uncertainties and made based on certain assumptions. Accordingly, actual performance could differ from statements made today, so we ask that you do not place undue reliance upon them. We disclaim any obligation to update forward-looking statements, except as required by law. And we refer you to the risks and assumptions we've outlined in our public disclosures, including fourth quarter and 2020 MD&A and filings with the securities commissions in Canada and the U.S. With that, over to you, Darren.

Thanks, everyone, and hello. For 2020, TELUS once again achieved strong operational and financial results in both our wireline and wireless businesses. This is a trend that TELUS team has demonstrated over the longer term and in 2020, realized against the backdrop of an unprecedented operating environment. Our performance in the fourth quarter and for the full year was characterized by our hallmark combination of robust, high-quality and profitable customer growth, alongside strong financial results. The quarter concluded another year of industry-leading customer net additions of 777,000, including an all-time record for annual wireline subscriber growth of 240,000. Thanks to decisive action and active cash management our full year cash flow of $1.435 billion was within the $1.4 to $1.7 billion range that we initially targeted back in February of 2020. This was achieved alongside 5.2% revenue growth and 0.2% EBITDA growth for the full year. These results were realized due to our team's resiliency, including a relentless focus on improving our cost structure, whilst driving important growth opportunities to mitigate some of the downside pressures we were experiencing. Notably, TELUS was the only telecom provider amongst our national peers to report positive EBITDA growth for the year. Moreover, excluding the effects of COVID-19, we achieved EBITDA growth of 6% in 2020. Our industry-leading subscriber growth was driven by our team's passion for delivering outstanding customer experiences day in and day out. This, in turn, contributed to strong and enhanced client loyalty across all of our key product lines, including postpaid mobile phone, Internet and TV churn, all achieving a below 1% churn rate in the fourth quarter and for the year. This performance was backed by our highly engaged team, world-leading wireless and fiber broadband networks, strong digital capabilities and our superior service offerings. Let's take a look now at our wireless business. Fourth quarter network revenue decreased by 1% as our consistent focus on strong and profitable growth was offset by reduced roaming revenue. As a result, wireless EBITDA was down 1.1%, partially mitigated by an intense focus on cost management by the team. Doug is going to provide more detail on these financials in just a moment. For the fourth quarter, our team achieved 87,000 mobile phone net additions, up 17,000 over last year. In terms of connected devices, we realized strong net additions of 88,000, up 28,000 on a year-over-year basis, reflecting increased demand for our IoT solutions. Overall, wireless net additions, inclusive of mobile phones and connected devices, were 175,000 in the quarter, which was up 45,000 over this time last year. Importantly, our team delivered another quarter of best-in-class loyalty results. Blended mobile phone churn was 1.09%, representing an 11 basis point improvement over the last year. Underlying this result, postpaid churn of 0.93% was better by 3 basis points compared to a year ago. Indeed, 2020 represented our seventh consecutive year of industry-leading postpaid wireless churn below 1%. As a key factor in this achievement, the efficacy of our ongoing investments in our globally leading broadband networks continued to be evidenced by major independent reports again in 2020. By way of example, TELUS' wireless network was recognized by U.K.-based Opensignal as the fastest in the world and by U.S.-based Ookla as the fastest and most expansive on a national basis. Both awards have now been received by TELUS for 4 consecutive years. In addition, for the second year in a row, Canadian-based Tutela placed TELUS first in respect of quality, latency and download throughput for our wireless network on a national basis. Building on these accolades, TELUS was recently named Canada's most respected mobile service provider in a survey of Canadians from coast to coast, conducted by U.K.-based Maru/Blue. This recognition acknowledges TELUS' reputation across customer service excellence, our team culture, our contribution to our communities, our diversity and inclusiveness, and our overall brand trust. To close in our wireless results, ABPU and ARPU declined by approximately 3.7% and 3.4%, respectively, in the quarter. This, of course, reflects industry-wide pressure on roaming associated with pandemic-related restrictions and reduced travel. Partially mitigating this, we continue to thoughtfully migrate our base to our endless data plans, with more than 60% of rate plan changes in the quarter representing step-ups or remaining flat, whilst holding the line on our premium brand ARPU. This does set us up nicely for the increased commercialization of 5G and the opportunity to lead innovation and increase productivity in areas such as health care, smart cities and smart buildings, home automation and digital life and AgTech, whilst further monetizing our network investments across 5G and fiber. Turning now to our wireline results, where TELUS once again delivered a very strong quarter. Fourth quarter wireline revenues increased by 14% and EBITDA increased by 1.5%. These results reflect the increased contributions from TELUS' Internet growth and home and business smart security technology as well as growth from TELUS International, which I'm going to speak to in a moment, as will Jeff Puritt. TELUS' wireline financials were driven by data revenue growth of 22% through a combination of higher revenues from our diverse portfolio of services and solutions, including robust growth in Internet and third wave data services, as well as a resilient performance from our TV offering. It also includes strong growth in home and business smart technology, inclusive of security. It includes increased revenues from the hyperscaling of our virtual health care solutions. And finally, it includes resilient performance at TELUS International, thanks to our TI team, and it's inclusive of organic growth as well as the successful Competence Call Center acquisition. Doug is going to provide more details on our wireline financial performance and the temporary COVID-related impacts that we've had to navigate, but we've navigated them successfully. Looking at our robust customer expansion in wireline; our company and our team achieved fourth quarter Internet net additions of 44,000. This represents an increase of 16,000 additions on a year-over-year basis. This was buttressed by a churn rate below 1%, which, alongside a solid double-digit percentage increase in monthly recurring revenue for new customer additions, continues to bode well for future lifetime economics for our growing Internet business. Also supported by churn being below 1%, we realized healthy TV net additions of 20,000, which represents a 5,000 increase over last year. Notably, residential voice line losses came in at 9,000 in Q4, representing yet another quarter below 10,000 and a 3,000 improvement again over last year. Furthermore, we delivered industry-leading growth in our security business, with additions of 23,000, up 8,000 on a year-over-year basis. And this is a North American industry-leading result as it relates to the excellence of our security operations and the team delivering these great results. In summary, total wireline RGU net additions of 78,000 were up 32,000 year-over-year. This represents our best fourth quarter wireline loading on record. These results underscore the unique and attractive bundled offers available to customers across our superior product portfolio and our team's focus on leveraging the competitive differentiation that is truly inherent in our PureFiber network. In that regard, at the end of 2020, our PureFiber coverage stood at 81% of our high-speed broadband footprint, up from 70% at the end of 2019. This is a positive progression for 5G as well, given the potent synergies between the 2 technologies that I've talked about for so very long. Like our wireless network, our fiber network continues to receive important recognition from independent authorities. U.S.