Fitch Ratings has affirmed
Fitch has simultaneously withdrawn all ratings.
TELUS's ratings reflect its leading market position, stable revenue and EBITDA profile and expectation of leverage to decline below 3.2x within the next 18 months-24 months supported by EBITDA growth including synergy realizations and debt repayments.
Fitch has withdrawn TELUS's ratings for commercial reasons.
Key Rating Drivers
Strong Market Position: TELUS's ratings reflect its operations as one of the three principal national mobile operators in the Canadian market, as well as its leading market position as a local wireline operator offering high-speed data, Internet protocol television (IPTV) and voice services in western
Strong Operational Performance: Revenues are expected to grow in low single digits in 2024, supported by continued mobile and fixed subscriber growth as well as investments in 5G and fiber network. Fitch expects EBITDA growth in 2024 and beyond will be supported stable revenue growth, cost efficiencies and synergies from acquisitions. Since acquiring Lifeworks in 2022, the company has committed to
Deleveraging Expectations: Fitch expects gross leverage to be near mid-3x range in 2024 and trend down to the low 3x range in 2025 due to the revenue growth and EBITDA synergies from LifeWorks and WillowTree acquisitions and various spectrum auctions. Over 2022-2023, the company's EBITDA leverage was elevated as a result of the acquisition of spectrum in the 3800MHz auction in 2023, and WillowTree and LifeWorks acquisitions. Although the spectrum acquisitions and business acquisitions have pressured leverage, Fitch believes the investments will enable TELUS to maintain a strong competitive position.
Recent Acquisitions: TELUS acquired LifeWorks in
In
Capital Spending and Spectrum Investments: Fitch believes TELUS's spending on fiber and spectrum support its longer-term credit profile. Spectrum is a key resource that is largely available to TELUS only through auctions. During 2023, TELUS was the successful bidder for 1,430 spectrum licenses of 3800 MHZ band spectrum and acquired 72 MHz of spectrum for
Derivation Summary
Fitch believes TELUS's business risk profile is very similar to peer
In addition, TELUS has diversified into health care, home security, business process outsourcing and agriculture. TELUS has demonstrated strong execution on its strategic initiatives, with growth in its wireless business, high-speed Internet services and IPTV platform. Wireless business growth has been supported by very low mobile phone customer churn.
Fitch expects TELUS's leverage will decline to low 3x by the end of FY 2025 and further to 2.9 x in FY 2026 from high 3x at the end of FY 2023. Rogers leverage is expected to decline to upper 3x area from 5x in FY 2023. Fitch expects both will refrain from material share repurchases and will focus on deleveraging.
TELUS has similar telecom and video-oriented offerings as its North American peers, but does not compete directly with them. These carriers have much larger scale and more geographical diversification.
Key Assumptions
Consolidated revenue growth in low single digits in 2024 and the rest of the rating horizon;
EBITDA margin to slightly improve and remain in the mid-30% range owing to efficiency initiatives;
Capital spending levels in 2024 is expected to approximate
Fitch has included placeholders for spectrum auction and acquisitions in 2024 and the rest of the forecast;
Dividends to grow within the company guided 7%-10% target range.
Recovery Analysis
Fitch has assigned one notch up for all secured debt instruments and no notching for all unsecured debt instruments.
RATING SENSITIVITIES
Rating sensitivities do not apply as the ratings have been withdrawn.
Liquidity and Debt Structure
Strong Liquidity: TELUS's financial flexibility is good, owing to its balance sheet cash (
TELUS maintains a
TELUS also has
AR Securitization: The
Maturities: TELUS' 2024 maturities are approximately
TELUS International Debt: TI has a secured bank credit facility that expires in
The facility is nonrecourse to TELUS but is included in leverage metrics by Fitch and the company. At
Financial covenants in the
Issuer Profile
TELUS is one of the three major telecommunications providers in
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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