TELUS Corporation Stock

Good day, everyone. Welcome to the TELUS 2026 Q2 Earnings Conference Call. I would like to introduce your speaker, Ian McMillan. Please go ahead.

Thank you, Karl, and hello, everyone. Thank you for joining us. Our second quarter 2026 news release, MD&A, financial statements and detailed supplemental investor information were posted on our website earlier this morning.

Today's agenda will include opening remarks from Victor Dodig, President -- TELUS President and Chief Executive Officer; and Gopi Chande, our Executive Vice President and Chief Financial Officer. After the presentation, there will be a question-and-answer period, followed by brief closing remarks by Victor.

Turning to Slide 2. Prepared remarks, slides and answers to questions contain forward-looking statements. Actual results could vary from these statements. Additionally, please note that all dollar amounts referenced today are in Canadian dollars, unless otherwise stated. The assumptions on which they are based and the material risks that could cause them to differ are outlined in our public filings with securities commissions in Canada and the United States, including our Q2 2026 and 2025 annual MD&A.

With that, let me turn the meeting over to Victor beginning on Slide 3.

Thank you, Ian. Hello, everyone, and thank you for joining us on today's earnings call, which is my first as President and CEO of TELUS. I'm excited to be here, and I look forward to working with all of you.

I want to start by recognizing Darren Entwistle. Over the past 26 years, together with our team, Darren built the network, the culture and the foundation of our company, and we are grateful for his service and the impact that he's had.

For those of you who are new to TELUS or new to me, let me provide a brief background for context. Prior to joining TELUS as CEO, I was President and CEO of CIBC for 11 years. Before my planned retirement in October 2025, I spent over 20 years with the bank leading businesses and gaining financial and operational experience. Working for and leading CIBC has given me a deep understanding and appreciation for customer service excellence; managing in highly regulated industries; building a collaborative culture; and nurturing the strategic plan, talent and execution discipline required to transform an organization. In addition, I've served as a Director of the TELUS Board for 3 years, which has provided the on-ramp to shepherd the work we need to do here going forward.

So please turn to Slide 4. Today, I will discuss how we're accelerating the TELUS transformation and driving progress with intentionality and with speed to deliver improved performance. The plan, which I'll outline, will see us build on our strong foundation. We will drive financial discipline. We will simplify our business. We will restore balance sheet strength. We will drive greater operational discipline, and we will focus investments in our core telecom business and digital infrastructure, which are our crown jewel assets, all of this to ensure that TELUS is in the best position to deliver sustained value to our customers, opportunity for our team members and returns to our shareholders over the long term. These guiding principles of focus, of simplicity and of discipline are central to our plan.

Importantly, our second quarter 2026 results and our 2026 guidance update underscore a company that's in active transition, leveraging our strengths and addressing challenges to position TELUS for long-term success. Gopi will cover our performance and outlook in greater detail later on in the call.

Turning to Slide 5. To support our plan, we made strategic changes to our executive leadership team and organizational structure. First, I'm excited to be joined by our new CFO, Gopi Chande, who's right here in the room with me, as we execute together on our transformation and deliver value for all our stakeholders.

Further, as you saw last week, I'm also very pleased to welcome Dave Fuller back to TELUS, now as Executive Vice President and Group President of Communications. Dave brings 25 years of telecom industry experience including 15 years at TELUS and a number of senior executive roles across both our business and consumer organizations. Dave will lead our newly established telecom business, which will be known as TELUS Communications, that brings together our consumer and business solutions teams under a single accountable leader. This structure is designed to simplify decision-making to sharpen our operational focus and to accelerate execution against our priorities. I look forward to working closely with Dave in the years ahead.

Navin Arora, now as Executive Vice President and Group President, will lead our Global Platform businesses. The portfolio that includes TELUS Digital, TELUS Health and TELUS Agriculture & Consumer Goods. In addition, Navin will assume oversight of enterprise corporate strategy, corporate development, our AI data center strategy and execution as well as TELUS Global Ventures, bringing together the strategic and financial discipline governing this portfolio together under one leader.

These changes give us clear lines of accountability, a focused operator leading our core telecom business and a disciplined steward managing our global platform portfolio. This is an important step as we set up to execute the priorities ahead with focus and with speed. As part of these changes, Zainul Mawji will depart TELUS September 1. Her numerous contributions to our company over the past 25 years are immeasurable, and we wish Zainul every success going forward.

Please turn to Slide 6. Now let me spend a few minutes and offer some initial observations about our business and current industry dynamics. This is really important context for the discussion on strategy that's going to follow. On the 1st of May, I joined the management team at TELUS as CEO designate. During the 2 months before becoming President and CEO on July 1, I worked alongside Darren and the rest of the leadership team to gain a deep understanding of our business from all angles, which surfaced important insights into our company and our operating environment.

The inherent strength of our organization is undeniable. We have a true leadership position in our TELUS PureFibre network, sustained customer growth and loyalty, and we're advancing the next generation of AI enabling capabilities. We're investing in true nation-building infrastructure projects, including sustainable sovereign AI data centers that will support Canada's technological independence and drive economic prosperity. This foundation is strong, and it offers TELUS real opportunities for growth. Yet at the same time, we have challenges.

While I'm mindful that our industry is inherently competitive, we're navigating macroeconomic headwinds, namely lower immigration, which is translating into lower demand for certain core products across all carriers. In addition, there's a greater need -- there's a need for greater simplicity at TELUS and a return to our roots. To that end, I see a real opportunity to focus on our core business, harness our technology and encourage a culture of innovation and a culture of efficiency.

I see the opportunity to further deepen our customer relationships, something our TELUS team is exceptional at and double down our competitive advantage here. And I see the opportunity to invest in the technology and infrastructure that will play a vital role in Canada's economic growth and prosperity at a critical moment for our country.

Now to be certain, our strategic plan is built on what we can control and execute on. So with that backdrop, let me turn to our priorities going forward.

Moving to Slide 7. Today, we're introducing our transformation strategy, which comprises 3 financial and operational priorities. The first is to strengthen our financial foundation, which means getting our balance sheet to where it needs to be, so TELUS has the financial flexibility to invest, to return capital and to operate from a position of strength. This includes a capital allocation framework that is sustainable and sets us up for long-term success.

The second is to hone our operational discipline, to control our costs and to reinvest in our core business. This is about running our business with greater rigor and discipline and a sharp focus on efficiency and returns on deployed capital. This will continue to enable competitive advantage across our telecom business and digital infrastructure.

And the third priority flows from the first 2. As we strengthen our financial foundation and hone our operational efficiency, we'll be in a better position to generate robust free cash flow and deploy resources to drive profitable, sustainable growth and returns to our shareholders over the long run. These 3 priorities will frame how I look at and how I talk about our performance going forward. We expect this plan to deliver minimum compounded annual free cash flow growth of 10% over 2027 and 2028. This is the number I'm holding myself and our team accountable to.

Now let me walk through each of these priorities more specifically. If you would please turn to Slide 8, I'll start with the first priority, which is to strengthen our financial foundation. First, fortifying our balance sheet is the prerequisite for everything else. We're carrying approximately 3.5x net debt to adjusted EBITDA. Our updated target is 3x or lower by the end of 2028, a commitment that we are confident in achieving.

The dividend reset we announced today is a direct action to accelerate that path to lower debt. We expect approximately $2.7 billion of cumulative cash savings from the dividend reset that we will use toward debt reduction. Specifically, effective October 1, our quarterly dividend will be $0.1875 per share, which represents $0.75 per share annually, a reduction of 55%.

In addition, we're now targeting a payout ratio range of 45% to 60% of trailing 12-month free cash flow. The discount on the dividend reinvestment plan is also being terminated effective October 1. It served a clear purpose during the peak of our network build. Preserving cash and capital intensity was at its highest. With our network build maturing and free cash flow growing, that mechanism is no longer necessary. To that end, we'll be driving greater capital discipline across our entire enterprise.

And while in-year CapEx is going up slightly due to supply chain dynamics and inflation as well as an incremental strategic investment in our infrastructure, this is not a retreat from our commitment to a multiyear 10% capital intensity target, which remains on track. It's about strengthening the foundation from which we can and which we will build. To demonstrate our discipline, we have put a moratorium on acquisitions. Once we reach our targeted leverage level and fortify our balance sheet, we will revisit our capital allocation priorities.

Finally, we remain committed to monetizing noncore assets to optimize our portfolio and pay down debt, which will ultimately support a stronger financial foundation for TELUS. I'm going to provide an update on this work stream in a minute.

So please turn to Slide 9 and our second priority, which is to hone operational discipline, control our costs and reinvest in our core. Operational discipline comes down to 3 things: value for every customer relationship, efficiency in how we deploy our resources and return on invested capital. TELUS has an incredible heritage of customer service. It's in our DNA. And we're fortunate to have a team that is the best in the industry of putting our customers first.

If we were looking at everything through the lens of return on capital, there's no better place to start than how we serve our customers. This includes driving product intensity and value for every customer relationship. This is going to be a big part of the focus that I'll bring to our team in the first few months.

As part of our effort to reposition TELUS, we're taking a hard look at our cost structure. We will redeploy -- we'll deploy a surgical process that will embrace technology, eliminate redundancies and ensure every dollar is deployed with discipline. We're currently conducting extensive work to make sure our cost structure decisions are made thoughtfully and are in the best interest of the overall enterprise. Given the long-term importance of these decisions, we're focused on making the right ones rather than making fast ones. I expect to provide a detailed overview of the scope of this work on or before our third quarter earnings call in November.

As we sharpen our focus and free up capital, we will recycle resources to the parts of our core business where we have the strongest competitive position and the clearest path to drive value-adding returns for our shareholders. Our governing principle is straightforward. We will invest where returns on invested capital exceed our cost of capital, and we will seek to redeploy capital to areas of highest return potential. Every dollar, every dollar will be evaluated on this basis.

Turning to Slide 10 and our third priority, which is to deploy resources to drive profitable, sustainable growth and returns. As part of our plan, we will expand Canada's digital infrastructure by strengthening the connectivity and networks people rely on every day. We will invest directly in next-generation technology, including high-speed network upgrades and sustainable sovereign AI data centers built to meet growing national demand.

In telecom, we will continue to build on our wireless and TELUS PureFibre network leadership while extending our network into rural and indigenous communities. And in our Global Platform businesses, we'll continue to invest to better serve our customers and deliver a better return profile. The level and timing of these investments will depend in part on the state of our business and the progress we're making in executing the priorities I've just outlined.

With that, let me provide an update on our strategic portfolio review and asset monetization efforts, which are already underway ahead of my appointment as CEO. I'm on Slide 11. Before I speak to our active processes, I want to point to Terrion on as an example of how we think about unlocking value from within our portfolio.

In September 2025, we sold a 49.9% stake in Terrion, our wireless tower subsidiary to La Caisse. Through our partnership, Terrion now thrives as a stand-alone entity, providing superior network quality and service that TELUS customers continue to rely upon. This transaction resulted in proceeds of $1.26 billion, allowing us to reduce our net debt to adjusted EBITDA by 0.17 turns. It's a proof point for the approach and discipline we're bringing to our broader portfolio.

Now regarding TELUS Health, I want to stress that this is a great business of great people. We remain active in the market around certain noncore assets, and we're encouraged by the discussions we're having with interested parties. We'll also -- we're also advancing the monetization process of our core non-real-estate assets. Additional details on all of these efforts will be provided as notable developments arise.

So in summary, these processes are active and progressing. Together, they represent a significant source of proceeds that will go directly to paying down debt and accelerating our path to 3x your lower leverage by year-end 2028. In the meantime, my priority -- our priority is supporting our team and supporting our clients and keeping them focused on the right things.

So let me recap. Our second quarter results and reset of targets reflect a business in transition. And the decisions we announced today will advance the work already in flight. Our focus is on executing with discipline and positioning TELUS to deliver sustainable, profitable growth and returns over the long term. We are moving with clarity, and we're moving with urgency, and I'm confident, very confident in the ability of our team to deliver.

And with that, I'll turn the call over to Gopi to provide an overview of our financial and operational performance and our updated outlook for the balance of 2026. Gopi, over to you.

Thank you, Victor, and hello, everyone. I'm also excited to serve TELUS in my new role. I do want to say thank you to Doug French for his leadership over the years.

Today, I will cover our Q2 financial performance, provide more details on our dividend reset and broader capital allocation strategy going forward, and walk through our updated financial guidance for 2026.

Turning to Slide 13 and our second quarter consolidated results. Service revenue of $4.4 billion was down 1% year-over-year, and adjusted EBITDA of $1.8 billion decreased 2%. While results reflect good underlying performance in mobility with network revenue continuing to improve, they were offset primarily by weaker results in TELUS Digital and as it relates to adjusted EBITDA, lower real estate gains. I'll speak to each segment in a moment.

Normalizing for the impact of other income, consolidated adjusted EBITDA was stable, demonstrating the resiliency of our underlying telecom business. Basic EPS was negative due to the TELUS Digital impairment, which I will address shortly, while adjusted EPS was $0.16, down from $0.22 a year ago due to after-tax impacts of lower operating income and the elimination of the noncontrolling interest for TELUS Digital. Cash from operations increased by 15%, while free cash flow of $545 million was higher by 2%, reflecting lower net income taxes paid and lower lease payments partially offset by increased interest and lower EBITDA.

Moving to Slide 14 and starting with TELUS Technology Solutions or TTech. TTech service revenue of $3.3 billion and adjusted EBITDA of $1.6 billion were both relatively flat year-over-year. Drilling into the subcomponents, mobile network revenue of $1.7 billion was up 1%. This performance reflects our disciplined operational execution despite an active competitive environment, evidenced by our ability to preserve premium economics. Notably, this is our third consecutive quarter of mobile network revenue growth.

Encouragingly, during the quarter, we saw signs of a moderating promotional environment, a positive second half setup. This supported our fifth consecutive quarter of year-over-year improvement in ARPU, declining at a stabilizing pace of less than 0.5%. On the subscriber front, mobile net phone additions of 17,000 reflected lower gross additions as we remain disciplined on quality premium brand loading, while blended mobile phone churn was up slightly to 1.08% while postpaid churn was stable.

While demographic headwinds, including population growth and lower immigration levels, have meaningfully reduced the addressable market for new customer growth, we're encouraged by what we're seeing in the wireless competitive environment. Fundamentally, we're focused on controlling what we control, which will be supported by honing our operational discipline.

Turning to Fixed Data Services. Revenue was stable at $1.2 billion supported by growth in residential of 2%. In our business solutions portfolio, performance remained challenged by revenue variability and customer contract changes in the public sector, partially offset by growth in fixed data revenue with small and medium business clients. Internet net additions totaled 20,000 as our focus remains on accretive growth and a deliberate shift away from more aggressive promotional pricing.

Let me turn to TELUS Digital on Slide 15. As outlined in our disclosure materials today, this quarter, we recorded a pretax noncash carrying value impairment of $2.1 billion. The factors for this write-down are as follows: first, we experienced more pronounced churn in the second quarter as legacy services provided to certain hyperscale clients are being automated faster than we anticipated, specifically content moderation as well as ad relevancy, search-related services. This is a reflection of customers no longer needing these services from external providers amid accelerated AI adoption.

These services are expected to continue declining, and we're rightsizing our cost structure accordingly. While we have begun to pivot to higher value, complex AI data sets, that work is not yet fully enough to offset the accelerated pace of the legacy decline. To support this shift, we are actively executing a comprehensive commercial rebuild pairing dedicated technical leads with industry experts, resetting account leadership and placing specialized senior commercial leads in key markets to strengthen our go-to-market and pipeline conversion success.

Finally, we've undertaken the reassessment of our AI enabling services growth trajectory. While the market continues to move towards AI at scale and we still see exciting opportunities within these services, customer adoption is slower than we previously modeled as sales cycles have extended and deal sizes have compressed.

We remain confident in the long-term trajectory of our AI capabilities, including the exciting growth we see in AI data centers. Notably, at TELUS Digital, our customer experience management service line, which represents more than half of TELUS Digital's total revenue, continues to show incremental growth, leaning to CXAI engagement, which are proving to be our innovative edge that sets TELUS Digital apart from its peers.

Please turn to Slide 16. The TELUS Health service revenue of $533 million grew by 4% year-over-year, and adjusted EBITDA of $99 million expanded modestly by 1%. These results were supported by 1 final month of inorganic growth from Workplace Options, offsetting softer organic growth.

Looking forward, the quality and scale of our global health assets gives us confidence that this business can drive better organic performance with improved profitability as we execute on additional efficiency initiatives implemented in Q2. The team continues to work through Workplace Options integration, including product enhancement, expanding sales channel and effective cost management, all of which are expected to contribute to stronger financial performance.

Regarding Agriculture & Consumer Goods, service revenues of $90 million increased by 6% driven by higher animal agriculture revenue.

Let me now address the balance sheet on Slide 17. Our financial position remains strong. We remain well capitalized with total available liquidity of $2.7 billion and a net debt to adjusted EBITDA leverage ratio as of June 30 of 3.5x down from 3.7x a year ago. As Victor noted earlier, we are committed to a target of 3x or lower by the end of 2028. The revised time line moving from '27 to '28 is a direct consequence of the business headwinds described earlier. We remain fully committed to maintaining our investment-grade credit rating profile. Looking forward, our operational execution, declining capital intensity and free cash flow growth and active asset monetization processes will continue to strengthen our balance sheet.

To achieve our goals, we are recalibrating the near-term capital allocation strategy to support a stronger TELUS in the future, as you can see on Slide 18. As noted, first, we are focused on reducing leverage through our -- towards our stated target, which will be supported in part by cash savings from the dividend reset and the proceeds from asset monetization efforts.