-based PCMag ranked our PureFiber network as best for gaming in 2020 given the symmetry and the quality of the network, and they named TELUS the fastest Internet service provider on a national basis. At a time when the speed, quality and expansiveness of our networks has become more important than ever for Canadians, these recognitions both for our wireless and wireline broadband networks are particularly resonant. I'm deeply grateful to the entire TELUS team for the exceptional grit they demonstrated during an exceedingly challenging year and the way that their talent and commitment came to the forefront. Indeed, at the outset of the pandemic, many customer-facing team members were redeployed to support our clients virtually or pivoted to provide assistance remotely or through virtual installations and repairs. As a result, we avoided team member departures and continued to deliver outstanding customer experiences during the most challenging of times. This was evidenced by our industry-leading customer loyalty rates and by earning an industry-leading score of 75% in respect of consumers' likelihood to recommend TELUS' products, recommend our services and recommend our people. And when we talk about industry-leading on the customer service excellence front, it goes beyond national to global. Our team's ability to consistently earn enhanced customer loyalty and drive profitable growth over the longer term provides us with confidence in delivering on the 2021 target that we announced today on the back of strong fourth quarter and 2020 operational and financial performance delivered by our team. This includes industry-leading 2021 revenue and EBITDA growth of up to 10% and 8%, respectively, alongside free cash flow of approximately $1.5 billion that we're targeting in 2021. Whether it's revenue or EBITDA or cash flow, clearly, the financial parameters for TELUS are compelling, compelling today, retrospectively, and prospectively. These objectives will be buttressed by smart broadband network investments and our highly differentiated and potent asset mix in combination with a strong balance sheet to support sustainable long-term growth. Furthermore, the unparalleled skill and innovation of our dedicated team underpins our industry-leading multiyear dividend growth program now, although it's hard to believe, in its 11th year and targeting annual growth between 7% and 10% through 2022. Finally, I'd like to address our recent IPO of TELUS International, which we successfully completed last week with TI embarking upon its next journey as a publicly traded company on both the Toronto and New York Stock Exchanges. This was undoubtedly a monumental achievement for our team, notably establishing an important growth currency for TI's continued global expansion with a market capitalization of more than $10 billion. It was indeed a historical accomplishment, representing the largest technology IPO in TSX history and one of the largest IPOs in the history of Canadian capital markets with total aggregate proceeds of almost $1.5 billion. Proudly, this also represented the fulfillment of an important aspirational goal for me personally. To achieve an enterprise value for TI exceeding the $8 billion market cap of TELUS 2 decades ago when we first embarked on our national growth strategy really is a fulfillment of an ambition. And when the progeny can outgrow the origins of the parent, there's something meaningful and poetic about it. Congratulations to the team in that regard. This significant value creation reflects the steadfast focus of both TELUS and the TI teams in emulating the parameters of TELUS' success. Over the last 15 years, TI has evolved into a digital customer experience innovator that harnesses the power of technology to provide truly outstanding customer and community experiences on a global basis. With TELUS retaining a controlling interest and a 55% economic stake, we remain extremely confident in TI's future as it continues to drive better business outcomes and grow value for all shareholders. Jeff will talk more about TI in just a minute. TI's success story reinforces the efficacy of our strategy of organic growth well executed, complemented by selective, thoughtful acquisitions as we look to build scale in exciting emerging growth businesses like TELUS Health, TELUS Security and TELUS Agriculture, evolving them into tremendous assets of consequence in the future. Our integrated and broad portfolio of data technology solutions within these growth verticals, combined with a strong financial growth profile, further enhances the highly differentiated value that we are creating for our investors. On that note, earlier this week, TELUS announced a strategic alliance with Google Cloud to co-innovate on new services and solutions that support digital transformation within key industries, including communications technology, health care, agriculture, security and our connected home solutions. This 10-year collaboration will accelerate TELUS' network innovation initiatives and our digital transformation journey, enabling further operational agility and truly enhanced customer experiences that differentiate us from the competition in a meaningful way for our customers. This announcement came to fruition in large part due to the strong partnership TELUS International and Google have enjoyed over the past decade. Notably, our international team has provided complex, next-generation digital IT and customer experience solutions to Google, while they, in turn, have helped to drive TI's digital evolution. TELUS' strategic partnership with Google will propel our digital leadership, whilst amplifying our customer's first priority, redefining how service is delivered in Canada and globally. In a year like no other, as we manage through the ongoing global pandemic, the TELUS team continued to do good in the communities where we live, work and serve as citizens. We expanded our TELUS Health for Good program with the launch of 7 new mobile health clinics in 2020 and an additional 2 clinics in January of 2021, bringing our total to 13 mobile clinics nationwide. Throughout 2020, our mobile clinics supported 28,000 patient visits, including administering 12,700 COVID-19 assessments and tests. Furthermore, our TELUS family contributed $85 million, and perhaps more importantly, from our hearts, 1.25 million hours of volunteerism to charitable and community organizations in 2020. Our team's leadership in social capitalism was once again recognized on a global basis with TELUS ranking 54th on the Corporate Knights 2021 Global 100 most Sustainable Corporations index for the ninth time, making TELUS the highest-ranking telco or cableco in North America. These are outstanding achievements, and I remain exceedingly proud of and grateful for the entire TELUS team. On that positive note, Jeff, I'll hand the call over to you to talk more about the exciting progress at TI and how brilliant the future you have.

