Telus profit plunges 74% in the third quarter as restructuring costs bite

VANCOUVER — The cost savings from recent layoffs at Telus Corp. will have a bigger impact on the company’s financial results in the coming quarters, Telus president and CEO Darren Entwistle said.

"The incremental cost savings are expected to more meaningfully contributeto fourth quarter EBITDA, with the run rate expected to be felt by the second quarter of nextyear," he said on a call with analysts Friday.

Entwistle's comments came as the cost of that restructuring took a bite out of the telecom company's third-quarter profit, which dropped 74 per cent year-over-year despite a solid revenue boost and record customer growth.

In early August, Telus announced it would be cutting 6,000 jobs due to issues around regulation and competition, including 4,000 at its main Telus business. The reductions would be made through a combination of layoffs, early retirement and voluntary packages, as well as vacancies that would not be filled. The other 2,000 were at Telus International.

At the time, the company said its planned restructuring would cost the company $475 million in 2023, but lead to annual savings of more than $325 million.

The company has “substantially completed” the headcount reductions, chief financial officer Doug French said on the same call, adding Telusanticipates costs to remain elevated in the fourth quarter due to the restructuring.

Net income attributable to shareholders fell to $136 million in the third quarter ended Sept. 30 from $514 million in the same period the year before, the telecommunications company said.

On an adjusted basis, net income was down 20.8 per cent to $373 million.

Among the other factors Telus attributed to the profit decline were higher depreciation and amortization from its network buildout and acquisitions, and higher financing costs.

The company said operating revenues rose 7.5 per cent in its third quarter to $4.99 billion from $4.64 billion a year earlier.

Adjusted basic earnings fell nearly 27 per cent to 25 cents per share from 34 cents per share, but slightly beat analyst expectations of 24 cents per share, according to financial markets data firm Refinitiv.

Telus said net customer growth hit a quarterly record of 406,000, an increase of 59,000 from the year before that it said was driven by demand for bundled services.

Mobile and post-paid churn were both up slightly, "against the backdrop of heightened competitive activity," Entwistle said on the call.

Results were overall in line with expectations, as the full benefits of Telus's restructuring plans have yet to be reflected in results, Desjardins analyst Jerome Dubreuil said in a note to clients on Friday.

RBC analyst Drew McReynolds said in a note Friday morning that the third-quarter results, “while not perfect,” demonstrated resilience amid a more competitively intense operating environment, especially in western Canada after the Rogers-Shaw merger.

In another note after the bell, McReynolds said the third-quarter results represent a potential early glimpse into Telus's playbook for competing against Rogers-Shaw. This includes "ceding as little market share as possible on wireline loading in Western Canada," he wrote, noting the company's "long-standing focus on bundling, product intensity and economies of scope, base management, customer service and execution."

Shares in the company were up 2.79 per cent at $24.32 in mid-afternoon trading.

— With files from Sammy Hudes

This report by The Canadian Press was first published Nov. 3, 2023.

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