Second, we are deploying a disciplined approach to investments, focusing on strengthening core telecom and digital infrastructure with 2026 CapEx expected to be approximately $2.6 billion, up from approximately $2.3 billion previously communicated. This increase is driven by a few main points. The first is overall pricing inflation and supply chain dynamics impacting customer premise equipment. The second is a modest strategic investment directed towards our AI data centers, including network infrastructure upgrades and site enablement to support our state-of-the-art sovereign AI centers in Rimouski and Kenwood. And third, we're allocating additional capital in a deliberate shift towards customer base management, such as addressing customer pain points, eliminating friction for interaction and expanding wallet share within existing relationships, each of which improves churn economics and lifetime customer value.

Finally, as we announced today and as Victor addressed earlier, we reset our quarterly dividend to $18.75 per share and are removing the dividend reinvestment plan discount effective October 1, 2026. As a result, we have also updated our free cash flow dividend payout ratio to a range of 45% to 60% of trailing 12-month free cash flow from a range of 60% to 75% on a prospective basis previously. This will be our dividend policy moving forward, beginning in 2027. Based on actions taken today, TELUS will see cash savings of approximately $2.7 billion through the end of 2028 that we intend to use to support our deleveraging efforts.

Let me now close my remarks with our updated outlook for 2026 as outlined on Slide 19. For the full year 2026, we are now expected -- we now expect consolidated service revenue to be in the range of flat to negative 2%, with TTech service revenue forecasted to be closer to flat. Consolidated adjusted EBITDA for the year is now expected to be in the range of negative 2% to negative 4%, with TTech adjusted EBITDA also expected to decline within a similar range. This compares to our prior forecast for both consolidated service revenue and adjusted EBITDA to be 2% to 4% growth year-over-year.

Breaking it down, our revised outlook is due to our updated view of the current business environment, which includes both encouraging trends and challenges. Furthermore, our original target anticipated the pace of the underlying business growth would offset onetime benefits we realized in 2025, largely reflecting real estate gains. We no longer anticipate that level of growth, which results in about 200 basis points of headwind. To help with modeling this, we have provided additional details for you in the appendix.

Despite the in-year CapEx increase, which I outlined earlier, we remain committed to our multiyear approach of reducing capital intensity as a percentage of total revenue, as we continue to drive towards our target of 10%. We believe we can operate at a substantially lower capital profile beginning as early as next year. Finally, free cash flow for 2026 is now anticipated to be approximately $1.8 billion versus our previous outlook of approximately $2.45 billion as a result of lower EBITDA, higher CapEx and an incremental $100 million in transformation-related restructuring costs relative to our Q1 update.

In closing, we have work ahead of us. We are fully committed to our transformation program and communicating with transparency. We are confident that our actions today and the plan we have laid out will position us for stronger performance as we head into 2027.

With that, I'll turn it back to Victor before we start our Q&A.

Thank you, Gopi. So let me quickly wrap up our prepared remarks with a few key takeaways before we go into Q&A.

TELUS is building from a foundation of strength and is competitively advantaged with industry-leading customer service, PureFibre and 5G networks, digital infrastructure and a collaborative and energized culture. These assets are difficult to replicate, and we have them. With experienced leadership and perspective, we are executing a clear strategy to transform TELUS. This work is already underway. Decisive actions to reset our dividend, recalibrate our broader capital allocation approach, advance our asset monetization program to support deleveraging, invest in our core business are proof of that. And when we report our third quarter results in November, we'll go further with additional actions to support our efforts, including outlining our cost savings program and providing updates on our progress against our 3 strategic priorities to date.

We remain steadfast in executing our plan and driving accountability. I'm personally energized by the opportunity to get back to our roots and committed to delivering long-term value to our TELUS shareholders, our TELUS customers and our TELUS team members.

And with that, let me turn the call back to Ian for a Q&A. Ian, over to you.

Thank you, Victor. Karl, let's proceed with questions from the queue, please.

The first question is from Drew McReynolds from RBC Capital Markets.

Yes. Three for me. First, Gopi, maybe on the adjusted EBITDA guidance revision for 2026, which, I think probably caught most off-guard here. Can you just, at a highest level, just unpack the revision by segment? Would be helpful.

Second, Victor, maybe for you on the comprehensive review of the asset portfolio. I think most would have thought that comprehensive review would have been done kind of 1 to 2 years ago, so just wondering from your perspective, kind of what's new or different here. Maybe it's scope. Maybe it's timing.

And then lastly, on the TELUS Digital outlook, back to you, Gopi. This one's going to be hard to kind of think through for the back half of 2026 and 2027. Can you just help us from a modeling standpoint as to whether Q2, I guess, is indicative of kind of what we should expect over the foreseeable future?

So Gopi, you want -- actually, you know what, you've got 2 pieces. So Drew, can I just talk about the asset portfolio? Let me just start with that.

Absolutely.

Okay. So let me just give you some perspective about how I think about this. One is we've got a core crown jewel in our telecom business. We've organized in a way to unlock value there. We've organized all of the other businesses under Navin in our Global Platforms business. Every one of these businesses are good businesses. They're run by good people, serving clients with value propositions that they value. Every 1 of them, the 3 components of TELUS Health, TELUS Digital in spite of all the ups and downs that we've had, TELUS Ag, it's all -- they're all good businesses.

Our goal is to continue to nurture the value in those businesses and focus on those that we believe should be monetized because they're better off in the hands of another owner and do that in a thoughtful manner, thoughtful meaning taking our time -- we are engaged. There are confidential memorandum out. People know that on part of the TELUS Health business -- so that we can maximize value for our shareholders. Personally, I'm encouraged by the discussions that I'm seeing. I don't have any specific news for you, although to give you a sense that I'm encouraged and to let you know that when I do have news, we'll let you know. All right?

On the real estate front, we're seeing the same kind of progress, and we're going to be reviewing our TELUS Ventures portfolio. So everything is really on the table in terms of understanding our portfolio, understanding those things we'd like to keep and also ensuring that there's a monetization program in place to meet those leverage targets. It's all tied together. It's all part of the plan. I know it feels like it's at 10,000 feet. We'll get to 5,000 feet and 1,000 feet as the months tick ahead. Gopi?

Perfect. Thanks, Victor. And Drew, thanks for the question. So there is a lot going on in our guidance and I think you're absolutely right. The way to look at it is by segment. I'll lay out a framework and then speak to each of the pieces. If you take the lower end of our original guidance and the midpoint of our current guidance, there's about a 5 percentage point differential. And the way to think about that on an EBITDA basis is 2 of those related to TELUS Digital, 1 related to Health, 1 related to pausing real estate joint ventures, which I'll speak about in a moment and then 1 related to telecom.

So I'll start with telecom, and this is a key point to take away. And that is year-over-year or half 2 compared to half 1, our telecom business is stable. We're seeing half 2 steady to half 1. We're seeing some momentum in mobility, and that's offset a little bit with some challenges in fixed and some indirect cost work we want to do.

On TELUS Digital specifically, the churn that I spoke to in my script around goodwill, that's known, and it's reflected in our forecast. So Drew, more towards your third question, half 2 for Digital is weaker than half 1. If you think about our service revenue guide and our revised guidance, about 2/3 of that top line reduction is related to TELUS Digital. We are seeing for TELUS Digital though promising results come out of CXAI, and in our AI and data solutions business, we see promising opportunities in robotics and physical AI. So there is potential there, but it is a challenging half 2.

And then for Health, our results were less good than we originally expected. But again, looking at half 2, we do see momentum on organic growth. We do see initiatives put into place that are getting traction for margin improvement, including leveraging the WPO acquisition and the platform associated with that and generating efficiencies.

Onetime items are a headwind year-over-year, and that's in the TTech segment. So I'll remind you that telecom also includes other income and TTech, and the telecom stabilization is not sufficient to overcome these nonrecurring items from 2025. The 2025 items are relevant context because there's almost $100 million to overcome in half 2, and 75% of that is in Q3. Much of that other income is related to real estate joint venture gains, and we've strategically paused from starting new joint ventures.

So in summary, picking up on Victor's comments, we're in active transition. This is a forecast that reflects our current state. We do expect to return to growth, and we do have confidence in the underlying trends of each of the segments.

The next question is from Maher Yaghi from Scotiabank.

Great. Victor, welcome, and thank you for the helpful commentaries in your prepared remarks. I just want to go back to something you mentioned on free cash flow growth and the commitment that you're making on that. When you said that you're committing for -- towards 10% free cash flow growth for the period between '26 and '28, is that off of the base of $1.8 billion that you guys updated the guidance on this morning?

It is. So Gopi, why don't you take that and I'll build on it?

Yes. So Maher, it is off of that base. We appreciate that 2026 is a lower base, and so we do expect free cash flow to be higher next year. This is more about our commitment on a regular basis to have 10% free cash flow growth. This is about focusing on profitable loading in our core telecom business and getting EBITDA growth to positive and then our commitment to reduce CapEx. So those are the 2 key features. It is expected to be higher next year, and then it's more about the commitment to 10% growth in 2028 and go forward.

Okay. So if I look at that commitment and compare it to the previous framework that we were working with, it's about $800 million of lower steady free cash flow production in '28 if I'm just using 10% because there was a 10% commitment before off of the previous free cash flow line. So that's $800 million annual free cash flow production lower that I'm trying to figure out where the gap is coming from.

So again, Maher, we're happy to work with you more specifically on the modeling. But in general, what I can say is we've got our EBITDA growth modeled. Again, hard to be very specific about the exact growth percentage as we're talking about 2028. We certainly returned to growth in 2027 and grow from there. Our CapEx is coming down. And I say that not just because our CapEx is going up this year. As Victor mentioned in his script, we are committed to being much more disciplined and adding simplification to CapEx, whether that be products or projects and materially reducing the CapEx.

And then another feature will be restructure. We do have some investments we're going to need to make and want to make to achieve that CapEx reduction and to get and garner some of those EBITDA efficiencies. So there is a restructure component. And then embedded in there are going to be the savings from the reduction in leverage, some of the asset monetization that we will undertake along that way. So those are all of the features and then, of course, the dividend reset as we -- to round out the story as we speak about leverage. So hopefully, that gives you a little bit more sense on there is growth in EBITDA, there is a reduction in CapEx, and there is an investment in restructure.

I think just to build on that, Maher. As we fill in the gaps on what a transformation looks like, there's a tremendous amount of EBITDA growth and value that can be unlocked by simplifying our business, not only from a cost standpoint but also from our ability to generate a better revenue outcome. And that's where our confidence, as we look further out, comes from. That information will be shared with you as we kind of head toward the third quarter. That is the intensity with which the leadership team is going to focus on over the next little while.

Okay. And maybe just a follow-up, Victor. In the MD&A, you discussed how you want to deploy resources going forward, and you focused in your discussion there on the telecom part but also mentioned digital and AI. So I wanted to dig into that, trying to figure out how much capital you're willing to invest in AI and if the existing TELUS Digital business is -- continues and remains essential for you to undertake that AI infrastructure investment or could be a portion of the business that could be also divested off or reviewed strategically.

Yes. So there's a bunch of good questions in there, Maher. Thank you for that. One is I want us to be thinking about AI, and I know that term is used way too often nowadays, not only within our TELUS Digital business, where you've quite rightly pointed out that we've got great capabilities. And in spite of the hiccup of the past quarter, we are seeing good growth in our CXAI segment in TELUS Digital, and that's where we're helping notable companies globally with their customer service support using AI to produce a better financial outcome for our customers and for our shareholders but trying to do that within our businesses.

So let me give you an example in our core telecom business. Yes, we will need to invest, but I actually think that the resources that we can free up from our existing business and the simplification of our business will allow us to reduce churn to deepen profitable relationships with customers to increase cross-sell as well as to reduce our operating costs over time.

In our Global Platform businesses, we have tended to go to the market as 3 different brands of TELUS every time we call in a large enterprise. And the reason we put these businesses under new leadership is not only to figure out, okay, which businesses do we want to monetize but which ones allow us to go as one TELUS to serve our existing telecom clients in Canada with another suite of services, which would include TELUS Digital and an aspect of TELUS Health and those outside Canada, where we don't have a telecom business but working together with those businesses to call on those clients as one TELUS. That and the simplification of our business, I have no doubt that we will be able to deliver better financial results over time and improve that free cash flow and give you more visibility, particularly into 2028 where you're quite rightfully seeking it.

The next question is from Stephanie Price from CIBC.

Victor, congratulations on the role.

Thanks, Stephanie.

Maybe following up on that TELUS Digital question. It's been acting as a drag and yes, CXAI is obviously a growth area, but there's other pieces that aren't growing as much. Just curious how you think about TELUS Digital as part of the longer-term business here and some of the opportunities you see around that TELUS Digital business outside the CXAI.

Well, some of the very -- it's a good question. Some of the very real capabilities we have in there actually serve our core telecom business and help our customers get a better experience. So that, I think, is a tick mark. The CXAI business is growing, and it's profitable. And we're encouraged by the developments we see there.

Our AI services overall, Gopi mentioned the fact that clients are trying to be mindful about everything nowadays. They're looking at their tokenization costs. They're looking at what is AI benefit, how is the benefiting us, how is it acting as a drag. There are benefits there. But one of the things I didn't address in Maher's comments and -- question and what you're asking about is how can we use those capabilities within growth avenues that are natural adjacencies to our footprint in Canada.

One would be in our sovereign AI data centers as we think through that. We've got some open. There's a real, real avenue there to not only secure the energy, build the box, provide the right level of equipment but to put our AI intelligence inside and offer that to Canadian clients that are looking for this. The margins in that business are quite healthy.

One of the things that we're mindful of is how do we grow that business without increasing our CapEx, and our view in that value chain is there's an amount of margin that we can actually partner with capital partners to drive that growth, to deliver what's inside that data center to our clients and grow that business as well, which I think we'll be more prepared to talk about in the third quarter.

And maybe just a follow-up on me on the core telecom business. Good to hear kind of focus on profitable growth in that business. Maybe you could talk a little bit about ARPU. The rate of decline improved sequentially, and it was better than The Street was expecting. How do you kind of think about ARPU trajectory here as TELUS kind of works towards ARPU growth and focuses on profitability?

Well, you're quite right in pointing out, Stephanie, that ARPU is -- the rate of decline is decelerating, which I guess is a good way of saying things. We'd like to see it grow over time. There's a couple of things that I'd say. One is there's definitely going to have to be more of a focus on our premium brand to continue to shore up our ARPU and develop relationships with our clients and not only ARPU but the overall share of wallet that we would have with a household or a business. That is going to be a core focus of Dave Fuller and the team.

At the same time, we see the competitive pressures from the other end of the spectrum, and this is where we're going to have to harness the value of our public offer, which is public is a low-cost digital-only offer, which can compete toe to toe at the low end of the market. So it's really important to preserve the premium brand and use our flanker brand in a smart way to preserve ARPU overall for TELUS. That's really our goal, and that's something that we will continue to focus on going forward.

And going forward, we're going to take it up a notch. It's all going to be about profitable growth, profitable growth for every dollar of capital invested, profitable growth, profitable relationships at every client level. I know it's not possible when you have 10 million-plus clients, but we're going to really start honing in on that and start really focusing on returns and profitable growth. And I think the market will reward us over time with that kind of a strategy.

The next question is from Tim Casey from BMO.

A couple for me. One, Victor, there seems to be a conflict here in the message, if you will, in that you're talking about simplifying the business and returning to roots. But there are parts of ag and health that you seem to be characterizing as core. And I'm just wondering if you could flesh that out a bit because I would have thought those 2 entities would -- you wouldn't keep those around if you're simplifying the core business.

And the second one, I just want to push back a bit, I mean, on your previous comment about focusing on profitable growth, and that's going to be new. I mean just to be clear, we heard from the previous leadership that, that was the mantra, used to be margin per user and things like that. So how is -- how are you going to get the troops to focus differently on that when it seemed to be a core focus of preserving the core brand and only profitable growth before you got there?

Yes. So thanks, Tim, for your question. So there's no real conflict in my message, although I can understand why you would see it that way at this point in time. If I can give you more granularity around our portfolio and how we're thinking about monetizing it and show you a picture of what I think it will look like 12 months from now, I think you'd say, you know what, you guys are right. You're focusing on your crown jewels. Whatever you tell is a natural adjacency to how you serve large enterprises -- like large enterprises and therefore, some capabilities may be alongside that. But I think you'll see a much more simplified TELUS over time, Tim. Let me just assure you of that. Okay?

And you will get updates as each asset is reviewed and monetized. When there's a notable update, we're going to share that with you. We're not going to wait for quarterly results in that regard.

When you talk about profitable growth, there is a mindset that you have to have within an organization. And when you say that the premium brand can't be compromised, it cannot be compromised. I don't want to draw on my past experiences, although I will tell you that building multiproduct relationships with clients, reduce churn, improve profitability and incenting a team to be doing business that way will be a leading driver of what we do.

Second thing is seeding too much territory to competitors that price at the low end of the market. If you do things smartly, you can be -- you can go toe to toe with them but protect your premium brand. That really is our goal. And we're going to try and deliver for you insights as to how we're doing that as we go forward into the quarters ahead.

Let me just assure you that our goal is profitable growth, and our goal is not to send conflicting messages and have a much more simplified TELUS. The overwhelming majority of our returns today come from telecom. It will grow over time even as a proportion of overall earnings.

The next question is from Vince Valentini from TD Securities.

Can I start trying to clarify 3 things? And then I got a bigger picture question. First for Gopi. The -- thank you for the breakdown on the EBITDA segments for the second half of the year, but I want to make sure I heard you correctly. The TTech segment accounts for about 1 point of the 5 point reduction, but all of that seems to be just because of the onetime items that don't recur. If I look at core TTech, I mean, as you know, it was barely down. It was basically flat year-over-year in the second quarter, but you're saying down 2% to 4% for the full year on EBITDA. But that's just because of the onetime items. If not for those, you'd be bouncing around roughly flat. So that's clarification number one.

Number two, on Slide 11, and apologies, Victor, I mean, we have to learn your lexicon versus the very unique lexicon that Mr. Entwistle had for years. I want to make sure I just understand. When you say robust interest in certain health assets and strong market interest in real estate, is robust stronger than strong? Or is strong stronger than robust? Or are they just interchangeable in your mind?