Thanks very much, Darren, and hello, everyone. It is indeed a very exciting time for the entire TELUS International team with our successful IPO last week on both the New York and Toronto Stock Exchanges. February 3 marked a historic milestone in our company's 10.5 years-long journey from a single delivery location in the Philippines to a globally scaled digital customer experience leader operating in over 20 countries around the world. The success of our IPO was a validation of our long-term digital strategy, our focus on customer service excellence and our internationally recognized social purpose impact, making TI, as Darren just mentioned, the largest tech IPO in TSX history. My heartfelt gratitude goes out to our 50,000 highly engaged team members around the world, our more than 600 valued clients, and of course, to TELUS and to Baring Private Equity Asia for their guidance and unwavering support. As a leading innovator that designs, builds and delivers next-gen solutions for global and disruptive brands, TELUS International has a unique approach to combining digital transformation and CX capabilities across the full customer experience value chain. Our highly engaged global team continued to execute very well in Q4. Our ability to leverage our carrier-grade infrastructure to help bring our differentiated culture to life in a virtual environment has been a source of our strength. As a result, TELUS International has proven to not only be resilient through the prolonged pandemic, but we've also demonstrated our ability to continue growing our business. In connection with our IPO, TI disclosed preliminary results for 2020, which highlighted our performance. With estimated 2020 revenues of approximately $1.6 billion, representing year-over-year growth of circa 15% and adjusted EBITDA margins of circa 24%, TI is expected to report strong year-end results for 2020 when compared against 2019 on a pro forma basis, including our CCC acquisition. Worth noting here, these impressive results do not include our recent Lionbridge AI acquisition, a leading global data annotation business fueling AI algorithms for the world's largest technology companies. This acquisition closed on December 31 and integration is well underway. In this regard, I'd also like to take a moment to welcome our newest team members into the TI family. I am so excited about our combined capabilities, including the natural adjacencies that exist within our trust and safety practice in particular. Indeed, we are continuing to define a new category at the intersection of digital IT and digital customer experience. And we expect to amplify and accelerate our go-to-market strategy through demonstrable scale, proven digital capabilities, and a differentiated culture. Let me now turn the call over to Doug for a detailed update on TELUS' Q4 financial results. Doug, over to you.

Thank you, Jeff, and hello, everyone. As we have seen in previous quarters, we are achieving significant subscriber growth with mobile phone net additions increasing nearly 25% from last year. A key development is the shift in our customer base towards our premium TELUS postpaid brand, with more customers opting for Peace of Mind unlimited data plans. We are focused on optimizing our cash COA and COR spending, particularly by reducing non-recoverable subsidies and ensuring a reasonable economic payback during the customer contract term. This consistent strategy is positively impacting our financial position, as reflected in our strong financial results, including robust network revenue trends. Additionally, the bundling of our mobile and home services enhances customer loyalty. Network revenue experienced a 1% decline, mainly due to a $63 million drop in roaming revenue. Without this impact, network revenue would have increased by over 3%, highlighting the strength of our loading profile and the quality of our subscriber base. We anticipate that roaming recovery will commence gradually in the latter half of 2021, heavily influenced by the progress of the global vaccine rollout and the relaxation of travel restrictions, particularly between Canada and the U.S. We believe a full recovery may not occur until 2022 at the earliest. The mobile phone ARPU fell by 3.4%, improving from a 5% decline in Q3 and a 5.8% decline in Q2, aligned with our strong loading and customer mix trends over the last year to two years. Excluding the roaming effect, our ARPU would have seen an increase of about 0.6%. Our Q4 wireless adjusted EBITDA declined by 1.1%, driven by the impact of lower roaming revenue, marking a stable sequential improvement from Q3 and Q2. Wireline revenue grew by 14% year-over-year, with wireline adjusted EBITDA rising by 1.5%, consistent with the previous quarter. These results reflect continued strong performance from acquisitions and organic growth across our business. We are currently managing the near-term J-curve impact as we integrate and enhance the value of our recent acquisitions in TELUS Health and TELUS Agriculture. While we have observed some recovery in Q3 and into Q4, temporary challenges persist for some business customers as they address their own pandemic-related issues. We've also faced impacts on TELUS Health from temporary site closures and restricted access earlier in the year. With our strong customer growth across both segments, there are upfront costs to consider. Nonetheless, we are optimistic about improving monthly revenue from both new and renewing customers and increased product intensity across our offerings. We remain committed to strong cost containment across our organization. For Q4, consolidated revenue rose by 5.2%, culminating in a full year growth of 5.5%. Although our consolidated adjusted EBITDA declined slightly by 0.2% in Q4, it was up by 0.2% for the full year. Free cash flow for the quarter surged by more than 60%, totaling $1.435 billion for the full year, a notable achievement without compromising our capital expenditures. I am pleased to report that we met the revised expectations we set in our Q2 2020 release, made during a time of considerable uncertainty in the economy. Our consolidated targets announced today reflect our confidence in the business, supported by a consistent strategy and strong execution. We will keep pursuing economically beneficial loading that ensures positive financial outcomes and sustainable cash flow. We are also excited about the growth potential of our unique asset mix and product offerings. With anticipated increased wireless consumer activity in 2021, we estimate a cash requirement of roughly $200 million related to device activations and upgrades due to pandemic-related deferrals. As this entails cash outflow, our free cash flow definition incorporates this working capital impact. Our 2021 capital expenditures are projected to align with 2020 levels. We are steadfast in maintaining investment-grade credit ratings and remain confident in our growth strategy, which includes participation in upcoming spectrum auctions, continuing to generate robust free cash flow. Importantly, we will strive for financial growth primarily through EBITDA increases and proceeds from the TELUS International IPO, alongside ongoing free cash flow growth. Before we transition to the Q&A session, I want to update you on upcoming reporting changes. We are moving to new reporting segments that reflect how we manage our evolving business. One segment will focus on TELUS International, while the other will capture the broader TELUS operations. Soon, following TI's financial reporting, we will provide an updated investor relations supplement that outlines these changes, including historical data from the past eight quarters for a smooth transition. This update will also clarify definitions between TELUS and TELUS International and address intercompany balance treatments. Now, let me hand it back to Robert to begin the Q&A.

Thank you, Doug. Mihai, can you proceed with the question period, please?

Thank you for taking my questions. I have one for Darren and one for Doug. For Darren, with the growth we're seeing in TI, TH, and the AgTech acquisitions, this high-growth part of the business has become a significant contributor to revenue and EBITDA, potentially tracking towards low to mid-teens and possibly 20% in value based on market valuations for these assets. As we consider TELUS breaking away from its peers in this area, do you have any medium- to long-term targets in mind for the mix of these two components within the overall TELUS consolidated figures? This is important as it could affect stock valuations in the future. Now, moving on to Doug, with the reporting changes you've discussed, it has become a bit challenging to assess profitability in wireline as well as free cash flow generation in legacy wireline. With a clearer understanding of TI, there are many moving parts related to AgTech and other elements you've mentioned. How can we gauge how TELUS is achieving its wireline margin improvement goals set over the past few years?

Okay. Thanks for the question. To be explicit about it in terms of are there medium- to longer-term targets that I have for our TELUS Health business, our agriculture business and our security business, yes, there are quite explicitly, actually. Secondly, those targets are clearly not something I'm going to disclose within this form. They're competitively sensitive, but they are specific, and they are ambitious. I think it's also perhaps maybe helpful to the street that you can draw inference from what's happened with TELUS International with the milestone culmination of the IPO, and then what we're going to do prospectively to support significant future growth, leveraging the transaction currency that we've just established. Whilst there are some differences between TI and health and Ag and security, there's a tremendous number of similarities between the two. And I think you can draw inference from what's transpired at TI in terms of what it portends for our emerging growth businesses prospectively. To give you some detail behind it, as it relates to health, agriculture and security, my medium- to longer-term goals are all about profitable scale. So it's value creation, centered around profitable scale to build tremendous assets of consequence within those businesses. And that's what we're setting out to do with a very specific game plan in that regard. The other thing that is, I think, more and more clear to people is the synergistic nature of TELUS Corporation's focus on technology and data-centric digital strategies that are getting imparted to our emerging growth assets on the health, the ag and the security front. It's all about our digital progression. And then lastly, the form that bringing these particular emerging growth businesses to fruition into the value-centric assets of consequence that I've just articulated, it gives us tremendous optionality and not just in the future, but currently in terms of how we can leverage those assets, their growth profiles, their makeup in servitude to the growth ambitions that we have for them along the way, be it organic, be it third-party partnerships or be it acquisitions to create the right composition of capabilities on a global basis that's going to support the growth profile that we would all like to see. So that's the mentality here. And the only thing I would add to close is that we will be giving the street increasing insights into our health and ag businesses and security as well as the 2021 year unfolds and beyond that into 2022. And we'll start with an examination of our health business and its parameters in greater detail in the month of May, and then we'll follow-up on the Ag front and security front thereafter. But to have that optionality, that differentiated optionality that's so synergistic with our technology and data strategy is key.

Thank you, Darren. Yes, so we will be continuing to show, call it, very relevant and key metrics so that analysts and shareholders alike will be able to do a proper and effective assessment of the value proposition that TELUS is generating across our multiple product sets. So within the reporting stream for telecom, for a better term, at the moment, we would include still ARPU, loading and key metrics, which, to Darren's point, will also include metrics on health care and AgTech over time. We could be including revenue and gross margin for certain of those product sets as well, and that would be very direct to the product offerings in which we're delivering. And so as we roll that out, you'll be getting more and consistent approach for those reporting streams. With the convergence of broadband and when you think through how we deliver our services, there is a point where a lot of the cost structure that you have below those product sets and those product deliveries become allocations. And as we go through and deliver the best broadband service to Canadians, irrespective of the wireless and wireline old categorization, that we are going to deliver it, and we're going to have the best customer service and the best networks either way. So we will then just show that consolidated telecom segment for conclusion, but the KPIs will give you what you need to be able to do a formal assessment of the value drivers.