Actually -- so the way I look at it, it's a good question. Let me start because you're asking me that question on my lexicon. So when I look at a business that we may wish to monetize and I feel like the value that's surfacing allows us to reduce our leverage and I got -- I have an interested owner that actually will do good things with the business, I have a couple of those that are interesting to me in terms of people that have said we're interested in that asset and that would qualify as robust, I guess, with a small R, not a large R. It's easy -- so I can be clearer on that, right?

When I look at real estate, there are -- there's also robust interest in that as well with small Rs, not large Rs. I mean that's an industry in transformation as well. But I'm confident that we'll be able to get a few things done here that allow us to simplify the business and allow us to lower our leverage over time. I'd like to see those happen sooner than later.

But again, part of this process is to make sure that everyone understands that I'm in no rush, and we're in no rush to just get something done. We're working for all of you and for the shareholders that you advise to get the best price and best investor possible to own the assets that we think are better in someone else's hands. We'll get to know each other better over time, Vince, and you can understand what my kind of -- you can measure the spectrum of my words. I don't use many.

No, I appreciate that. That's why I asked. And while you're on, before I let Gopi clarify the other one, so the other 2 things. One was you mentioned the AI intelligence inside the data center box, I think, is the word you used. Does that mean you approve and you agree that TELUS should be buying these expensive chips and GPUs as opposed to just building the infrastructure?

So here's what I would say on that because there's always this raging debate on what should you be doing. Should you be building the shell? Should you be owning the chips? What else can you be doing? My sense in speaking to the team and in kind of getting greater granularity around our strategy there is there's a real demand emerging in our country for more than just a box. And it falls under the kind of umbrella of sovereignty, security, and that comes from not only government. It comes from academic institutions, it comes from hospitals, and we'd like to be able to fulfill that demand.

There's clearly other demand emerging in our country because of ample energy and the ability to build these boxes, and you see that in the headlines on some of the stuff that you've read recently. But I think we want to be sustainable. We want to build smart data centers, and we want to do it in a way where we can get the kind of returns that you would expect of us, so it doesn't actually weigh on our leverage and it improves our return on capital. I think we can actually do all of that, and I'm looking forward to providing that update with the team to you when we put that all together.

Perfect. And then, Vince, I'll top up on that first question. And so there are 2 components. There's essentially 2 factors. One was the onetime items, and then there is 100 basis points related to telecom. So transparently, the growth that we expected in fixed in mobility has not come to pass as expected in guidance. We are happy with what we saw in Q2 results on mobility and have some work to continue to do on fixed primarily in business. And we have some work to do on indirect costs and how quickly we continue to take them out of the business as our industry changes. So it's a combination of both the onetime as well as the pressure in telecom in the walk that I went through.

I appreciate all that, and I know Ian's going to kill me, but -- so I counter those as all clarifications. So just the one big picture question, Victor. Have you changed or are you considering changing any of the compensation drivers? Are you going to add an ROIC metric? Are you going to get rid of the volume growth metric? And can you clarify that for you and the new team members that you're putting around you -- and I applaud that. There are some good people you're putting in place, in my view. For you and those team members, does the clock get reset as of today in terms of any sort of stock options and meeting any targets? It's all now based on this new guidance and what we saw in the first 6 months?

Well, I can tell you that my general philosophy is to focus on aligning shareholder interest with -- management's interest with shareholders' interest, and that's rewarding profitable growth over time. So that will be something that we can increasingly focus on.

I'm already a shareholder. I've already -- it's all in public record in terms of what I own currently. I believe in this company, and I believe in our ability to actually focus more intensely on profitable growth. And at the same time, people will say, well, does that mean you're not going to be loading like you're loading before. You know what, if you manage your base well, you manage your existing portfolio of customers, households and businesses and get your team incented to do the right things in terms of transforming how we do business, the cost of doing business and focusing on profitable growth, you will get the right outcome. And we will get the right outcome.

It's not going to happen in 3 months. It's going to happen over a series of quarters. But I would like to think that you'll see bright light start to shine as every quarter gets printed going forward. I recognize the large reset that kind of was presented to you all this morning. I see it as a bit of an abbreviated detour. And I say abbreviated because we're going to work pretty intensely in course correcting and transforming our company over the next little while. And that, we plan to share with you in the months ahead.

The next question is from Jerome Dubreuil from Desjardins.

Gopi and Victor congrats for the appointment. First one is another clarification kind of similar line to Vince's question. I'm looking to understand what exactly is the base level of EBITDA we should be using for '25. You mentioned there was $100 million of nonrecurring items in the second half. I wonder if you can comment on what is the full year number just because I don't think we should be using minus 3% EBITDA going forward, and that's -- just want to clarify exactly what's the nonrecurring aspect of the minus 3% for the year.

Perfect, Jerome. So in our appendix, we've actually included detail on that. I'll just walk you through it at a high level. So what we've done is we've pulled out other income. That is already on the face of our financial statements. And so you can see that for last year and coming into this year.

As I mentioned, we've paused any new joint ventures in real estate. So we don't expect any material gains associated with that. There will continue to be monetization of real estate as it comes available, and we'll continue to have minor amounts of copper sales. So that's what you can continue to see in the year.

And then again, we did call out a particular nonrecurring item grouping in Q3 of last year, and those were just particular to Q3 of last year. We don't see anything like that coming through the rest of the year. So you've got details on Page 24, and we'd be happy to clarify any questions you have coming off that.

That's great. And second one, I mean, the CapEx increase was a bit of a surprise by some investors. Can you maybe provide some maybe points to discuss about the ROI you're seeing on the additional CapEx just maybe to reassure the investors that your focus on profitable growth is -- I'm sure it is, but it is grounded in numbers and the returns you're expecting?

Absolutely. That's a very fair comment, especially because we are committed to the 10% capital intensity over time. The focus, the incremental, as we mentioned, there's some related to inflation, some modest investments, but then Victor spoke to how we're more generally thinking about AI data centers. And so really, the remaining investment we made is in our customer base, making it easier for them to work with us, putting in tools that make their experience with us delightful, making sure that they can use digital when they want to. And so some of that will continue into next year. Everything that is gross related will continue.

And then in general, some of the items are products and projects that we are wrapping up that we are bringing to a close, and that isn't something that you can terminate quickly. And so we will get the returns as expected, but we are focused on simplification and focus in terms of what we invest in go forward.

The final question is from Adam Shine from National Bank Financial.

I'll make it 2 quick ones. Victor, you've said very clearly that on the monetization front, you're in no rush. But is there a particular total number that perhaps you're looking to raise in regards to some of these efforts? And just secondarily on the monetization exercise, I didn't really hear anything on agriculture and was wondering if that's something also to be divested or the fact that it wasn't mentioned, perhaps not.

Just going back to Stephanie's question on the AI data center, and I know you're going to come back to us with more details in Q3. Will that ultimately include some disclosure around a road map in terms of AI data center-related revenues, EBITDA, free cash flow, CapEx, kind of like what Bell has laid out for us? Or is that still a bit premature?

Thanks, Adam. Again, both very good questions. In terms of the dollar figure for monetization, let me rather than speaking about any of these specific businesses because I don't want anybody to get worried. They're really good businesses. We want to run them well. We'll surface value from them well, and we'll identify a couple that we've already -- kind of working on to surface value that will help reduce our leverage.

When I think about like the portfolio of leverage reduction opportunities, some of it comes from the maturity of our CapEx profile in our core businesses. Some of it comes from the transformation of our business. In a couple of months' time, you're going to get a better picture of what did that transformation envelope look like from a revenue enhancement standpoint and from a cost transformation standpoint. What do the -- we'll get more clarity on the -- we'll give you more granularity on the monetizations, and that will all fit into that envelope of how does leverage get to 3 or less by the end of 2028. That's how the puzzle pieces fit together.

And on your question on data centers, yes. I mean, look, I want to provide as much transparency as possible once I feel comfortable that the road map is buttoned down, and I can speak to you about the economics of it. In my early review, I see attractive economics, right, in building a sovereign, sustainable smart type of data center approach, where I think that there'll be a demand. I do not want to get caught up in the frenzy that I see out there of building, building, building only to get caught flat-footed. We can't afford to do that. That's not generally how we operate. So we'll give you more granularity as we go forward as well, Adam.

Thanks, Adam. This concludes the Q&A. I'll pass the call back to Victor for closing remarks.

Okay. Thank you, everyone, for your great questions. Thank you, Ian. Thanks, Karl, for helping us moderate through this as well.

Let me close where I started. We got a clear set of priorities for TELUS, and we're committed to doing the 3 things that we've outlined: strengthen our financial foundation; be really, really disciplined around our operations, controlling our costs, freeing up resources to invest into the future; and redeploying those resources to profitable, sustainable returns and businesses that we want to be in. What we have set out here today is a thoughtful plan. I know you don't have all the granularity you want, but I can tell you, you get more of that as time moves on to realize the full potential of TELUS on a go-forward basis, and it's our plan to deliver on this as a leadership team.

I've clearly seen in my first few weeks that we've got an extraordinary team at TELUS that embraces challenge. It's innovative. It's customer focused. And I believe, knowing this company and knowing what it stands for, that we're going to be able to deliver on what we're promising to you.

So our objectives are clear: number one, reduce our leverage to 3x or lower by the end of 2028 and no later than the end of 2028; two, deliver minimum 10% compounded annual free cash flow in 2027, which I think all of you recognize is likely easier hurdle because of where we'll end 2026 and give you greater granularity around why we believe we can do that in 2028; and three, supporting a dividend that's sustainable, that's competitive, and once we get our growth profile back and we're well within our payout range, to grow that dividend again as well as use other ways to return capital to shareholders.

I'm proud to be working with over 100,000 team members at TELUS as we embark on this next chapter. It will be intense. It will be bumpy, but it's all meant to transform our companies, produce the kind of financial performance that we believe we can deliver for you going forward. And with that, thanks for your time today. I know there's a lot to digest, and I wish all of you a wonderful summer, and we'll be back to you on a one-on-one basis as you request and as we request. I'd love to see more of each other in the coming weeks, all right? Thanks, Ian, very much, and I guess we're done.

This concludes our call today. Please reach out to the IR team for any follow-up. Karl, back to you.

Ladies and gentlemen, this concludes the TELUS 2026 Q2 Earnings Conference Call. Thank you for your participation, and have a nice day.

Good day, everyone. Welcome to the TELUS 2026 Q1 Earnings Conference Call. I would like to introduce your speaker, Ian McMillan. Please go ahead.

Thank you, Karl, and hello, everyone. Thank you for joining us today. Our first quarter 2026 news release, annual MD&A and financial statements and detailed supplemental investor information were posted on our website earlier this morning. On our call, we'll begin with remarks by Darren and Doug, for the Q&A portion, we will be joined by Zane, Navin and Tobias.

Briefly, prepared remarks, slides and answers to questions contain forward-looking statements. Actual results could vary from these statements. the assumptions on which they are based and the material risks that could cause them to differ are outlined in our public filings with securities commissions in Canada and the United States, including our Q1 2026 and 2025 annual MD&A. And with that, over to you, Darren.

Thank you, Ian. Hello, everyone. In the first quarter of 2026, our team's unwavering commitment to operational excellence and cost efficiency has once again empowered TELUS to deliver industry-leading customer growth stable profitability and industry-best free cash flow growth of 19% on a comparable basis. These results were achieved within a dynamic operating environment reinforcing our disciplined approach to respond tactically to market conditions whilst preserving our premium TELUS brand value. This strategic focus reflects the enduring resiliency of our business and the compelling strength of our leading portfolio of bundled services nationally.

Our mobile and fixed customer growth underscores the sustained demand for TELUS' premium offerings, underpinned by our world-leading broadband networks and customer service excellence. Notably, we achieved industry-leading customer growth of $262,000, demonstrating the compelling strength of our integrated mobile and home strategy in action. This result included 12,000 mobile phone net additions and 229,000 connected device and additions, a first quarter TELUS record and the second highest quarterly result ever

This was further supported by Internet customer net additions of some 21,000. Together, this growth is powered by our world-leading PureFibre and 5G plus broadband networks which continue to differentiate TELUS meaningfully from the competition. Our Pure Fiber network is a significant strategic asset valued at approximately $20 billion based on comparable fiber infrastructure asset valuations in the United States. This valuation reflects the substantial capital invested in building Canada's most extensive fiber-to-the-home network and underscores the competitive moat and long-term value creation of our broadband infrastructure. Indeed, TELUS is the top fiber operator globally with industry-leading penetration product intensity, churn and cost to serve performance parameters that set the benchmark for operational excellence.

Our consistent strategy of leveraging our superior and growing portfolio of bundled products and services on a national basis, creates compelling value for our customers. This was supported by our commitment to economic margin-accretive customer growth. This is once again evidenced by our ongoing industry-leading customer lifetime revenue supported by our industry best churn result and continued improving ARPU performance.

Indeed, as a result of our moderating ARPU decline, network revenue was higher by 1% and the second consecutive quarter of positive growth and modestly leading the industry. This is a trend we intend to build upon throughout 2026 and well beyond. Our sustained focus on enhancing the customer experience, combined with the strength of our customer relationships and the value of our bundled solutions positions us well for an improving trajectory going forward.

Let's turn to our unique and differentiated data-centric growth businesses. TELUS Health delivered another quarter of strong growth, achieving service revenue and adjusted EBITDA growth of 11% fueled by strategic investments, continuous product innovation, and cost efficiencies across our global platforms. Notably, this marks our 15th straight quarter of double-digit adjusted EBITDA growth since acquiring LifeWorks in Q3 of 2022.

This performance was bolstered by the $431 million in annualized LifeWorks synergies, overachieving our $427 million target and nearly 3x our original $150 million commitment. Furthermore, when combined with TeleHealth lower capital intensity, this business drives strong cash flow generation, serving as a strategic capital contributor to TELUS' overall capital allocation priorities. TELUS Health is now generating over $2 billion in annual revenue and is targeting EBITDA of over $400 million in 2026.

By way of illustration, we are targeting more than $200 million of simple free cash flow in 2026 coming from TELUS Health. The economic scale of TELUS Health continues to grow, now covering nearly 170 million lives globally, further progress in our position as the world leader in workforce digital health solutions. TELUS Health is capturing meaningful industry, technology and societal tailwinds that position it for sustained growth. Our financial advisers continue to support our comprehensive review of strategic partnership opportunities for TELUS Health.

As part of this process, we are looking to bring in strategic investors across key areas of the business. This includes, by way of example, retirement benefit solutions as we look to accelerate growth enhanced capabilities and unlock value within TELUS Health's attractive lines of business whilst maintaining our commitment to customers and market leadership.

As we advance these aforementioned strategic partnerships, TELUS Health will concentrate its focus on strengthening still further its globally leading position across the workforce digital health and well-being market. In this regard, our Employer Health Solutions platform remains the cornerstone of our TELUS Health growth strategy. Our goal here will be to drive penetration and cross-selling, deliver new product innovation, seize greater market share, expand geographically and leverage full business digital AI transformation and to do that aided and embedded by TELUS Digital and delivering sustainable value and value-accretive growth along the way. This strategic review, which we foreshadowed a year ago and announced publicly in January, has generated significant interest from multiple parties reflecting the strength and quality of our TELUS Health portfolio.

Notably, we have received more than 75 inbound inquiries from interested parties prior to launching the official marketing process demonstrating the significant value and market appetite in our health assets. Furthermore, as part of this process, a confidential information memorandum is currently being distributed to qualified parties. And as you know well, proceeds from strategic partnerships will be deployed towards deleveraging supporting our path to augmented financial flexibility in the future.

Another area of differentiated growth is TELUS digital the engine to TELUS' customer experience leadership for over the last 2 decades and the accelerator to our enterprise-wide AI and data capabilities. Indeed, TELUS Digital is uniquely positioned to provide TELUS and our clients complete end-to-end AI solutions. From AI transformations, all the way through to the compute needs of our clients with a special differentiating emphasis on world-leading CX AI transformation for the massive global market and customer care operations. At TELUS Digital, we are especially encouraged for the Q1 growth in our legacy CX business. which we are transforming end-to-end by deploying our CX AI capabilities, which include our proprietary fuel platform and best-in-class third-party AI solutions.

Indeed, our combination of existing CX relationships, client data and world-class technical and AI capabilities underpinned by TELUS as our Living Lab creates a unique competitive position for TELUS Digital in the industry. The results while they demonstrate that we're gaining meaningful traction with CX clients, enabling cross-promotion of our industry-leading AI solutions across TELUS.

Furthermore, the strategic expansion of our AI capability is synergistic with the integration of TELUS Digital, which continues to unlock meaningful operational efficiencies for us. Notably, annual cash synergies of approximately $150 million to $200 million is tracking well against plan. realizing annualized free cash flow synergies of approximately $115 million as at the end of the first quarter of 2026 with TELUS digital operating at a modest CapEx intensity of approximately 4%, combined with the cash synergies realized by TELUS we are driving strong cash flow generation for the benefit of our shareholders of $150 million per annum. Moreover, between these cash synergies and strong cash flow generation.

The discounted payback period on privatizing TELUS Digital will be realized in short order and shift thereafter the value accretion. In respect of commercializing the compute capabilities that TELUS has been building, our sovereign AI factory in [indiscernible] which launched in September of 2025 as Canada's first fully sovereign AI factory is now sold out, validating strong market demand for sovereign AI infrastructure.

Accordingly, we are expanding our compute inventory in [indiscernible] to meet continued demand whilst our second facility in [indiscernible], British Columbia will be coming online in fairly short order. This new compute capacity will serve the growing ecosystem of businesses, researchers, entrepreneurs and start-ups and government organizations seeking to innovate rapidly and leverage AI capabilities for training, models or inference applications. We look forward to sharing an important update regarding our sovereign AI factories on Monday, May 11, and which will further demonstrate our commitment and progress in advancing Canada's digital infrastructure and AI capabilities. Indeed, with these unique capabilities across the entire value chain of AI, we are creating prescient and meaningful new revenue streams for the TELUS organization and our portfolio of companies.