And what that delineation on the CapEx front on fiber, 5G and digital mean specifically to our emerging businesses on health, Ag and security.

Thank you, that's helpful. I'll pass the line.

Next question comes from Drew McReynolds from RBC. Please go ahead.

Yes, thank you very much. Just two for me. First, on the mobile connected devices that you began disclosing, you're kind of closing in on about 2 million of them, obviously, another strong quarter. I guess, Darren, starting off with you. Can you maybe give a little more granularity as to how the loading mix has evolved; the base of devices by type has evolved? Are you able to help us out on any service revenue impacts? And then second question on the agreement with Google, really kind of reads very interesting, still trying to assess the magnitude of this. So could you flush it out a little bit more in terms of specifically where it is unique relative to your Canadian peers or maybe even North American peers?

Jim, why don't you take the first part? And then Tony, you and Zainul can finish off with some color on Google, and I'll mop up thereafter.

Sounds good. So in the connected devices portfolio, we're seeing more of a mix towards IoT-type connections. In fact, this quarter our tablet net loading declined slightly. So on the IoT front; it's everything from transportation to enabling home security. So a wide variety of IoT applications, the installation of modems, smart hubs and specialized devices. This category is growing, and it's going to become more and more important as 5G rolls out as we'll start to see even more applications happening with low latency. And also this category is going to really help accelerate the investments we're making in AgTech and in health. In terms of service revenue, I don't want to give an exact number, but suffice to say, these are lower ARPU connections, but very high margin because you don't have any device subsidy and very little cost to support them. So it's very accretive from a margin perspective. And as it's growing, it's becoming more material in ARPU.

Tony?

Thanks, Darren. Yes, so let me tell you a little bit about the Google relationship as it's evolving. Over the latter half of last year, Google reached out and asked if TELUS would be interested in participating in their Google digital transformation partnership program. And we set up two joint executive teams through Q4 to do some due diligence on what this would look like, and we follow a structured framework that Google have. They conducted maybe 12 of these partnerships annually with global leading players that have an alignment in culture, in aspirations to transform segments of an industry or an industry to deliver beneficial consumer or customer outcomes and drive some social good. And so the two executive leadership teams were working through Q4 to construct a framework that would create a number of swim lanes of activity where we would co-create capabilities that would transform, one, our telecom business as well as putting more fuel into the fire on the transformation we're already well underway on. And as you can see by our results throughout 2020, despite massive channel disruption, our digital capabilities allowed us to drive peer best performance on customer loading. It also allows us to focus on some of the exciting new growth areas that Darren articulated, particularly around the AgTech and the health space, where Google's ability to drive digital transformation leveraging their data analytics capabilities, along with our combination of smart assets can bring together some really transformative outcomes that will propel the global capabilities that we want to deliver, particularly in AgTech and in health. So we think it's an exciting opportunity. We've co-committed for a 10-year arrangement where we will invest substantively, both parties. But we expect to see a 4 to 10x investment return as we power those areas of focus into driving go-to-market initiatives that will deliver value for both organizations.

Thanks so much, Tony. So I think we are all incredibly excited about the opportunities to co-develop and transform our core businesses and our emerging businesses through leveraging the assets that Google can bring to the table. If you look at our home solutions environment and the way in which we are driving digital life experiences, leveraging our superior PureFiber and mobile networks, we're working to think about all of the solutions a customer might need to enhance their efficiency and effectiveness in the home and out of the home. And if you look at the transformation that COVID has driven in that context, there are numerous opportunities to drive improvements across different services when you look at health care or security and automation or the evolution of IoT. We've demonstrated that we are already an aggregator of choice, and we have platforms to deliver that, such as in our unique and differentiated TV environment. And now, we want to take that to the next level and think about more data-driven personalization and digitization of all of our activities so that we can drive better experiences for our customers. So we're really excited about that co-development partnership. And we're excited about the fact that the core capabilities Tony referenced are going to unleash some cost efficiency and other accretive economics so that we can invest in that innovation.

And this builds on the long-term significant strategic partnership that's been existing and deeply fruitful for both organizations between TELUS International and Google, and that really has provided the foundation for us taking the next step in this relationship at the TELUS Corp. level.

Next question comes from Vince Valentini from TD Securities. Please go ahead.

Thank you very much. I would like to clarify a couple of points that have already been discussed and then ask a big picture question for Darren. Regarding Google, can you confirm if there is anything that restricts you to working solely with Google? I’ve noticed that one of your competitors has formed a partnership with AWS and another has announced something with Azure. Does this imply that everyone selects their hyperscaler partner and moves on, or do you still have the flexibility to engage with anyone you choose in the new 5G landscape and other services? That's one clarification. Doug, I'm not sure if you touched on this, but can you provide specifics? Will TELUS Health be listed as a revenue line item consistently once you transition to the new reporting format, assuming that happens in Q1? Or will TELUS Health still be disclosed somewhat sporadically as it has been until now? Lastly, Darren, it’s impressive what you’ve accomplished, perhaps quicker than anticipated, with TELUS International’s market cap now exceeding that of the original TELUS-BC Tel merged company when you took the helm. Kudos on that. I recall you mentioned at the time that achieving that was one of your goals before contemplating who would succeed you in leading this great company. So, can you shed some light on this? Does it mean you are nearing the time to pass on leadership, or do you still see several years ahead in your role? I would appreciate your thoughts on this.