As we bring together the power of TELUS, leveraging assets from TELUS digital, TELUS Business Solutions, and TELUS Health, we are bringing end-to-end solutions for our clients, validating our integrated approach in this regard. Altogether, our AI enabling capabilities delivered strong double-digit revenue growth of 22% in the first quarter of 2026. This result demonstrates the continued momentum of our AI-driven strategy as we progress towards our revenue target of circa $2 billion in 2028, across TELUS Digital and TELUS Business Solutions, including contributions from our sovereign AI factories. TELUS is well developed world-class networks, data-centric growth assets and customer experience leadership positioned TELUS to execute on our strategic priorities including moderating capital expenditures and generating strong free cash flow of approximately $2.45 billion in 2026.

An important component supporting this execution is the welcome stabilization and competitive dynamics with a gradual retrenchment from the relentless pricing aggression that has certainly characterized recent years in our industry. This is complemented by an ongoing emphasis on cost efficiency as a way of life, leveraging digitization and further integration of AI across all areas of our business stewarded by TELUS Digital. This is further supported by our team's unwavering commitment to customer service excellence, positioning TELUS to deliver sustainable value-accretive growth for years to come. As we move through 2026 and beyond, TELUS will progress its balance sheet strength as compared to our Canadian peers still further with an industry-leading net debt-to-EBITDA leverage ratio. This position reflects the most resilient financial and operational profile in the Canadian telecommunications industry particularly since 2022, a period marked by significant competitive regulatory and macroeconomic headwinds.

Driving our performance is a disciplined approach to financial management, supported by compelling business fundamentals and significant free cash flow generation. Our confidence in delivering free cash flow growth at a minimum 10% compounded annual growth rate through 2028 reflects our strong financial momentum. Our comprehensive deleveraging strategy is moving ahead of plan and expected to reach circa 3.3x or lower by the end of 2026 and 3x or better by the end of 2027 and years ahead of our peers.

In 2026, our team is advancing monetization opportunities, including the accelerated monetization of real estate and copper assets. This monetization program is being enabled by our pure fiber film, which at the same time, is making our real estate, including our central offices redundant. Indeed and importantly, 77% of our pure fiber build will be self-funded by the real estate and copper assets that we are monetizing.

Notably, our copper to fiber transition is generating substantial real estate opportunities with a portfolio of 70 sites representing some $4 billion in total value, including $600 million from commercial assets. These 70 sites, which represent nearly 10,000 homes will drive future customer growth through exclusive TELUS products and services while positioning us as the first telco globally to scale real estate value from owned network assets addressing housing needs in our communities.

These efforts will be buttressed by operational growth, including EBITDA and robust free cash flow expansion, supported by moderating capital expenditures and an industry-leading CapEx intensity ratio trending from 12% towards circa 10%, which, of course, would represent an industry fast. TELUS is already at where others strive to be, given our early start and proficient fiber build and preemptive OpEx improvement from sequential staff level reduction programs implemented presently a couple of years ago. Notably, we are achieving this industry low CapEx intensity whilst maintaining world-leading broadband connectivity and continuing to invest meaningfully in Canada's digital infrastructure, demonstrating the operational efficiency of our network strategy in action.

As part of our capital allocation framework, we continue to maintain our dividend at the current level. Additionally, in the first quarter, we reduced our DRIP discount to 1.75% from 2%. Further reductions are planned through 2026 and and into 2027 with the full removal taken effect by the end of 2027, if not better, given our monetization programs. Importantly, in this regard, we continue to assess both an accelerated deleveraging and an expedited DRIP step down in conjunction with the execution of our monetization program, targeting $7 billion of assets inclusive of the near-term TELUS Health monetization opportunity. Myself and the leadership team remain confident that the TELUS organization prospectively will provide clarity in respect of TELUS' capital allocation priorities based on what is best for TELUS and our shareholders including our employees who collectively represent our third largest shareholder group.

One way or the other, I'm sure TELUS' future will be underpinned by the strong operational and financial execution, TELUS has long been known for. and the lucrative capital allocation associated with such. Reflecting on our team's long-standing belief in the synergistic relationship between doing well in business and doing good in our global communities. Since 2000 TELUS contributed $1.85 billion, including 2.5 million days of voluntarism more than any other company in the world. This is supported by our annual TELUS giving events in 35 countries around the globe.

For 20 years, our annual days of giving events have been a powerful and authentic demonstration of our team's unparalleled legacy of giving being put into action. In closing, I would like to express my gratitude to our global team for their efforts and expertise in executing on our winning strategy to meet our commitments to all stakeholders. Your dedication to operational execution and customer service excellence and community impact continues to set TELUS apart and positions us for sustained success.

Before I conclude my remarks, I would like to extend my sincere gratitude the Doug French, [indiscernible] here, who, as you would now have Welder, is retiring at the end of June. Doug has had, without a doubt, a truly extraordinary career at TELUS, and I'm a huge admirer. I feel exceedingly fortunate to have had the opportunity to work alongside him for 26 of his 30 years at TELUS. The people on this call know very well Doug is one of North America's most respected and experienced CFOs. Throughout his story tenure, Doug administrated an outstanding ability to support TELUS in generating leading results, excellence in balance sheet and cash management alongside robust shareholder value creation.

Doug is also the living embodiment of our social purpose thesis in action in terms of the way it gets back to our communities and make such a meaningful difference. Doug leaves behind him an extremely impressive legacy of success. He is undoubtedly truly one of a kind, both as a professional and as a human being. I'd also like to congratulate [indiscernible], on being named TELUS' new CFO, which will take effect on the 1st of July. [indiscernible] has considerable CFO experience with TELUS Digital as well as nearly 3 decades of strategic financial leadership and should be a great partner for Victor and ensuring that both Victor and our entire leadership team have a strong continuity of financial leadership and the financial excellence and the business results that, that drives.

So to my phenomenal partner, the best partner that I've ever had the opportunity to work with I'll hand over one last time and just again express my gratitude that I had the opportunity to take our 78 years of combined telecommunications experience between the 2 of us and put it to work fruitfully for investors, for customers, for team members and our communities. Over to you, Douglas.

Thank you, Darren. It's been an amazing journey. I'm incredibly proud of our results that we've built together. I have confidence in the leadership team to take our organization into the future. It's been a real honor. Darren, I'd also like to thank you for everything you've done for our customers, our team, our communities and our investors over the past 26 years. You have all TELUS from a regional telco to a national telecom company and a global powerhouse spanning health, agricultural, digital and will benefit our stakeholders around the world for many years to come. Here you are 104 IR calls later. You've certainly created an amazing legacy. On behalf of the TELUS team, congratulations on your well-deserved retirement. I hope the next call we make together will be whether to use a [indiscernible] as we dump the hole in one.

Now turning to results. First quarter results illustrate our team's discipline with focus and operational execution and vigorous cost management. On a consolidated basis, Service revenue increased by 1% year-over-year and adjusted EBITDA was stable. These results were supported by continued strong performance of TELUS Health and consistent execution of TTech and TELUS Digital demonstrating the resilience of our diversified business portfolio and a dynamic and ever-changing telecom market.

During the first quarter, our response to competitive dynamics continued to focus on preserving our premium TELUS brand. Our consistent strategy and discipline are evident in our financial results, delivering on continued positive network revenue growth of 1%, while ARPU demonstrated continued sequential improvement. Our strategy is built on a proven thesis of bundling mobile and home, driving lower churn higher revenue per household through Internet and wireless and further differentiated service offerings.

As we progress through the year, our team will continue to execute maintaining a strategy that differentiates us from our competitors and protects long-term wireless industry health. In fixed, you will note our disclosure, we are no longer reporting on TV, security and automation and residential subscribers and have removed them from the reported subscriber base. This change underscores our focus on product intensity, reflecting our core business thesis, mobility and Internet complemented by a suite of additional products and services that will add value to our customers.

Overall, this update reinforces our focus on economically accretive growth supporting our efforts to drive profitability and cash flow. Fixed data service revenue for the first quarter increased 1%, driven by continued residential Internet subscriber base and revenue per customer growth within fixed. In business, fixed data continued to reflect revenue variability with customer contract changes, partially offset by continued growth in small and medium business.

Overall, TTech adjusted EBITDA was stable, while adjusted EBITDA margin expanded 80 basis points to 44.4%. This is a reflection of our cost efficiency programs synergies achieved from privatization of TELUS digital along with our AI enablement. In health, operating revenue and adjusted EBITDA each grew 11% and -- the growth captured benefits from global business acquisitions, notably WPO and in May -- I'm sorry, in May of last year and organic growth in payer and provider solutions. At the same time, profitability in health reflects our realization of integration synergies as the migration of customers, the Workplace auctions platform continues.

For TELUS Digital, I'll remind you that our results reflect the updated segment reporting to align with operational realignment of TELUS digital following Telus' privatization of the business. TELUS Digital segment operating revenues were lower to start the year, reflecting an overall unfavorable foreign exchange impact and lower volumes from certain tech clients. However, in U.S. dollars and including the intersegment revenue, TELUS Digital's revenue grew by 3%.

We are seeing increases in service revenues from clients across our digital solutions and customer experience management service lines. At the same time, TELUS Digital's segment's adjusted EBITDA increased 2% year-over-year with the margin expanding by 20 basis points to 10%, reflecting operational expense efficiencies. The team will continue to drive further efficiencies through business simplification and AI enablement as we progress through the year with the expectation of both revenue and EBITDA improving in the second half.

Our net debt-to-EBITDA ratio as of March 31 was 3.5 as compared to 3.9 at the same time last year. TELUS leverage remains the lowest of our national peers. We remain highly confident in delivering on our leverage goals of 3.3 or lower by the end of 2026 and 3.0 or better by the end of 2027. Supporting these efforts is strong free cash flow generation.

In the first quarter, we delivered cash from operations of more than $1 billion and industry-leading free cash flow on a comparative basis of $583 million, increasing 19% year-over-year. This underscores our solid financial foundation as we look to achieve our objectives established with our investors. Importantly, we are delivering on all of our commitments we set out. If this includes deleveraging, moderating CapEx intensity, stepping down on the discount on the DRIP and executing on our asset monetization program.

Regarding our targets, we are striving to be within the mid- to lower end of our consolidated service revenue and adjusted EBITDA range. As economic and market conditions improve, we anticipate seeing more accretive growth supplemented by efficiency and effectiveness in the second half. As we navigate through the competitive environment, our focus remains on generating free cash flow. -- affirming our target of $2.5 billion -- $2.45 billion for 2026, supported by EBITDA growth, CapEx intensity, moderation sorry, CapEx intensity moderation and ongoing efficiency and synergy realization.

With our free cash flow growth target of minimum 10% compounded annual growth through 2028 combined with our portfolio of asset monetization opportunities, we are on solid footing to support our capital allocation plan and deleveraging cards. Ian, back to you.

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

[Operator Instructions] The first question is from [indiscernible]

First of all, [indiscernible] the carrier and Doug, too, congrats on this always appreciate our our discussions. So all the best first one is on CapEx. We're seeing it being up 10% in the quarter. Wondering how -- if there's potential for lower CapEx down the road, I think you said in the prepared remarks that you're already aware others want to be. I'm just double checking if that refers to whether there's potential for further CapEx reduction down the road.

Yes, there is. The explicit comment that we made in terms of being where others are striving to get to is the 12% CapEx intensity reflective also of how we exited 2025. And the view prospectively is to take that down still further towards the 10% CapEx intensity zone, which would be reflective of a leading metric certainly within the global telecom industry. I think what is enabling that is many of the heavy lift of the organization are more behind us than ahead of us. What that fiber build or spectrum auctions that were particularly challenging, given the rules associated with them. But it's also reflective that the organization is changing fundamentally in the leveraging of AI and the developing of our asset portfolio where the CapEx intensity within that asset portfolio by way of example, looking at TELUS Health and the 8% CapEx intensity zone, TELUS digital in the 3.5% to 4% CapEx intensity zone the mix of the organization is also evolving as we become more and more an AI services organization on that front. So to give you a view as to where we would like to take it to. And of course, that expansion and going from 12 to 10, we also want to complement that with an improving EBITDA profile, hopefully within a more economically sanguine Canadian telecom market. But we think the combination of the lower CapEx intensity and the improving EBITDA profile sets up a very strong free cash flow story of this organization on a chronic basis. And that's attractive for us from hygiene reasons like deleveraging to obviously value creation.

The next question is from Drew McReynolds from RBC.

Congrats, Doug, I wish you all the best and absolutely fabulous working with you. Two for me. I guess back to you, Doug, we're not letting you off the hook yet. On the TTech margins, obviously, a very good lift again in Q1 here. You alluded to AI and digital synergies, overall efficiencies. Are we still in the gradual margin expansion looking out over the next kind of 2, 3, 4 years as that revenue mix even within TTEC could evolve with potentially the data center, [indiscernible] coming in with a little bit more fors?Or do you see potential for maybe a little bit more of a step up at some point? And then second, I guess, back to you as well on the real estate monetization road map, Darren, thanks for the additional granularity there. Just wondering, kind of of that $4 billion, just how that kind of feeds into your pocket over time? What's the time frame looking like on that front?

So on the -- maybe I'll start with the second one first. So the real estate one will feed in over time. We have the commercial one that Darren referred to and a view of the residential ones will be more short term and then probably the remaining portfolio would be between the next 2 to 5 years over that time frame. So it's going to be a a smooth line, but there's definitely some upfront opportunities that will be more lumps on that end. On the margin side, some of the advantages we do have with our data center rollout as we own the end-to-end. We not only are owning the real estate, the chips, the operations. So our margins on that end, yes, will contribute and will be a benefit tailwind to where we're headed in the longer term. And I think when you think through or look at our restructuring in the first quarter, as we continue to shut down copper areas as we shut down 3G networks as we integrate from some of the older platforms to more digital and AI. Yes, there is an opportunity to continue on margin expansion. And especially as we realize the final benefits even through that real estate portfolio we talked about on shutting down COs and no longer having to keep those open for a small portion of our customer base. So I would expect that to continue. And we also have done significant items you'll see on pricing for and quality of loading, which I'm sure we'll continue to have our other leaders talk to.

If you look at the long-term view, Drew, we're postulating prospectively into the future, inclusive of what we do with Pure Fiber nationally of a cumulative circa $10 billion spend on fiber. And when you examine the real estate portfolio component, the $4 billion and then say, okay, with the development of that real estate portfolio, we've got a captive market for our telecom services with those customers that reside within that real estate portfolio that we have developed. And so we think that's roughly about $5.5 billion right there. fairly precise actually, another $1 billion as it relates to copper recycling activities. So that takes you up to kind of the mid-6s and then looking at certain commercial real estate monetization opportunities and things that we can do on subsidies like the broadband fund that's about another $1 billion in totality. So that gets you to just over $7.5 million on a cumulative $10 billion spend. So 3/4 of it is self-funded. And I think the discipline of doing that but also a point that Doug has made that the gift of fiber never stops giving. It's not just the new 100-year return on investment assets to replace copper the byproduct components of it, whether it's fiber supporting our wireless business or it's fiber freeing up real estate. The economics are tremendously attractive and they're double over TELUS because within my remarks, and I would encourage you to go out and benchmark us, but I don't think you'll find a fiber operator globally that post the type of pen rate that we do that has the 3.4x product intensity that has the unit cost that deserve the average revenue per account or per home or a lower churn rate. I think you'll find that globally, we're leading across all of those parameters. So we just like the holistic aspects of this business. And the other thing we thought was interesting, probably brought on by our frustration with the stock price, but we thought it would be an interesting thing to just take a U.S. fiber multiple looking at transaction and trading comps and apply it to TELUS' fiber business and you get a $20 billion result, and that doesn't reflect our superior operating attributes in that regard. So from a sum of the parts point of view, I think that's quite potent even if you just took that and added our spectrum value to it along the way.

[Operator Instructions] The next question is from Stephanie Price from CIBC.

Wanted to circle back on AI a little bit. And just regarding TELUS Digital and how it's enabling TELUS' AI strategy. Can you help us understand kind of the interplay between the different businesses at TELUS and what the opportunity is there with Telus Digital?

Sure. Maybe what I'll do, given the question, Stephanie, I'll let [indiscernible] kick it off, and he can provide the overview. And then Naveen can speak with specificity on the business unit front and as well [indiscernible]. So why don't we do that? Go ahead, [indiscernible]

Yes. Thanks, Darren, thank congratulations, Doug, as well. Stephanie, thanks for the question. I would think about the relationship in a couple of different ways. So one is TELUS Digital is an operational efficiency machine for TELUS and for all our clients, frankly. That is universal with everyone that we serve. And we do that in 2 primary ways. One is global optimization of the team; and then 2 is deployment of AI, right? And those things go hand-in-hand. They're not separate things. every piece of work that we do for TELUS is supported now by AI. You can think of the contact center is a prime example where as Darren mentioned, we are super focused on being the differentiated global player in CX AI. Every contact with a customer is supported by AI telling our agents, what is the best-in-class response? What is the best response that we've done over the years in this type of situation, right? And I think when you think about the evolution of it's going to be supporting humans is going to be the primary use case for us, and it allows our humans to work on much more difficult problems, and it allows our new team members to get up the learning curve much more quickly. So when we think about how we do that with TELUS, right, we're improving on first call resolution, save rates, product intensity, that's our living lab. And when we roll that out to clients, we're getting results like for U.S. telco, 25% reduction in AHT, 800 basis point improvement in customer NPS and with a tech hyperscaler 600 basis point improvements in quality, 23% improvements in CSAT. And we're using our agent trainer to get our 30-day production performance for new agents an improvement by 920 basis points. So these are step functions. I think there was a previous question to Doug on, is this a step function or linear it becomes more and more a step function over time as we get smarter and smarter. So by doing that and doing that with TELUS First, we're able to roll that out to clients. But it's not just supporting the cost efficiency of all of the TELUS enterprises. It's also going to market together. And so we are super tightly aligned with [indiscernible] team in TELUS Health, for example, bringing our solutions together, for example, to Alberta Health, where we're working on an agent digital front door together to support 5 million citizens in Alberta. So there's a revenue synergy as well as the cost synergy. And I'll hand it back to Darren.

[indiscernible], why don't you think a quick example and maybe say, you can wrap it up quickly thereafter.

Yes. Thanks, Darren. As as Darren said, we -- on the pure sovereign AI factory side, we've been partnering with [indiscernible] and our CIO organization. And the Rimouski factory is now sold out. And so we are excited to see that, but are anxious now to continue to build out our IDC or [indiscernible] data center. And that data center has a very strong funnel of opportunity ahead of us, and that funnel cuts across multiple segments. So there's customers in our enterprise space or public sector space, mid-market and many small start-up organizations that are keen to take advantage of our sovereign AI factory capabilities. And as Tobias said, in the B2B space, whether it's health, agriculture or TELUS business solutions, really strong alignment with to be on the go-to-market side around our professional services and digital transformation capabilities that we can offer our customers. And then just lastly, internally, in the B2B side, we are working with the TELUS digital team around our own AI and genetic implementations that are going to really help with an improved customer experience as well as margin expansion going forward.

[indiscernible]

Yes. Maybe a couple of things. Thanks for the question, Stephanie. I just wanted to highlight how that -- these efforts and synergies have been realized in our results. So it's not the first quarter, but for the last 24 months as we've seen margin compression, particularly in the consumer side of the business. that we've been delivering 5% and 10%, 5% and 10% quarter after quarter on cost efficiency quarter-over-quarter. And so the CX and AI relationship with TELUS Digital has been a material driver of that. As Tobias mentioned, there isn't really even one area of our business that we're not using AI at this stage. And then I would also say that we have leveraged TELUS Digital significantly on our own development activities. So we've had adjacent businesses that have been pressurized from cash flow like video, where we've had to pay licensing costs, and we've completely transformed those businesses into cash flow generating businesses. So and with greater flexibility to support our customers on -- across their portfolio of content needs as one example and doing the same thing on the automation and security front now. So all of that would not have been -- we would not have been able to do at scale and at speed without the support of TELUS Digital and the significant resource and scalable AI capacity that they provide.

And Stephanie, I think maybe one thing is not as well understood as it should be, and this is my fault as it relates to TELUS Digital. But given the massive size of the customer care market globally, looking at TELUS Digital's end-to-end AI capabilities, both how comprehensive they are and how technologically advanced they are and the fact that they've already got 700 clients on this front, many of them, blue chip clients without a shadow of a doubt, TELUS digital is the hyperscaler in the CX AI space.

That's great color. Doug, maybe 1 for you. And just to confirm, I think I heard you say that you're striving to be in the mid- to lower end of consolidated service revenue and adjusted EBITDA range. Did I hear that correctly? If so, can you elaborate on that comment a little bit?

Yes. Just when we see that some of the market pressures that we've experienced out of the gate is kept us closer to the middle to the bottom end of the range so far. We hope we can mitigate and see market opportunities to take it back up, but that's where we're currently trending.

Okay. Okay. Darren and Doug, congratulations on the phenomenal run at TELUS and all the best going forward.

The next question is from Vince Valentini from TD Securities.

Yes. A couple of things. First, on CapEx, as your peers strive to catch up with you, as you pointed out, they're giving a few data points. Bell yesterday said their wireless capital intensity is only 7% of revenue given the network sharing deal, is there any reason to think that TELUS shouldn't be able to operate in that same ZIP code?

We should be in the same ZIP code. I don't have the exact number on my fingertips, but we would not be far off. So when you're saying 10 overall, I mean, wireless is pretty much your biggest business still, you're really still spending quite a bit in other areas. And I assume the fiber-to-the-home part of the business requires minimal maintenance CapEx given how efficient and new that network is?

Yes. And customer loading has a higher capital investment on the wireline side. So there is a definite higher portion of capital going towards that.

Okay. And separately on wireline data, quite frankly, there's a lot of talk here about how great things are going in all these capabilities. And your wireline data revenue growth is less than 1% this quarter. It remains quite disappointing. I assume you would agree. Is -- can you give us a little more unpacking here of what the -- how big this enterprise repricing was to offset a data center that's fully sold out and all of the good things going on in consumer broadband, those are all totally wiped out by one enterprise contract that's repriced. And maybe you can just unpack it a bit more for us because I assume there's a better picture underneath the surface a little.

Yes. So the data center revenue in Q1 is actually quite low. We have sold it out. So the run rate going forward, you'll see more of an impact in that line. But from the ramp up and getting to being where we are today, Q1 had a minimal contribution. Second would be the business side has been improving from that negative trajectory that you highlighted that we've talked about for a few quarters now. And there is a little bit of pressure on the consumer side. But all of those looking to enhance with what we're looking at on bundling and continue to take it in the right direction. So I would expect that we can continue to show improvements in that area. I think this one this quarter, though, was not influenced by the data center and [indiscernible] is its way to a positive contribution on that front in the back half of the year.

Okay. Can I just add one last. You mentioned something about a a press release or some sort of announcement on Monday related to data centers. I mean, if you're going to float it here on this call, can you maybe just level set. Is this some sort of massive new facility or a contract that could be coming? Or are you talking about just some sort of government partnership or customer wins within existing facilities you've already announced.

It's significant. It's developmental, and it's in collaboration with the public entity, and I think I'll leave it there, [indiscernible] that long that you have to wait.

Karl, we have time for 2 more questions.

The next question is from Maher Yaghi from Scotiabank.

Great. First, I would like to wish both of you, Darren and Doug, a great retirement, and it was an honor to have interacted with you all these years. My first question is on your guidance. So you are looking to deliver 2% to 4% growth on EBITDA, $2.5 billion, $2.45 billion in free cash flow. In Q1, you delivered flat growth on EBITDA and $600 million on free cash flow. I would love to hear from you what are the key inflection points you're monitoring in your 3 business segments that gives you the confidence in achieving the middle, let's say, of your guidance range? And where do you see the most execution risk or market sensitivities that could drive outcomes towards the lower end of the guidance.

Yes. If you look at all of the biz lines. I would say they're all at an inflection point. We just talked about business data and and the biz side, showing more progression into the back half of the year. We saw organic health being a little bit lower and gaining momentum to the back half of the year. we talk the data centers on where that is going and that there was minimal impact of that in Q1. And I would say you then have TELUS Digital, which also has got to more opportunity on the AI growth trajectory as we go throughout the year. So I think all the areas have contributions that I would say will continue to evolve as the year progresses. I think the highest level of risk is probably the obvious one of above-the-line market intensity and wireless. And I think -- that would be the -- probably the most influential for the rest of the year should it take any negative turn.

[indiscernible], would you want to top up on that? Maybe [indiscernible], if you want to add something as well. But Dan, why don't you lean in on this.

Yes, sure. So maybe I'll talk about a couple of the inflection points with a little bit more color, Vince. So I would say maybe the first one I will talk about is that on the wireless side, as Doug highlighted, really, we are focused all about the base. So trying to drive premium value to the base. And I think you see that trajectory in our and in our network revenue. We had to forsake net through the last half of March, as you've seen the churn performance is not indicative of anything this organization has ever delivered. And we lost some share at the lower end of the market, but we continue to build at our premium level and not let that get diluted. And so where the market pressure would impact those results is if you had to put in subsidy in the flanker side at a premium level and bring the premium down. And that is the one trend that we have to really avoid overall. And so in the wireline side, I think we don't talk as much about some of the similar pricing pressure and commoditization that has occurred. And even though we have a premium asset, I think we haven't played it to be a premium asset as much as we could. And you'll see that change in terms of the way that we differentiate our Internet product going forward with the way that we deliver customer-friendly value propositions on service, on pricing certainty and in terms of video and automation capabilities that we can integrate into the product. So those are the things that we will push to drive a premium outcome, and we have more market to grow into. And so our base and our bundle will be the drivers of those points of inflection.

And just a follow-up on Slide 15 of your deck and in your prepared remarks, Darren, you reiterated the sustainability of your dividend and the deleveraging road map that you have set in motion. I wanted to ask you I'm not going to ask you what the new management and the Board might do on dividend policy in the coming months. But I wanted to ask you, what would you be monitoring or what could change -- what changes could take place that would derail achieving those free cash flow targets and the sustainability of the dividend?

Okay. Mark, I think it's important that I'm specific on the correction of what was in my prepared remarks. It wasn't related to the sustainability of the dividend that was related to the pause on the dividend while we address our deleveraging activities. So I wasn't making a foreshadowing on that particular front. It was related to pausing the dividend for a number of reasons, but most particularly, so that we could focus stridently on addressing our immediate deleveraging goals. Also at the end of the day, when you're looking at the dividend yield I think addressing that as we address the future stock price improvement is the synchronous way to tackle that. To answer your question specifically in terms of parameters. Number one, I would continue to track how well the company does on deleveraging first and foremost. I think it's not just AI or statistical analytics where the past can be a leading indicator of the future. But when you're looking to make it a termination on how well we'll do on deleveraging prospectively. I think it's good to draw inference from what we've achieved thus far on the deleveraging front. I think we've made excellent progress whether it's the junior subordinated debt or whether it's the creation of Terrion. We've got good momentum on that front, and we are ahead of our plan as it relates to net debt to EBITDA. And I think the trend line towards 3.3 and 3.0 is exceedingly strong. So I think you should draw some confidence to that effect. And the thing that I think is important to also to point out is the comparative aspect of I would argue that we have the best balance sheet in the industry. When you look at our net debt-to-EBITDA position versus our peer group, I would be hopeful that the holistic debt load on the industry would drive more sanguine pricing behavior and a more disciplined approach to overall economics, which would help everyone on the deleveraging side of it as well because net debt-to-EBITDA is a quotient. It's not a singular parameter related to the debt itself. And I think the quicker people get seized of that reality, the better we will all do within Canadian telecom. The second thing I would look at is we have been pretty good at giving forward-looking guidance. And I would say we've been pretty good at delivering against forward-looking guidance. And so following a discussion with a number of investors and discussions, including [indiscernible] on this particular front. We listened to the investor advice and we came forward with a forward-looking view on free cash flow. That was not something that originated within TELUS. It originated with feedback from both the buy side and the sell side. on that front. And so that's why we did it in terms of 10% compounded free cash flow growth through 2028, and we intend to deliver against that. Again, I think in terms of figuring out what we're going to do on capital allocation. FCF is a good leading indicator. And I'm pleased that we've got 2026 off to a good start with a 19% pure free cash flow growth rate. And it's a nice positive corollary to my frustration that we're not aiding and abetting it EBITDA expection. I would have like to have seen that as well within Q1 but market conditions right now. have been a bit challenging. So I would expect continuity in that regard. And I think, again, that's indicative of what will come on capital allocation. Third thing would be our monetization strategy. So we've got to look at, that's inclusive of Terrion within that number, the almost 1.3 that we did there. But if we continue to make good progress on monetizing assets, and we're in the midst right now of distributing a confidential information memorandum as it relates to a particular line of business on the TELUS Health front, where we have no shortage of interested parties. I think that speaks well for latitude on capital allocation prospectively. And when TELUS puts its mind to execution, I think we execute pretty down well. And the core team will do exactly that on the telehealth monetization. But we have a plethora of additional monetization opportunities over and above that along the way. Next thing I would look at is business performance. Everything that we're talking about here, deleveraging, FCF growth, monetization, [indiscernible], and capital allocation they're all just by products as to how well is the business doing? Are we generating revenue? Are we making a profit? Are the business operations are we generating good quality of earnings along the way. So the health of the business, wireline, wireless, looking for performance on the emerging growth side I would say that overall health of the business is also a leading indicator. And then finally, there's no one that wants to give the Street clarity on capital allocation more than I do. But I'm part of TELUS' past. I'm not part of its future. And -- my Zio on clarity has a pecking order, but let's just say whether it stay the course or make an adjustment I would like clarity one way or the other. I think that would be a very, very, very healthy thing for the organization. So make it call, stay the course or make a call and do a cut either way, I think that's good for the company. I have a personal view as to what I would do if that was something that was participating in, but I won't be here. We've got a talented administration coming in. We've got an experienced administration coming in. They're familiar with our business from opportunities through the challenges. I know in the head and in the heart, the incoming administration and the Board wants to do the right thing for this organization on a sustainable basis. So we're going to need to give them the time to do that. And I'm sure in the not-too-distant future, you'll get the adjudication that your desires of.

congratulations to both of you on your retirement.

And that last answer came from both the head and the heart. So there you go. Thank you, [indiscernible], through the hour, so we'll end it there. Thank you for everyone for joining the call today. Please reach out to the IR team with any follow-ups that you may have. Thank you.

Ladies and gentlemen, this concludes the TELUS 2026 Q1 Earnings Conference Call. Thank you for your participation, and have a nice day.

Hello, everyone, and welcome to the 2026 Annual General Meeting for TELUS Corporation.

[Interpreted] Welcome to our [ '26 ] annual general meeting for TELUS Corporation.

My name is John Manley and I'm pleased to be your Chair for this meeting of the TELUS shareholders. I'd like to begin by acknowledging that I'm speaking to you today from the territories of the Musqueam, Squamish and Tsleil-Waututh nations. We recognize that TELUS work spans many territories and treaty areas across the country. For everyone joining us virtually today, I also want to acknowledge the lands on which you are living and working.

As a corporate leader in advancing reconciliation, TELUS was the first technology company in Canada to launch an Indigenous Reconciliation Action Plan. This plan reflects insights from indigenous peoples, including our TELUS Indigenous Advisory Council, the communities we serve and the partners that we collaborate with. Access to connectivity is the foundation of our plan, and we are proud to have connected 90% of premises in indigenous communities to TELUS networks in our serving areas.

Once again, this year, we are using technology to enable shareholders to attend virtually via a live webcast. This ensures that everyone can participate equally regardless of geographic location while eliminating the environmental impact of travel. As well, please note that this meeting is available in French and portions of my speech will be in French. If you're listening in English, you will hear the translation. To listen in French, please click the Stream Language button in the bottom right corner of the screen. Lastly, closed captioning is available for our meeting by selecting the icon in the upper right-hand corner.

This year marks a historic transition for this organization. As we recently announced, after 26 years of exceptional leadership, Darren Entwistle is retiring at the end of June. During his tenure, Darren transformed TELUS from a regional carrier operating in just 2 provinces into a global technology powerhouse spanning 45 countries. Under his leadership, TELUS built world-leading broadband and AI infrastructure, expanded our business portfolio and fostered a culture of excellence at TELUS that will stand the test of time.

Most importantly, Darren proved over his tenure that commercial success and social impact are not mutually exclusive. He firmly established social capitalism as our core operating principle. Since 2000, TELUS and its team members have generously devoted $1.85 billion in value, including 2.5 million days of volunteerism in local communities. Darren's leadership, his commitment to innovation and his passion for our business, our people and our customers have established a strong foundation for growth at TELUS. He will be remembered as one of the greatest business builders in our industry globally.

Darren, you're here with us in the room today. On behalf of the entire Board of Directors, I want to extend our deepest appreciation for your immeasurable contribution to TELUS over the last quarter century. In recognition of his contribution over so many years, Darren will hold the title of CEO Emeritus.

Following a comprehensive succession process, Victor Dodig will assume the role of CEO on July 1. We're thrilled to welcome Victor to the role of CEO at TELUS. He served on our Board since 2022 and brings a deep understanding of our industry, our strategy and our culture. Victor is an exceptional leader and brings an unparalleled track record of positive transformation and value creation to the role.

Over 3 decades at CIBC, he transformed the bank into a modern customer-oriented and digitally focused institution. To ensure a seamless handover, Darren will serve as an adviser to Victor until April of 2027. Importantly, Victor inherits a company operating from a position of strength. While we recognize our 2025 share price did not reflect our fundamental health, our team delivered industry-leading results in a highly competitive market. We consistently outperformed our peers by achieving the highest customer net addition, lowest postpaid churn, and unmatched free cash flow growth alongside record low capital intensity.

As we navigate this leadership transition, please be assured that the Board and Victor are building on a strong foundation here at TELUS and focused on creating value for you, our shareholders. Victor joined the TELUS executive team on May 1. He will take the next several months to dig deeper into the business and begin developing more specific views on key issues of our strategy and growth plans, and you can expect that Victor will offer his initial impressions on this during our Q2 earnings call in late July.

[Interpreted] As a global technology leader, we remain committed to delivering measurable environmental, social and economic results whether it be revolutionizing health care to support more than 161 million people worldwide or bridging the digital divide or becoming the most sustainable telecommunications company. According to Time Magazine, we rely on innovation to drive positive change at scale driven by our unwavering commitment to our social mission. We leverage our technologies to fundamentally improve the quality of life for the communities that we serve.

Now I'd like to formally introduce the people joining me here today to help conduct this meeting. First, Darren Entwistle, our President and Chief Executive Officer. We also have Andrea Wood, our Executive Vice President and Chief Legal and Governance Officer. Andrea will be acting as the Secretary of this meeting. Assisting us today is Chris Main, our Associate General Counsel and Assistant Corporate Secretary. Chris will act as our moderator for any questions during the formal portion of the meeting. And finally, Jill Schnarr, our Chief Communications and Brand Officer, who will moderate the question-and-answer session following the meeting.

Now before we begin the formal business, please read the cautionary statement on your screen. Today's meeting will contain forward-looking statements. These are based on assumptions and subject to risks including those described in our public filings, and actual results may differ materially. We may also use non-GAAP measures to discuss our performance. Details can be found in our annual report and our Q1 financial disclosure. Now before we call the meeting to order, I'd like to invite Darren to share some remarks. Darren, the floor is yours.