Thanks for that description, Vince, of several years of life left in me. So in terms of the question with Google, no, it's not exclusive. No, we're not pigeonholed by that. There are ecosystem considerations that are important for us in terms of having the flexibility that we need. But I would say the opportunity with Google is enormous. And we've got a great track record to date to build upon with TI that's been tremendously beneficial for both TELUS International and Google. And we're excited by the value that we can create. We've put a target of $800 million of value creation through this partnership, and we think the strategic fit on the digital front between both organizations is tremendously compelling and synergistic and serendipitous in a way. If you look at the focus on health, there's a commonality focus. On Ag, there's a commonality. If you look at the focus on the automated home and the digital life within the home, there's a terrific commonality. As it relates to what TELUS is ingesting internally at the network and the IT level, we're already going through this digital transformation. So we're really bending into the momentum in that regard. And so we think there's a huge amount of value to be created here. And we like the symmetry in the relationship, the reciprocity on a back and forth basis. This is not something that's asymmetric when you look at what Google and TI have been doing all along. So that's that. I'll let you get Doug to answer the next question before I think up a good final answer to your third question.

Darren and I are finalizing the key performance indicators that we will present for the first quarter. Revenue is one of the relevant KPIs we are considering for assessing overall health, but it has not yet been finalized. We are also looking at other important KPIs, including measures related to virtual care that will help evaluate our long-term success. Once we have finalized these, we will provide a more formal update, but they are definitely part of our conversation regarding metrics that we believe analysts and shareholders will want to consider for a comprehensive assessment of our organization, particularly in the health and agriculture sectors, which differ from our usual offerings.

My answer is yes. Darren, please let Doug disclose it.

To answer your question specifically, Vince, I had set out five parameters for what I wanted to achieve. TI was one of them, but there are four others that I want to tackle while I can still make an impact. I'm fortunate to be working with an exceptional leadership team. My commitment at TELUS is for the long term, and I want to be clear about that. Regarding my goals, I aim to replicate some of our successes with TI in health, agriculture, and security. I won’t be content until we achieve this outcome. Additionally, I want to support Jeff and his talented team as we progress with TI. This is a milestone in our TI growth strategy and there’s still significant potential to realize. Our goal is to lead globally, which has always been our focus. I believe the best is yet to come in terms of TI growth and value creation, and I want to contribute to this. Another priority for me is to finalize our fiber and 5G initiatives. Completing this will reassure me, as having a robust broadband infrastructure solidifies our competitive advantage at TELUS and enables us to create new value and cut costs through the efficiencies of fiber and 5G technology. Additionally, we still have work to do regarding customer service excellence. I want to enhance our leadership in this area, focusing on our culture and improving our digital capabilities, processes, and automation. Lastly, I have a vision, perhaps influenced by my Canadian roots, to ensure that the perception aligns with the reality of our position as a leader in social capitalism. No other organization combines doing well in business with making a difference in the community like we do consistently. Amplifying this on a global scale to align perception with reality is the final goal I want to pursue. That's what I'm focused on, and I hope this resonates with investors in terms of value creation.

That's awesome. Thank you. I'll pass it back to Ramirez.

All right. So next, we have a question from David McFadgen from Cormark Securities. Please go ahead.

Hi, a couple of questions, if I may. I was wondering just on your guidance, if you could give us the breakdown between TELUS and TELUS International. So when you look at, say, the revenue growth, 8% to 10%, would, say, 6% be from TI and the balance from TELUS? So can you give us those kind of parameters? And secondly, just on the fiber build. So you finished 2020 at 81% of your footprint. What's the target for the end of, say, '21? And then, I don't know if you can provide this, but I was just wondering what percent of your broadband footprint that is not covered by fiber overlaps with Shaw? I was just wondering on that front.

Okay. Doug, given the sensitive nature of TI right now, I'll let you handle the first part of the question. And then the second part of the question, Tony and Zainul, as it relates to our fiber build and what it means to our go-to-market capability, I'll ask you to address that. And maybe with that expansiveness of the fiber build, François, you could comment on what it's going to mean to our health business to have that broadband underpinning and what it means to our Ag business as well.

So on the first one, TI is going to be releasing its final results in the next 10 days, give or take, and so I will not be breaking out TI or TELUS from a guidance perspective at this stage. And when TI is ready to put out its own guidance, it will do that and the split will be more evident. The only thing, as we break out the segmentation discussions, we do need to remind you that when TI discloses, it would include revenue from TELUS. TELUS' disclosures do not have that because of the segmentation eliminations that will happen on a consolidated basis. So as we do the multiple disclosures, we will definitely help get the elimination entries right along the way. And we look forward to when TI is ready to give its guidance back to the street for that purpose.

Thanks, Doug. Tony, Zainul, François?

Thank you, Darren. David, when we began the PureFiber project, we evaluated the market opportunity based on our broadband infrastructure in 2013. We aimed for approximately 89% to 90% coverage of our wireline footprint. Over the past seven years, the project has been remarkably successful in enhancing our market share in high-speed internet access and improving our position in television, where we initially had a smaller market presence. As we refined our approach, we broadened our view of the potential market and identified ways to utilize federal and provincial funding to expand our reach into more rural and remote areas. This means that our end goals are somewhat adaptable. However, where we can improve on our existing brownfield copper infrastructure, we plan to do so when it is economically viable. In every area we've implemented these upgrades, we've seen a significant boost in our market share, establishing a strong position compared to networks that are not fiber to the premise. While they may market themselves as fiber providers, they do not offer fiber to the premise, which our customers recognize as a valuable advantage. We will continue to invest where it makes sense and have a strategy for expanding into the remaining areas in the upcoming year and beyond. The major investments are behind us now, and our focus will be on targeted builds where we see the best opportunities. Zainul, over to you.