Thank you, John, and hello, everyone.

[Interpreted] Welcome to our Annual General Meeting, and thank you.

I'd like to take this opportunity to extend our sincere gratitude to Doug French, TELUS' Chief Financial Officer, who, as we announced earlier today, is retiring at the end of June. Doug has had a truly extraordinary career, and I feel exceedingly fortunate to have worked alongside him for 26 of his 30 years at TELUS. Throughout his storied tenure, Doug has demonstrated an outstanding ability to support TELUS in generating leading results, balance sheet and cash management alongside world-best shareholder value creation. As one of North America's most respected and experienced CFOs, Doug leaves behind him an extremely impressive legacy of success. He is truly one of a kind, and we will miss him dearly.

I'd also like to take this opportunity to congratulate Gopi Chande on being named TELUS' new CFO effective on the first of July. Gopi has considerable CFO experience with TELUS Digital as well as nearly 3 decades of strategic financial leadership, and she'll fit in well in this role. TELUS and our shareholders are in very good hands with Gopi.

Let me now return to my formal remarks. As I look back on what we've built together over the past 26 years, I feel tremendously grateful to have been part of the TELUS team. During my remarks, I'll reflect not only on our 2025 results and in terms of what we delivered in Q1, but also take the opportunity to reflect on our extraordinary journey that we commenced back in 2000.

[Interpreted] Here's an overview of the past 26 years.

TELUS has consistently led our peer group across key growth parameters.

[Interpreted] TELUS has constantly dominated in its [indiscernible] industry.

Since 2000, TELUS' revenue growth has increased by 242%. EBITDA, the growth has more than doubled to $7.4 billion. Free cash flow has increased by 1,666% to $2.2 billion through 2025. Customer connections have grown by 383% from 4.3 million to over 21 million today. Total shareholder return has grown by 661% leading all telcos globally. And TELUS' enterprise value has increased by 428% since 2000 to $55 billion. These achievements illustrate TELUS' unparalleled track record of execution excellence while reinforcing our consistent leadership when compared to our global peer group. In addition, our TELUS team has evolved from a regional telecommunications provider with 25,000 employees in 2 provinces and 2000 into a world-leading data technology organization operating in 45 countries with over 133,000 team members today.

[Interpreted] What a remarkable transformation.

In 2025, our team once again led our industry and global peers in respect of key financial and operational metrics, almost on an exhaustive basis. These achievements outlined on the accompanying slide illustrate your company's unparalleled track record of execution excellence demonstrated by TELUS' leadership across nearly every financial and operational performance parameter. By way of example, in 2025, we added an industry-leading 1,081,000 new customer connections, surpassing the 1 million mark for the fourth consecutive year. Owing to our team's long-standing commitment to customer service excellence, TELUS consistently realizes world-leading client loyalty.

[Interpreted] Customer loyalty is unparalleled in the world.

This includes a full year 2025 postpaid churn rate of 0.97%. This represents our 12th consecutive year of churn being under 1%, which is truly an unparalleled accomplishment within the global telecoms landscape. We also achieved our full year public guidance, with TTech adjusted EBITDA delivering industry-leading growth of 3.1%. In addition, we delivered almost $5 million (sic) [ $5 billion ] in cash from operations and notably delivered record consolidated free cash flow of $2.2 billion, which represents an increase of 11% over the prior year, exceeding our annual target. This builds upon the 12% and the 38% free cash flow growth we delivered in 2024 and 2023, respectively. These are but a few of the highlights from 2025.

Now let's turn and have a look at our first quarter results. In Q1, your company realized industry-leading customer net additions of 262,000. Consolidated operating service revenue growth of 1%, also industry-leading. Industry-leading postpaid mobile churn of 1.06%, industry-leading blended mobile churn of 1.35%, industry-leading mobile phone lifetime revenue 13% better than our closest competitor, driven by our churn leadership, and finally, industry-leading strong free cash flow growth of 19%. This growth is powered by our world-leading 5G plus and pure fiber networks, which continue to differentiate TELUS meaningfully from the competition and drive long-term shareholder value creation Our company's ongoing and future success is also supported by the innovative and differentiated growth areas of our business.

[Interpreted] Our activities are unique in our [ set ].

By way of example, TELUS Digital's world-leading capabilities and digital customer experience solutions and AI innovations are highly complementary to our strategy at TELUS, helping to drive our customer experience leadership and industry best loyalty results for over 2 decades on a highly cost-efficient basis. In 2025, we completed the privatization of TELUS Digital, including access to TELUS Digital's strong cash flow generation of $170 million per annum. Notably, this transaction will generate approximately $150 million to $200 million in annualized cash synergies through operational efficiencies.

Indeed, through the first quarter of 2026, we have realized annualized free cash flow synergies of approximately $115 million thus far. These include accelerated AI-driven automation. These include business simplification, and these include strategic cross-promotion of services with TTech and TELUS Health. The organic cash flow of TELUS Digital plus the aforementioned cash synergies means that we will have a short payback period on the privatization and a strong financial return prospectively. TELUS Digital is uniquely positioned to provide TELUS and our clients' complete end-to-end AI solutions. From AI transformations through to compute needs with a special differentiating emphasis on world-leading CX AI.

Indeed, with these unique capabilities across the entire value chain of AI, we have created prescient and meaningful new revenue streams for TELUS. TELUS Digital is also leveraging TELUS as an innovation lab to commercialize cutting-edge AI-enabling capabilities for our external clients. These initiatives further strengthen our financial performance, and they support high-impact opportunities to create significant shareholder value in the years to come.

[Interpreted] That means our shareholders will benefit from this value creation for a long time.

The monetization of our refurbished legacy data centers into sovereign AI factories is also creating new revenue streams whilst positioning TELUS and TELUS Digital as the trusted partner for businesses seeking secure sovereign AI computing infrastructure and capabilities. Notably, our sovereign AI factory in Rimouski launched in September 2025 as Canada's first fully sovereign AI factory. The facility, which was named the fastest and most powerful supercomputer in Canada and 78th globally by Top500, is now sold out. This clearly validates the strong market demand for sovereign AI infrastructure and compute capability. Accordingly, we are expanding our compute inventory in Rimouski whilst our second facility in Kamloops will be coming online shortly to serve the expanding ecosystem of Canadian and American businesses, researchers, entrepreneurs and government organizations seeking sovereign AI capabilities and compute power. Speaking of emerging growth, TELUS Health has experienced significant expansion.

[Interpreted] TELUS Health growth is exceptional.

This is reflected in our strong financial performance with increases in revenue and adjusted EBITDA of 15% and 22%, respectively, for the 2025 financial year. This builds upon TELUS Health's EBITDA growth of 18% in 2024 and 36% in 2023. Indeed, TELUS Health's data-centric services now enhance circa 170 million lives across 200 countries and territories. Moreover, TELUS Health has increased revenue from $245 million back in 2008 to $2 billion in 2025 and is targeting EBITDA of over $400 million in 2026. Furthermore, when combined with TELUS Health's lower capital intensity, this business drives strong cash flow generation and serves as a strategic capital contributor to TELUS' overall capital allocation priorities. By way of illustration, we are targeting more than $200 million of simple cash flow in 2026 coming from TELUS Health. Thanks to our consistently strong results, TELUS has delivered significant value for our investors over the past quarter century.

[Interpreted] TELUS creates values for investors.

Since 2000, TELUS led all telcos globally with a total shareholder return of 661%. This is 228 percentage points ahead of the second place global telco and outpaces the MSCI World Telecom Services Index and S&P/TSX by 601 and 111 percentage points, respectively. Since 2000, TELUS has returned approximately $31 billion to shareholders.

[Interpreted] TELUS has generated returns of $31 billion.

This includes circa $26 billion in dividends and more than $5 billion in share repurchases, representing some $20 per share. These consistent returns are one of the ways we enable better outcomes for the families, pensioners, businesses and individuals who invest in TELUS.

[Interpreted] TELUS team members are the third largest shareholder group.

Our TELUS team is also strengthening our balance sheet through our de-leveraging program, a de-leveraging program that is ahead of plan. Notably, in 2025, we completed $7.3 billion in junior subordinated debt issuances, providing 50% equity recognition to support balance sheet flexibility. Additionally, we partnered with La Caisse to create Terrion, a dedicated wireless tower infrastructure operator, led by the excellent Eros Spadotto, reducing TELUS' net debt by $1.26 billion and giving us a strategic asset for the future expansion of wireless infrastructure in Canada.

These efforts reinforce our progress in respect to de-leveraging with our leverage ratio improving to 3.4x as of the end of 2025 and expected to reach circa 3.3x or lower by the end of 2026 and 3x or better by the end of 2027. Throughout the remainder of 2026, our team will pursue additional opportunities.

[Interpreted] And more business opportunities await.

This includes accelerated monetization of real estate and copper assets as a positive byproduct of our extensive fiber build and as well exploring strategic investors for TELUS Agriculture & Consumer Goods alongside TELUS Health. Throughout 2025, we continued to expand TELUS' world-leading broadband networks, which are the backbone of our digital economy and societies.

[Interpreted] Our networks are essential for our society and digital networks.

Indeed, the connectivity we provide improves the lives of Canadians by enabling teleworking, online health care and education flexibility. It drives heightened productivity, innovation and competitiveness for our country and it supports transformational change in remediating our environment, advancing agriculture efficiency and bridging socioeconomic and geographic divides. Today, we are announcing plans to invest an additional $66 billion in new technology, infrastructure and operations across Canada through 2030, that creates new high-quality jobs in Canada. This critical infrastructure is the 21st century equivalent to building railroads and highways that connect our country, and it underscores TELUS' commitment to always be building Canada.

[Interpreted] At TELUS, we're building the future of a country.

Impressively, TELUS has put to work almost $300 billion nationally since 2000. To put this into perspective, these investments represent the financial equivalent of constructing 84 Canadian Pacific Railways. 58 St. Lawrence Seaways, 27 Trans-Canada Highway systems from coast to coast or 8 Trans-Mountain expansion pipelines. As a result of these sustained investments over the past 26 years, TELUS has transformed our regional wireless network in BC and Alberta from basic first-generation voice services into one of the most advanced, high-quality 5G networks in the world.

[Interpreted] TELUS has the best 5G network in the world.

TELUS' world-leading 5G network now reaches more than 90% of Canada's population. Moreover, it was recognized by U.K.-based Opensignal as Canada's most awarded network in 2026 and the most awarded network ever. Since 2000, our wireless customer base has grown by over 1,200% from 1 million clients in BC and Alberta to nearly 15 million across Canada today.

Turning to wireline. In 2013, we undertook a unique transformational program to build a best-in-class fiber network that would replace aging copper in British Columbia, Alberta and Eastern Quebec. Today, thanks to the hard work and the engineering skill of our team, over 99% of our eligible legacy Internet and TV customers have migrated to TELUS PureFibre, the fastest most robust communications technology in the world.

[Interpreted] PureFibre is the fastest internet technology in the world.

TELUS, your company, is the best-performing fiber operator globally, as evidenced by our leadership in respect of market penetration and product intensity, customer loyalty, cost to serve, and lifetime revenue per account. Indeed, our TELUS PureFibre business is a significant strategic asset valued at approximately $20 billion based on comparable fiber infrastructure asset valuations in the United States. This valuation reflects the substantial capital invested in building Canada's most extensive fiber to the home, fiber to the business network, and it underscores the competitive moat and long-term value creation potential of TELUS' broadband infrastructure without even taking into account TELUS' best-in-class performance metrics in this regard.

In 2025, we advanced our national broadband wireline strategy with the expansion of TELUS PureFibre in the provinces of Ontario and Quebec. In doing so, we will leverage fiber wholesale access whilst making smart, targeted investments to build our fiber network in select significantly sized markets that are currently not served with fiber infrastructure. Backed by a $2 billion investment over the next few years, TELUS is entering these markets with a markedly different approach. Customers in these markets will benefit from TELUS' attractive bundles of home internet, entertainment and wireless packages as well as new unique services, such as AI-driven smart home energy management, next-generation home and mobile health care, affordable AI-driven home security and powerful home automation capabilities.

Impressively, TELUS has earned its way to becoming the market share leader in wireline services in Western Canada. Our internet market share has expanded from 8% back in 2000 when Shaw had 80% market share overall to a leading 51% market share today, realized, delivered and exemplified by TELUS.

Similarly, both TV and Security had 0% market share in 2000 for TELUS. 26 years later, TELUS is the market leader in both of these product lines with TV having 48% market share and Security earning 60% market share.

[Interpreted] TELUS is a market leader in web, television and security services.

Moreover, our wireline customer base has grown by 96% to more than 6.3 million clients today. As our company's customer base has expanded exponentially, so has our brand resonance with consumers. Notably, our beloved TELUS brand has increased in value from a few hundred million dollars in 2000 to nearly $12 billion today. This has earned TELUS recognition as Canada's most valuable and reputable telco brand by Brand Finance. Perhaps, the most important accomplishment of all over the past quarter century is what our TELUS team is achieving on the social purpose front.

Together, we have set the model and standards for other businesses and their employees to emulate and join us in making the world a better place. Since 2000, TELUS has generously devoted $1.85 billion, including 2.5 million days of volunteerism, which is more than any other company in the world.

[Interpreted] TELUS is the most generous company in the world.

This month, we are celebrating our 21st annual TELUS Days of Giving. What began in 2005 with 5,000 volunteers in Canada has grown to 90,000 volunteers now across 35 countries. Another important part of our legacy is the TELUS Friendly Future Foundation.

[Interpreted] The Foundation is a significant part of our heritage.

TELUS made history when we established the foundation with a $120 million endowment from TELUS. This gift was funded by the profit TELUS made in developing and monetizing our TELUS Garden headquarters in Vancouver. The foundation makes a meaningful difference in the lives of young people across the globe.

[Interpreted] The foundation helps youth from around the world.

This is exemplified by the creation of the TELUS Student Bursary program in 2023, the largest bursary fund in Canada.

[Interpreted] It's the biggest scholarship program in Canada.

To date, the foundation is dispersed $6 million in bursaries to 2,000 postsecondary students in need of financial assistance who are volunteering in their communities and making a difference with much more to come. This is a potent illustration of TELUS' world leadership in social capitalism and our belief that doing well in business and doing good in our communities are mutually inclusive.

[Interpreted] Succeeding in business and doing some good in for communities, these things go hand in hand.

This is but a sampling of our TELUS team's outstanding achievements throughout 2025 and over the past 26 years. On behalf of our team members and retirees worldwide, I would like to express my deepest gratitude to our shareholders, customers and community partners for your continued support and patronage.

[Interpreted] Thank you for your support.

As my tenure as CEO draws to a close, I would like to once again extend a warm welcome to Victor Dodig who will assume the role of TELUS' next President and CEO on the first of July. I would also like to extend my heartfelt appreciation to our amazing TELUS team across the globe for embracing our values and making the world a better place and TELUS a better company. And thank you as well for what our employees have done for creating value for customers and investors alike. The success our company has realized belongs to each of our TELUS team members. The extraordinary individuals who have created so passionately the exceptional culture that truly sets TELUS apart.

[Interpreted] It's our teams that set us apart from rest.

To be a part of this team and to support them has been an honor of a lifetime. And I remain extremely excited for what the future holds for TELUS and our team members.

[Interpreted] It's been an honor to be part of the TELUS team.

Thank you. I'd now like to welcome Andrea to review today's agenda and outline some procedural matters. Andy, over to you.

Thank you, Darren, and thank you for your remarkable 26-year commitment to TELUS and to Canada. Good morning, everyone. As outlined on the agenda, we have a few business items to cover today. In addition to tabling our financial statements, there are 4 motions that we will be voting on. Once all of the motions have been voted on, we will announce our preliminary voting results, and the legal business of the meeting will come to a close. If you have any comments not related to the business of the meeting, please save them until our question-and-answer session after the meeting.

Let us now turn to the meeting procedures. I'm pleased to advise that we have the necessary quorum. The preliminary scrutineers' report indicates that approximately 39.47% of the shares are represented here today at this meeting. I will add the final scrutineers' report to the minutes of the meeting when available. We have also received a declaration of mailing from Computershare confirming that it sent notice of today's meeting to all registered holders of TELUS shares as well as a notice advising them that the information circular was available online for viewing or downloading. I'm tabling the declaration and will add it to the minutes of this meeting. Back to you, John.

Thank you, Andrea, and I declare this meeting to be properly constituted. I'd like to appoint Stephanie Tuss and Stephen Bandola, representatives of Computershare as scrutineers for this meeting.

Let me now introduce the 14 Board members standing for reelection. Biographical information for each nominee can be found in our information circular. I am honored to serve as the Chair of the TELUS board. I've already introduced Darren Entwistle, our CEO. Darren will continue to serve as a director until his retirement on June 30, 2026.

Our other nominees include Ray Chan, Hazel Claxton, Lisa De Wilde, Victor Dodig, Tom Flynn, Mary Jo Haddad, Martha Hall Findlay, Christine Magee, David Mowat, Marc Parent, Denise Pickett and Sean Willy.

Let's now proceed with those matters that require a vote at this meeting. Andrea, would you please explain the voting procedure?

Yes. Thanks, John. Voting on the 4 resolutions will be conducted by an online poll, which I will explain shortly. But first, I would like to table TELUS' audited annual financial statements for the year ended December 31. These are included in our 2025 annual report. Our annual report was made available to shareholders on April 2 and can be accessed online at telus.com/AGM.

Now let me explain some of the basic features of our virtual meeting platform and how you can vote at our meeting. When you're logged in today, you should see the information screen displayed on the left and the broadcast window on the right. Here, you can view information about TELUS and ask questions.

To see our slide presentation while you're listening to the webcast, simply click the broadcast window on the right. Registered shareholders or validly appointed proxy holders may vote on the 4 items of business. We have asked [ Jon Poirier], a shareholder to make motions today. This is intended to make the meeting flow more smoothly. When the Chair declares the poll is open, you will see a Voting icon on the left of your screen. Within the window, you will first see the list of nominated directors followed by the other 3 items of business at today's meeting.

To vote, select one of the voting options. Your response will be highlighted, and it will be cast once the voting period is over. To change your vote, simply select the other voting option. If you'd like to cancel your vote, press the Cancel button below. In order for your vote to be properly recorded, it is important that you remain connected to the internet at all times. John will open the poll on all 4 items of business at the same time. This will give you ample time to vote while he introduces each resolution.

Now let me explain the procedure for asking questions. Note that only registered shareholders or validly appointed proxy holders are able to ask questions. When you wish to ask a question, please select the Messaging icon on the left of your screen and type your question in the chat box to the right of it, click the Send button and you should receive a confirmation that your message has been received. We ask that you please be concise and address only one topic per question.

If you have a question related to the resolution that's being moved, please submit it at that time. Once shareholders and proxy holders have had a reasonable opportunity to express their views, both for and against the matter, in the interest of keeping to our schedule, John may end the discussion. If you have a general question that's not related to the resolutions, please wait until after the formal business of the meeting to submit it. We will be monitoring all questions submitted, and we will relay them to John. If there are many similar ones on the same topic, we may pick one or we may summarize the nature of the questions.

All shareholder questions are welcome. However, we will not address those that are irrelevant to the business of the meeting or to TELUS' operations that are related to nonpublic information about TELUS or that are derogatory to individuals or otherwise offensive to third parties. Any questions that are personal in nature or related to customer service will be directed to a representative. We'll be in touch with you by e-mail after the meeting. We also invited shareholders to submit questions prior to today's meeting while they voted their shares electronically through the investorvote.com website.

Any questions that cannot be answered today due to time constraints will be answered and posted on telus.com/AGM. The questions and answers will be available within one business day of today's meeting, and they will remain online for one week.

We will now turn to the first item of business to be voted upon. John, over to you.

Thank you, Andrea. I will now open the polls for all 4 items of business. Please feel free to vote while I am speaking on each of the items.

The first voting item is the election of directors for the upcoming year. The Board has set the number of directors at 14. In addition to the senior executive and strategic leadership experience the Board requires of each director, the 14 nominees I listed earlier in the meeting represent a diverse cross-section of experience and background. They've all agreed, if elected at today's meeting, to help direct the future of TELUS for the next year. Darren will continue to serve as a director until his retirement on June 30, 2026. Further to our advanced notice requirements for director nominations, Andrea has advised me that no additional nominations were received.

May we please have a motion for the nomination of these 14 individuals?

I move that the 14 individuals nominated in the information circular be elected as directors of the company to hold office for the ensuing year.

Thank you, Jon. Chris, are there any questions on the election of directors?

There are no questions, Mr. Chair.

Thank you, Chris. And for the election of the directors, you will see the names of all 14 nominees, please scroll down to ensure you have voted on all 14 nominees. To cast your vote for a nominee, please select for. To withhold your vote from a nominee, please select withhold.

The next item of business is the appointment of our auditors for the ensuing year. The recommendation to appoint Deloitte LLP was made by the Audit Committee of your board and supported by the board. May I please have a motion for the appointment of the auditors?

I move that Deloitte LLP be appointed as the auditors of the company for the ensuing year at a remuneration to be fixed by the directors.

Thank you, Jon. Chris, are there any questions on the appointment of the auditors?

There are no questions, Mr. Chair.

Thank you, Chris. To cast your vote for the auditor's appointment, please select for. To withhold your vote, please select withhold.

The next item of business is a motion to accept, on an advisory basis, our approach to executive compensation. Our compensation program strongly links executive pay to actual performance and aligns compensation with corporate success and shareholder value. Additional details of our executive compensation program can be found in our information circular. We value your feedback -- your direct feedback, on the company's executive compensation approach. And the Board will consider the results of this vote when evaluating future compensation policies, procedures and decisions.

May I please have a motion to approve our approach to executive compensation?

I move that the shareholders approve, on an advisory basis, the approach to executive compensation disclosed in the company's information circular.

Thank you, Jon. Chris, are there any questions on the vote on executive compensation?

There are no questions, Mr. Chair.

Thank you, Chris. To cast your vote for the say-on-pay resolution, please select for. To vote against this resolution, please select against.

The next item of business is a motion to increase the share reserve under our restricted share unit plan. The RSU plan helps align the interest of management with those of shareholders by providing incentive compensation based on the value of TELUS shares. The increase in the maximum number of shares reserved for issuance under this plan is required as a result of the TELUS Digital privatization and the resulting increase in the number of team members who may participate. This resolution must be passed by a simple majority of the votes cast by holders of shares.

May I please have a motion to increase the share reserve under the RSU plan?

I move that the resolution set out in the information circular regarding the increase to the share reserve under the company's restricted share unit plan be approved.

Thank you, Jon. Chris, are there any questions on the RSU plan resolution?

There are no questions, Mr. Chair.

Thank you, Chris. And to cast your vote for the RSU plan amendment, please select for. To vote against this resolution, please select against.

We'll now continue with the voting. If you've not already done so, please vote on all 4 items of business. I'll give you some additional time to finalize your votes.

[Voting]

Thank you. I declare the poll closed on all 4 items of business. Thank you for participating. The scrutineers will now tabulate the results and we will disclose the official voting results shortly after this meeting. However, based on the proxies that we have received to date, we can confirm the results of the votes today.

On the first motion, the election of directors, the 14 nominees listed in the information circular are elected.

On the second motion, the appointment of auditors, Deloitte LLP, has been appointed as the company's auditors.

On the third motion regarding the company's approach to executive compensation, the company's approach has been approved.

And on the fourth motion, the amendment to the RSU plan, the resolution has been approved.

The official results of the meeting will be available on sedarplus.ca and on telus.com following today's meeting.

Now that we've completed the formal items of business for this meeting, I declare the meeting terminated, and we will move on to the question-and-answer session. If not done already, I invite shareholders and proxy holders to submit their questions online. As Andrea noted earlier, you can select the Messaging icon on the left of your screen and type your question or comment in the chat box to the right of it. Please remember to press Send, and you should receive a confirmation that your question has been received.

We'd like to remind you that shareholders are always welcome to ask questions throughout the year, not just at this time of the year, by e-mailing us at [email protected] or by e-mailing our Investor Relations team at [email protected]. We try to respond to every inquiry, whether directly by e-mail or by making sure the appropriate TELUS team member gets back to you.

Let's have the first question, Jill.

Thank you, John. We have time for one question only. We have a question from Francis, who asks, "Could you detail the measures that TELUS intends to take to achieve the target of reducing the net debt-to-EBITDA ratio to 3.0x by 2027?"

Thank you, Francis, for the question. Much appreciate it. Strengthening our balance sheet and delivering on our de-leveraging commitments are truly top priorities for our TELUS leadership team, and it's also a priority for our Board of Directors, and we've been gainfully focused on delivering just that. As I had the opportunity to share during my presentation, during the 2025 financial year, we completed $7.3 billion in junior subordinated debt refinancings, providing 50% equity recognition to support balance sheet flexibility on our path to de-leveraging.

The team also worked very hard to strike a partnership that was successfully realized with La Caisse with Terrion, which of course, is our dedicated wireless tower infrastructure operator. And that particular creation of the Terrion asset reduces TELUS' net debt by $1.26 billion or approximately 0.17x. So these efforts reinforce our progress in respect of lowering our debt levels, moving ahead of plan on that front with our net debt-to-EBITDA leverage ratio improving now to 3.4x at the end of 2025. And that is the lowest net debt-to-EBITDA ratio amongst our national peers.

So we do have a position as it relates to leverage. That's really the best within the Canadian telecom industry. To your question, we are looking to reach approximately 3.3x net debt-to-EBITDA or lower by the end of this year, the 2026 financial year or when we look ahead to 2027, we're looking to get to 3x net debt-to-EBITDA or even lower by the end of the 2027 financial year. So 3.4 at the end of '25, 3.3 at the end of '26 and 3.0 or lower by the end of 2027. That's the cadence that we're working towards. And as I said, we're ahead of our plan in that regard, thanks to the hard work and skill of the team.

Throughout the remainder of 2026, we are also pursuing key programs that support and in some cases, augment our debt reduction goals. Overall, we're targeting some $7 billion in monetization opportunities, inclusive of the Terrion deal that we struck with La Caisse. These also include the accelerated monetization of real estate and copper assets that are the byproduct of our fiber build, and we're progressing strategic investors for our TELUS Health operations. Importantly, with the successful execution of our monetization program, TELUS does not need to issue debt in the public markets until 2029.

So our balance sheet and our cash position and our liquidity position are extremely strong, and we've got that position in carrying forward for the foreseeable future. These efforts are buttressed by leading operational and financial performance, and this is important. Your company has the best operational and financial results in the Canadian telecom industry, Francis, including our free cash flow growth that we just posted of 19% in Q1, the 11% free cash flow that we delivered in 2025 at some $2.2 billion, which exceeds the expectations of The Street. And these results build upon the 12% cash flow growth that we delivered in '24 and the 38% growth in 2023.

So the combination there is reflective of excellence in our business performance and the financial results that we're generating and the strong free cash flow that's being used to retire debt. Our Q1 free cash flow growth of 19% is interestingly enough, consistent and above actually our public target of achieving a minimum 10% compounded annual growth rate in free cash flow through 2028. And this reflects our strong operating and financial momentum. And that free cash flow, as I said, will be put to work in lowering the leverage levels of this organization i.e., retiring debt. We're also pausing our dividend at its current level so that we can continue to have a biased focus to directing resources towards the strengthening of our balance sheet.

And finally, Francis, we're continuing to assess both an accelerated de-leveraging plan and an expedited discount dividend reinvestment plan step-down in conjunction with the execution of our overall monetization program. So your organization, Francis, remains deeply committed to creating long-term value for all of TELUS' investors on the debt and on the equity side, and I thank you for your question.

Thank you, Darren. We have run out of time for additional questions. Back to you, John.

Thank you, Jill. I'd like to remind everyone that responses to any questions we were not able to answer today during the meeting will be posted on telus.com/AGM. I'd like to extend my personal thanks and that of the Board of Directors to all TELUS team members for leading with purpose and innovating with passion to put our customers first and to drive our ongoing success. Through your efforts, you continue to demonstrate our heartfelt social purpose by creating remarkable outcomes for our customers and our communities. And also thank you to all who participated in our virtual meeting, please take a moment to provide your feedback by clicking the link to the online survey that will appear on your screen.

And lastly, thank you to our shareholders for your continued support and confidence. Inspired by our leadership in social capitalism, TELUS remains well positioned for the future and committed to making a meaningful difference around the world, thanks to our people, purpose and passion. And finally, thanks to you, Darren, our inspiring and inspired leader over a quarter of a century. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good day, everyone. Welcome to the TELUS 2025 Q4 Earnings Conference Call. I would like to introduce your speaker, Ian McMillan. Please go ahead.

Thank you, Carl, and hello, everyone. Thank you for joining us today. Our fourth quarter 2025 news release, annual MD&A and financial statements and detailed supplemental investor information were posted on our website earlier this morning.

On our call, we will begin with remarks by Darren and Doug. For the Q&A portion, we'll be joined by Zainul, Navin and Tobias. Briefly, prepared remarks, slides and answers to questions contain forward-looking statements. Actual results could vary from these statements. The assumptions on which they are based and the material risks that could cause them to differ are outlined in our public filings with securities commissions in Canada and the United States, including our 2025 annual MD&A.

With that, over to you, Darren.

Thanks, Igor, and hello, everyone. As you know, this morning, I announced that I'll be retiring from TELUS on the 30th of June 2026. It has, without a shadow of a doubt, been a tremendous privilege to be part of the TELUS team for the past 26 years and to have an opportunity to work alongside many of the people on this call.

The success TELUS has realized belongs to the extraordinary team members who have built so passionately the amazing culture that sets this company apart and has led to our significant accomplishments over the years. This team shows up every single day to serve our customers, support our communities and build a company that Canadians and shareholders can trust. To be part of this extraordinary team and to support them has indeed been the greatest honor of my career.

As a result of my retirement, I'm pleased to share that Victor Dodig, an exceedingly accomplished and talented leader, will become CEO effective the 1st of July. I'll remain part of the TELUS family as an adviser to Victor until May of 2027. The CEO progression was enabled through a robust succession planning process. Indeed, our Board of Directors have selected an outstanding successor in Victor, who is, of course, the former CEO of CIBC.

Victor embodies TELUS' core values, embraces a commitment to putting customers first, demonstrates exceptional character and excellent business acumen and cares deeply about creating stronger communities. Victor's tremendous skills, CEO expertise, leadership values and his proven track record of value creation will effectively complement TELUS' strong leadership team and position him well and the company well to lead TELUS into this exciting new chapter. We'll have more time to speak about this leadership progression in the coming weeks.

However, today, I'd like to focus on TELUS' strong fourth quarter and 2025 full year operating and financial results. In the fourth quarter and for 2025, our team's unwavering commitment to operational excellence continue to differentiate the TELUS organization, delivering strong quality customer growth and robust financial performance. Our leading asset portfolio and focus on profitable customer expansion delivered strong results to close out 2025, including our fourth consecutive year surpassing 1 million combined mobility and fixed customer additions, powered by our world-leading broadband networks and of course, our famous customer-centric culture, this momentum positions us well for continued growth in 2026 and beyond.

Once again, TELUS led the industry with 1.1 million mobile and fixed customer net additions in 2025. This included record connected device net additions of 716,000, robust mobile phones of 207,000 and fixed net additions of 158,000, representing our 16th consecutive year delivering positive wireline net additions, which is indeed a highlight, and it does significantly and positively differentiate the TELUS story within Canadian and global telecoms. This performance is a testament to the compelling value of our comprehensive bundled offerings across mobile and home nationally and our team's passion for delivering client service excellence in combination with our fiber moat and our best-in-class 5G wireless network.

Indeed, our sustained focus on customer experience leadership continues to drive best-in-class customer loyalty results. This was demonstrated by industry-leading postpaid mobile phone churn of 0.97% for the full year in 2025 and notably marks our 12th consecutive year below the 1% threshold, which is a global hallmark of the TELUS organization and, of course, a best-in-class result. This churn result is up to 25 basis points better than our peer group. Despite a dynamic operating environment, TTech adjusted EBITDA, including Health, increased 3.1% for 2025. This result is within our guidance range and demonstrates our team's disciplined execution and unrelenting focus on cost efficiency and effectiveness.

Furthermore, TELUS achieved record free cash flow of $2.2 billion for the full year. This represented an increase of 11% over 2024 and exceeded our annual target. It is notable that this growth of 11% in 2025 is on top of the 12% free cash flow growth we realized in 2024 and the 38% free cash flow growth we realized in 2023. And of course, it is foundational to the double-digit free cash flow we are forecasting to deliver through 2028.

Let's turn now and take a look at our fourth quarter results. In the fourth quarter, our team achieved industry-leading total telecom customer net additions of 377,000. In wireless, we drove strong industry-leading total net additions of 337,000. This included mobile phone net additions of 50,000 and industry-leading connected device net additions of 287,000, representing an all-time quarterly record for our organization. This was supported by our commitment, our strong and unrelenting commitment to economic margin-accretive customer growth.

This is once again evidenced by our consistent industry-leading customer lifetime revenue, supported by our industry best churn results and an improving ARPU performance that was the best in the industry on a sequential basis. Indeed, as a result of our moderating ARPU decline, network revenue returned to positive growth in the fourth quarter, something that we intend to build upon in 2026. This is an encouraging result that we look forward to executing against in the coming year and thereafter.

Moving now to take a look at our wireline portfolio. TELUS delivered another quarter of industry-leading total wireline customer growth of 40,000 in the fourth quarter. This included 35,000 Internet net additions powered by our leading PureFibre offering on a national basis. Our consistent strategy of leveraging our superior and growing portfolio of bundled products and services on a national basis continues to differentiate our company meaningfully from the competition in a way that matters to customers and a way that creates shareholder value.

We are delivering far more than connectivity. We are empowering Canadians with transformative digital experiences, including AI-powered smart home energy solutions, cutting-edge tech-enabled health care and well-being services, comprehensive security offerings and, of course, premium entertainment solutions. Furthermore, we drove continued strong momentum in our unique and highly differentiated data-centric B2B growth businesses.

Our TELUS Health team delivered another strong quarter of double-digit revenue and adjusted EBITDA growth, fueled by strategic investments, continuous product innovation and disciplined execution across our global platforms. We successfully delivered $431 million in LifeWorks annualized synergies, surpassing our $427 million public target and the commitment that I made to you in this regard. This comprises $334 million in cost efficiencies and $97 million in cross-selling revenue, demonstrating our ability to execute on transformational integrations.

Notably, this result is nearly 3x above our original target of $150 million that we set when we first acquired LifeWorks in September of 2022. Moreover, we expanded our global reach to more than 161 million lives covered, solidifying our position as the world leader in workforce, digital health and well-being services. By way of just one example, our commercial initiative with M42's Abu Dhabi Health Data Services marks a significant milestone in our expansion into high-growth markets globally.

This collaboration combines TELUS' proven global expertise with M42's regional clinical excellence and AI capabilities to deliver comprehensive workforce health solutions across the Middle East and within the broader region, and it clearly aligns explicitly with Prime Minister Carney's Snow and Fan International Trade initiative.

As we continue to expand our operational footprint, our engagement with financial advisers to explore strategic investment opportunities for TELUS Health demonstrates tangible progress on our well-articulated commitments to the investment community. As a leading digital health platform with expanding global reach, AI-driven innovation and strong profit and cash flow growth, TELUS Health is well positioned to attract strategic partners that unlock significant value for our shareholders.