Thanks, Tony. I’ll provide some insights on our competition and where we excel. We’ve observed that both new and existing customers are increasingly opting for PureFiber, as reflected in our results. Customers are choosing higher speed tiers and more integrated video packages, along with our unique offerings in security and automation, particularly in consumer health and cybersecurity. These services are not only distinctive but are available nationally in regions where we’re not in direct competition. We are experiencing the highest customer growth in the country across these three areas. Our investments in the PureFiber network have yielded strong results, with double-digit ARPU growth for new customers added in Q4 compared to last year. We maintain industry-leading churn rates and product usage intensity, alongside a lower cost to serve and a pathway to digitization. A triple play customer generates about five times the lifetime revenue of a single play customer, and the lifetime value of a fiber customer has increased by 80% year-over-year. This is evident in our direct competition. Additionally, we have a robust high-speed wireless offering that matches our product intensity and bundling capabilities, all supported by exceptional customer service and digitization. We see significant growth potential and favorable economics in our wireline segment across these portfolios and are enthusiastic about the rapid expansion and adoption of our services in security and automation, consumer health, and cybersecurity.

As we expand our fiber footprint, this significantly supports our 5G goals because every time we install fiber to a premise, it is also available for our small cell and 5G coverage. This provides us with a key competitive edge in the areas we have developed compared to our competitors.

Yes. And Tony, that's probably certainly true in health and agriculture if you think about where we're pushing in the future and working hard on right now in terms of digitizing the patient provider experience, introducing new layers of bio and imaging analytics or taking virtual care from what it is today, more of a consultation, primary care, mental health care or allied care perspective, down to new use cases in the future where you actually see medical interventions being done over either your fiber connectivity or as Tony rightly said, in more rural aspects over 5G connectivity in the future. Similarly, in agriculture, you're seeing the advent of soil sampling, weather monitoring capability that cannot be done at their utmost point without connectivity. But even more in the future, you see things like precision agriculture allowing us to be able to assess the quality of what's going on at the plant level and have the farming community do better intervention in terms of chemical spread in a more reduced fashion, again, down to the plant level. So both in health and Ag, you can't do this without an underlying first-grade telecommunications infrastructure. And therefore, there are great synergies with the pushes we're making in health and Ag and your fiber question here, and as Tony noted, down to the 5G connectivity points.

Okay. All right, thanks so much.

Next question comes from Jeff Fan from Scotiabank. Please go ahead.

Thanks, good afternoon. I want to revisit Darren's comment about developing profitable scale. Could you elaborate on your vision for that? Are we discussing the creation of a basic telecom platform for apps to operate on, or a software platform that aggregates various applications across sectors like agriculture and health? Additionally, relating this to the reporting and disclosure mentioned by Doug, when you refer to the telecom segment, are you merging the wireless and wireline operations into one segment now, or will you still report them separately at the EBITDA level? I'm curious about how the reporting for telecom will evolve in this new landscape.

To clarify the stratification, François, could you add some specific details regarding the empirical parameters on health and agriculture? It would be beneficial for everyone to understand the extent of our accomplishments. However, before that, Jeff, we are discussing a digital platform that includes a software component designed to create service ecosystems in both health and agriculture, supported by broadband technology. This outlines the framework of what we are developing. François, please share some empirical details of the ecosystems we've established on this digital platform and how we are advancing our software capabilities, particularly concerning our application ecosystems, while also utilizing our broadband technology and the data analytics that provide us with valuable insights.

Thanks, Darren. So I'll provide that quick overview. So as you all know, we've been investing in health care, as an example, for the past decade or more than $3.2 billion across the end-to-end health care ecosystem. And we've observed an increasing emphasis on chronic disease management, a focus on consumers and employers optimizing wellness and the potential benefits that our network and innovative technology can deliver. We've built an extensive digitized health care environment in Canada, building the backbone to enable more seamless and efficient flow of information across the health care spectrum. Let me give you a few examples and a few KPIs of actually the reach that we've built. Our technology solutions actually handle health benefit management for over 12 million lives in Canada, so over approximately 1/3 of Canadians. We've developed primary care solutions like electronic medical records or practice management solutions that service today, 28,000 physicians using our solutions across the country. We've developed through the pandemic and before the pandemic virtual care capabilities that have been seeing exponential growth over the last little while, whether it's our EMR solutions, virtual visit solutions that have seen hundreds of thousands of consultations in a very short time frame or our virtual care solutions that are seeing now close to 1.7 million or 1.8 million subscribers, seeing 500% growth year-over-year from 2019 to 2020. Similarly, in agriculture, but over a shorter period of time, over the last 18 months, we've assembled a suite of assets through a number of acquisitions that is second to none now in the world in terms of pure-play software technology that is targeting one of the biggest social challenges that we have in our lifetime, which is the access to good quality food for all. And that issue is going to be compounding itself as the global population continues to grow over the next decades. And so in a very short time frame, we've assembled a team that is now servicing customers in 57 different countries and that has over 160 million acres under management, reflecting the incredible scale we've built over a short period of time, powered by 1,200 team members in 14 countries that are providing digital solutions to 6 out of the 10 food suppliers, the top 10 food suppliers globally or 9 of the top 10 agriculture customers globally. And here, what we intend to do through our software capabilities is not just allowing farmers to be more efficient in producing better yield for the air crops, but also be able to follow the safety the quality of your food from the time we put a seed in the soil to the entire food value chain down to your plate so that we can improve yields, reduce wastage and as I said at the beginning, allow better food access for everyone across the globe.

On your second question about segmentation, yes, this means that telecom would be one EBITDA, but there would still be relevant metrics, including key performance indicators, revenue breakdown, and high-level cost of goods sold breakdowns to enable top-level assessments. With the ongoing convergence of our wireline and wireless operations, which we've discussed for years, an increasing portion of costs becomes shared. I would liken this to when we shifted our reporting from subscribers to connected devices in mobile, which changed our organization's focus to what truly matters, and you can see this reflected in our results. This is another instance of the priorities we are emphasizing within the organization to achieve strong results while ensuring we maximize value and minimize shared costs. I believe this will enable us to effectively manage our business, allocate capital wisely, and maintain our leadership in the metrics we have been focused on to date. We will ensure a smooth and meaningful transition with our investor relations supplement so that there are no hiccups, and you will still be able to understand and see the value of all our operations.

Great, thank you.

We have time for one more question, please.

Great, thank you very much. Thanks for fitting me in. A number of the U.S. broadband carriers have suggested that on broadband in 2021, we should think about more like 2019 being a reasonable comp rather than 2020, given some of the impacts from COVID and the pull forward of demand. It'd be great to get some thoughts about how you see it for TELUS. And then thanks for the update on 5G. Good to see the coverage expanding. Any early learnings on cost performance, on usage patterns, enterprise interest that you could share with us?

As it relates to the comment on 2019, I think that's accurate. When we set our budget for 2021, we normalized for the COVID impact in 2020 and used 2019 as a reference for our target setting. However, we still took into account the ongoing effects of COVID and its restrictions. It was a wise decision to avoid setting a budget that would unduly benefit from a comparison of 2021 to 2020 due to the COVID impact in 2020. We conducted a normalization exercise in 2020 and referenced 2019 to establish ambitious targets for 2021. We then adjusted those targets based on our expectations of how long the COVID impact would last. We acknowledged that our ability to manage COVID has improved, so our management capabilities in March 2021 should be much better than in March 2020 as we've learned from our experiences. I've previously discussed how we're utilizing our technology and digital capabilities, enabling our team to adapt and work more effectively in a virtual environment to achieve desired outcomes for our shareholders and customers. Analyzing our year-over-year performance for mobility or wireline in 2020 versus 2019 presents a strong narrative. We achieved impressive financial results, whether in top-line revenue or reaching positive EBITDA, as well as surpassing our free cash flow targets for 2020. At TELUS, we believe in using COVID not as an excuse but as a catalyst for digital acceleration, which aligns with our business strategy and technological advancements. We have digital businesses like TELUS International, TELUS Health, and Agriculture that facilitate this. Our teams in wireless and wireline are equipped to tackle challenges and find innovative solutions for customers, improving our service from 2020 compared to 2019, indicating a positive outlook for the future. Regarding 5G, we emphasize that it's a marathon, not a sprint. A common mistake in some regions has been to set overly high expectations for 5G's immediate impact. In some markets, there has been disappointment due to unmet expectations. While 5G is promising and should meet high hopes, realizing those ambitions and providing substantial services, particularly for businesses first and then consumers, will take time and will depend on having access to contiguous spectrum as we progress from mid-band to high-band. Thus, our approach to 5G should encompass not just 2021 in terms of coverage but also the profitable products we can develop by 2022, 2023, and 2024. At the end of 2020, we had about 30% 5G coverage across 81 communities and around 21 compatible devices, with plans to continue this expansion in the coming years. It's crucial to understand TELUS's operational principles regarding network performance. We are committed to leading in speed, symmetry, low latency, coverage, and reliability. We expect the same positive assessments from Opensignal, Ookla, and Tutela as in the past. Our recipe for success combines network leadership with outstanding customer service and compelling value propositions. 5G will provide peace of mind, and we plan to innovate our channel strategy, including digital avenues. It's essential to recognize that as we implement 5G, our LTE 4G network is performing remarkably well, often exceeding many global 5G networks, giving us a significant advantage. The integration of 5G with our automated home, consumer digital services, and enterprise solutions is crucial. We aim to enhance our IoT business, addressing scalability in health, agriculture, and security, facilitated by our 5G developments. Cost reduction is another critical aspect that isn't often discussed. We are focused on lowering the cost per gigabyte and maximizing the range of services we can offer over our 5G and fiber infrastructure. Within two years, we plan to completely phase out copper lines within our fiber footprint, enhancing network simplicity and energy efficiency while benefiting the synergistic deployment of fiber and 5G. Lastly, as we generate vast amounts of data, we must effectively manage and extract value from it through dynamic insights for both B2B and consumer applications. While we're making promising strides in 2021 in terms of device availability, the most significant developments are still ahead, and stakeholders need to be patient as we refine our products.

Thanks a lot.

Thank you, Darren, and thank you, everyone, for taking the time to join us today. Please feel free to reach out to the IR team with any follow-up questions you may have. And take care, everyone.

Ladies and gentlemen, this concludes the TELUS 2020 Q4 earnings conference call. Thank you for your participation, and have a nice day.