In parallel, following the privatization of TELUS Digital, we are accelerating our enterprise-wide AI and data capabilities. enabling strategic cross-promotion of our industry-leading AI product set throughout our entire business portfolio. At the same time, we are enhancing TELUS Digital's capacity to drive growth opportunities across its external client base. This positions TELUS for differentiated growth with our AI enabling capabilities revenue targeted to grow from circa $800 million in 2025 to approximately $2 billion in 2028 across both TELUS Digital and TELUS Business Solutions, including important contributions from our sovereign AI factories.

Notably, in the fourth quarter of 2025, AI-enabling capabilities revenue increased by 44% to $229 million, supporting a 35% increase for the full year, underscoring the strong momentum in this high-growth area and what it portends for the future. This performance reinforces our position as a trusted partner to enterprises navigating digital transformation and implementation of AI and validates our strategy of leveraging TELUS as an innovation lab to commercialize cutting-edge AI enabling capabilities for our clients.

Alongside this growth, we expect the integration of TELUS Digital to unlock meaningful operational efficiencies that we intend on harvesting. This includes delivering annual cash synergies of approximately $150 million to $200 million with circa $150 million being realized within the 2026 financial year. Driving our performance is a disciplined approach to financial management, supported by strong business fundamentals and significant free cash flow growth generation.

Our confidence in delivering free cash flow growth at a minimum of 10% compounded annual growth through 2028 reflects our strong financial momentum in action. Additionally, effective with today's dividend declaration, we are reducing our DDRIP discount to 1.75% from 2% with further reductions planned through 2026 and into 2027 with the full removal taking effect in the 2027 financial year.

Importantly, we continue to assess a more accelerated step-down, facilitated by the execution of our monetization program targeting $7 billion of assets under management. And I think it's interesting to note when we look at the $7 billion of dispositions that we are considering the synergistic effect with our overall growth strategy. By way of example, our PureFibre build is what is enabling our real estate monetization and our copper recycling. Our real estate monetization and our copper recycling cumulatively are going to end up paying for about half of the cost of our fiber build. Now that's a strong strategy.

Secondly, when you look at the opportunity to bring in a strategic investor in TELUS Health, the investments that we have made historically in this business are going to yield significant multiples over the capital that we've invested. As part of our capital allocation framework, we are maintaining our dividend at the current level until our share price and associated dividend yield better reflects the considerable growth prospects of TELUS.

Based on the current quarterly dividend, our cash dividend payout ratio is approximately 70% on a prospective basis, and we anticipate that it will remain in the 70s over the course of our multiyear plan with the net effect of our deleveraging plan in action and the DDRIP removal. Resuming dividend growth will be contingent upon maintaining this payout ratio trajectory with the DDRIP discount fully removed as we execute against our strategic plan, including free cash flow generation and achieving our deleveraging target.

Indeed, in 2025, we undertook several targeted activities to further appreciably strengthen our balance sheet. This included the successful issuance of hybrid debt securities as well as our partnership with La Caisse and Terrion, our dedicated wireless tower infrastructure operator, enabling wholesale access and colocation. Notably, our Terrion transaction reduced TELUS' net debt by $1.26 billion or approximately 17 points on TELUS' net debt-to-EBITDA ratio, accelerating deleveraging and advancing TELUS' progress towards robust and long-term sustainable growth.

Looking ahead to 2026, our team is advancing additional monetization opportunities, including strategic investors for both TELUS Health and TELUS Agriculture and Consumer Goods and the accelerated monetization of real estate and copper assets. These efforts will be buttressed by operational growth, including robust EBITDA and free cash flow expansion, supported by moderating capital expenditures and an industry-leading CapEx intensity ratio of 12%, trending to circa 10%.

Our comprehensive deleveraging strategy is moving ahead of plan with a leverage ratio ending 2025 at 3.4x and expected to reach circa 3.3x or lower by the end of 2026 and achieve 3x or better by the end of 2027. Our strong financial and operational performance are enabled by our world-leading broadband networks, our data-centric growth assets, including what we are building and have built on the AI front and as well our commitment to customer service excellence.

This provides a sustainable foundation in delivering on our 2026 targets announced today, including consolidated service revenues and adjusted EBITDA growth of up to 4%, consolidated free cash flow of approximately $2.45 billion and finally, moderating capital expenditures of circa $2.3 billion that support that CapEx intensity ratio ending from 12 to 10. Underpinning our outlook is a growth strategy centered on amplifying profitable revenue expansion, complemented by ongoing and important focus on cost efficiencies being realized, positioning TELUS to deliver sustainable value-accretive growth.

In closing, 2025 marked the 25th anniversary of our iconic TELUS brand and the 20th year that our team members have participated in our annual TELUS Day of Giving. Since 2000, TELUS, our team members and retirees have contributed $1.85 billion, including 2.5 million days of giving equivalent to 19 million hours in our global communities. This is more than any other company on the planet.

And here's the equation at TELUS, social purpose and leading the way globally drives higher employee engagement. Higher employee engagement drives better business execution. And this has yielded a culture where better business execution from that higher engagement leads us to deliver the type of customer service outcomes and the lowest churn rate within global telecoms for decades now. It's quite the combination. And in closing, I'd like to express my gratitude to our global team for their efforts and expertise in executing on our consistent strategy to meet our commitments to all stakeholders.

And on that note, I'll turn the call over to you, Doug.

Thank you, Darren, and congratulations on your retirement.

Our fourth quarter and full year results demonstrated strong operational execution and financial discipline, closing out 2025 with strong momentum across all key metrics and continued significant progress on our deleveraging commitments. During the seasonal competitive fourth quarter, we executed in a highly tactical and disciplined manner that is evident in our financial results. We delivered positive network revenue growth, while ARPU continued to stabilize, declining 1.6% demonstrating an accelerated sequential quarterly improvement.

Notably, this is the strongest sequential improvement amongst our peers, reflecting the -- sorry, reinforcing the effectiveness of our go-to-market strategy and the focus on economic loading. Furthermore, TTech adjusted EBITDA, including -- excluding lower mobile equipment margin from lower contracted volumes increased 2.7% and free cash flow increased 7%, supported by our positive free cash flow impact of lower contracted volumes on disciplined device financing in addition to our lower cash restructuring.

To summarize, wireless, we had the largest network revenue growth, the largest improvement in ARPU and the lowest contracted volumes in subsidies in handsets. This is a trifecta in value generation. And the numbers, not talk, support the financial market discipline that we have showed. Fixed data services revenue in the fourth quarter increased approximately 2%, driven by continued Internet customer growth and higher Internet ARPU. Declines in business fixed data revenue continued to reflect revenue variability and customer contract changes and was partially offset by continued growth in small business and medium business.

Overall, TTech adjusted EBITDA margin expanded 240 basis points to 40.9%, driven by our commitment to strong economic growth and persistent efforts to reduce costs, including our competitive advantage of TELUS Digital's AI enablement. In Health, operating revenues and adjusted EBITDA grew by 13% and 10%, respectively. The growth was attributed to the acquisition of Workplace Options as well as our organic growth in payer and Provider Solutions and with strong performance across all product lines.

Moving to TELUS Digital. Operating revenues grew 3% for the quarter, supported by services in our TTech and Health segment as well as expansion with our external customers, notably in banking and financial services. This was partially offset by a reduction in volumes from certain technology and e-commerce clients. While TELUS Digital's adjusted EBITDA declined 5% year-over-year, the margin of 13.7% improved 260 basis points as compared to the third quarter. The team continues to streamline operations through digital transformation and further implementation of AI, particularly in CX delivery as well as looking closely at geographical optimization.

On our balance sheet, we continue to benefit from a strong free cash flow generation as we're executing a disciplined capital allocation and deleveraging strategy. In 2025, we made meaningful progress targeting our financial -- strengthening our financial position and our net debt-to-EBITDA leverage ratio declining to 3.4x as compared to 3.9 at the end of 2024, positioning us well as we advance towards our leverage targets highlighted earlier today in '26 and '27.

During the year, we completed several proactive initiatives to support this initiative. These include the issuance of our junior subordinated notes as well as successful execution of multiple debt tenders that retired $2.9 billion of outstanding debt securities. Notably, the $400 million of 5.375% fixed to float rate junior subordinated notes represented the lowest hybrid notes issued in Canada Telecom cable hybrid debt history. At the end -- at year-end, our long-term debt carried an average maturity of approximately 14.7 years and a weighted average cost of debt of 4.75%.

Moving on to our financial outlook for 2026 guidance, which reinforces our commitment to delivering strong shareholder value, and it includes consolidated service revenue growth of 2% to 4%, consolidated adjusted EBITDA growth of 2% to 4%, consolidated capital expenditures of $2.3 billion, including real estate or approximately 10% decrease and consolidated free cash flow of approximately $2.45 billion, circa 10% growth. Our outlook for free cash flow is driven by higher EBITDA and moderating CapEx, stable impact from contract assets, offset by higher interest and restructuring charges. A detailed list of our assumptions for 2026 are included in our annual MD&A released today.

To conclude, our 2026 reinforces our commitment to strong delivery of our strong shareholder value. we are confident that our ability to deliver sustained profitable growth, supported by a robust asset mix, diversified business portfolio and proven operational excellence.

With that, back to you, Ian.

Thank you, Doug. Carl, please proceed with questions from the queue.

The first question is from Stephanie Price from CIBC.

Darren, congratulations on your retirement.

Thanks, Stephanie.

I was hoping you could maybe talk a little bit about the current wireless environment. It seems like it's a little bit more promotional than we typically see in Q1. How does TELUS think about its strategy on the flanker versus fighter brand side here?

Thanks for the question, Stephanie. I'll hand it over to Zai to comment on that.

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Stephanie, thanks for the question. So you're correct in observing that the industry is engaged in some irrational tactics, unfortunately, following a period of some additional sanguine behavior that you've seen flow through in our results, of course. When this activity is manifested both above and more recently below the line, our response has been pretty unequivocal. We believe maintaining healthy industry economics is contingent on driving the brand differentiation, as you highlighted, between premium flanker and prepaid segments. And when we see behavior of masking promotions to erode value at the premium level, that undermines the perception of premium brands and initiates a pretty detrimental race to the bottom in the mind of the consumer.

So in that situation, flanker and prepaid brands serve as a really important function in catering to the value-focused demographic within the market. And we don't want to be criticized or really apologetic for how we respond to that competitive aggression. And our performance substantiates our position. We're the undisputed leader in establishing the optimal balance and quality loading to ensure superior economics. We've led in churn reduction in network revenue growth, in ARPU amelioration and most critically in cash flow growth year-over-year. And that's on the back of significant improvement year-over-year, not on the back of a poor performance in 1 year.

So that sustained level of value creation is not as a result of destroying value on our part. We have accomplished it through a series of deliberate strategic moves ranging from redefining the premium segment and optimizing bundling economics to enhancing customer retention, achieving sustained year-over-year unit economics and really judicious device subsidy management, as you've seen in our cash flow improvement. So given the industry scrutiny regarding debt load and uncertainty that we've seen, cash flow is paramount and TELUS is unmatched in our capacity to demonstrate quality loading with a high payback. So if you observe a period of time boxed, high irrational market behavior, our track record should unequivocally indicate that, that's a reaction to aggression.

That's good color. And maybe just a follow-up on ARPU. I think both Doug and Darren highlighted the rate of decline has improved pretty significantly sequentially. Just curious about the puts and takes there and how you think about TELUS working towards ARPU growth.

Yes. I think that's great. I would say that the other element of that is that we participated as well more significantly in the value segment through that ARPU growth. And so what you're really seeing is a reestablishment, as I highlighted, of premium and giving customers a reason to step up -- and our value props in terms of true Unlimited, price lock for value step-up and offering some roaming plans in that value proposition for premium have really redefined the premium.

And so with that, we've seen a renewal step-up that has -- that we haven't seen in the last several years actually. And that's manifested itself. And then finally, it gives us the ability to differentiate the promotional subsidy and attach a higher level of subsidy to where the higher value for what customers are willing to pay for premium plans is. And that's what's really created that differentiation.

The next question is from Drew McReynolds from RBC.

And just would echo congratulations on retirement, Darren, I certainly wish you all the best going forward.

Thanks, Drew.

Two for me, if I may. I think first, in terms of the guidance range, and I think we could probably just stick to revenue growth, but maybe EBITDA growth. Just the usual question of what gets you closer to 4% versus 2% and some of the moving parts and assumptions there? And then secondly, just with TELUS Digital now in the guidance and underneath the hood, just wondering if you could provide us with an update on kind of growth and outlook expectations there. And then specifically, just what its role is here in 2026 and helping to drive that $150 million in synergies and the broader TELUS strategy?

Thanks, Drew. In terms of what gets us closer to the high end of either revenue or EBITDA, I think it's pretty simple at TELUS. We've got 3 significant areas that we need to execute on. One is telecom, where the key growth drivers within that are within consumer and small business. Second is TELUS Digital; and third is TELUS Health. As it relates to both TELUS Digital and TELUS Health, we're looking in 2026 to realize double-digit EBITDA growth from both of those assets and a significant step-up in nominal EBITDA and cash flow generation. And I think that's -- it's a laudable and an exciting story.

Within the telecom business, it's pretty clear to us. We want to see growth coming from 4 areas. Number one, and this is common to both consumer and SMB. We want to do well at new product development and new product scaling. We have a number of products within our portfolio that are highly differentiated from our competition and pretty meaningful and exciting to our consumers and getting them into our bundles and scaling that, I think, will be not just a growth opportunity in and of itself, but also a halo effect, protecting our traditional telecom services from areas like price aggression because we are differentiated within our overall product suite.

Second area of growth for us is improving churn. We have a significant opportunity to lower our churn rate at TELUS on both wireless and wireline, both consumer and business and get back into a churn ZIP code that is emblematic of the type of churn rates that we posted in 2022 and 2023. So that's a specific goal for this organization. And again, the economics go beyond the obvious on that. So not only do we get a better yield on gross to net by improving churn, but we can be more discretionary when it comes to COA because we don't have to chase net adds because we're doing very well at the churn line, and that's a very positive economic story.

Third area of growth is product intensity. We have a material number of clients on the SMB front and on the consumer front that are single product customers. getting those single product customers to 2 product customers, 3 product customers and 4 product customers when we have the quality of the product portfolio that we do is a very doable undertaking for this organization. And again, we get a synergy with that because, of course, as you know, as we drive up product intensity, where the opportunity, as I just said, is plentiful, we are simultaneously going to be driving down churn because the more products that we have with a client, the stickier the relationship is.

And then the last growth area for us is national expansion. We have the opportunity on both a build-it basis and a wholesale basis to pursue smart economically accretive quality customer acquisition strategies on both consumer wireline and SMB wireline within Ontario and Quebec, and we intend to do just that. And then the final area of growth is at the margin level. And God forbid that we ever forget this or become so blinded by the pure revenue to EBITDA growth opportunities that we miss our OpEx responsibility on cost efficiency.

And it's incumbent upon TELUS to really drive that cost efficiency story for 2 reasons. One is we have TELUS Digital. We own the totality of that asset, and we should be able to get excellent cost efficiency without sacrificing customer service because of how we drive that particular asset. Secondly, TELUS Digital is truly a world leader when it comes to CX AI applications, truly a world leader. And you don't have to ask just TELUS, you could look at some of the blue-chip clients that are buying our CX AI solution set and leveraging AI to drive down our cost and improve our go-to-market outcomes is a big part of our growth story as well. So that's where it's going to be coming from.

And I like the fact that from a diversification point of view, we're not a one-trick pony on growth. We've got growth coming from telecoms. We've got double-digit growth coming from TELUS Digital. We've got double-digit growth coming from TELUS Health. I think that provides a robust story. So if there's any shenadigans in one particular area, it can't knock us off of our stride. And of course, we're never going to take our eye off the ball of cost efficiency along the growth path Glide.

And on the second question on the efficiencies of TELUS Digital, we split them out into 4 categories. We have below the line, which is interest and capital, which is probably 1/3 of the savings. The other 2/3 is split between TELUS Digital and TELUS from efficiency and effectiveness. And those are all being executed in a lot of what Darren highlighted as we speak.

[Operator Instructions] The next question is from Vince Valentini from TD Securities.

Let me start trying to clarify just a couple of things. Your last comment there, Doug. First off, did I hear Darren correctly that double-digit EBITDA growth is expected for both TELUS Digital and Health in 2026?

That is correct.

Okay. So assuming I got that right, TELUS Digital has double-digit growth even though some of the $150 million of synergies, it sounds like it's allocated to the telecom division as opposed to being allocated to digital?

That's correct.

Okay. And do we know yet if the reporting segments are going to stay the same? Will we still get revenue and EBITDA for TELUS Digital going forward?

So we will be resegmenting in Q1 and the segmentation at the moment, I'm still doing some refinements is what will be external customers will be the TELUS Digital segment. So the internal TELUS business for customer experience will be put back into telecom. We will restate, so you'll get the year-over-year comparative. And then it will be the digital AI and external CX that will be left in that number.

Okay. And I also try to clarify what Zainul said earlier on the ARPU. It doesn't sound like there's anything unusual this quarter in terms of the material improvement in the ARPU trend, no like roaming contracts or any other unusual items. So keying off of that, given the good improvement you're seeing in renewal upsell and gradual improvement in pricing discipline in the market. Is there any reason to think that we should take a step backwards from minus 1.6% in Q1 or Q2 or it continues to get better from that level?

Certainly not from us. So I would say that you have the readout right. It's organic improvement, and we're continuing to see that progress.

Zainul can do better.

Good point.

I appreciate that.

Last one, apologies, but I mean, we're just -- I'm in dated with this question all day. I assume some of the other analysts on the line are as well. But is the change in CEO meaning that we should be thinking about any sort of change in capital allocation or dividend policy? And if so, do these questions start to get addressed in the next couple of months? Or do we wait until after Darren takes his well-deserved retirement?

I think it's important to focus on the facts, Vince. It was only 2 months ago that the Board unanimously approved our 3-year strat plan and all that, that entails. So I would expect strong continuity in terms of what this organization is doing and more specifically, strong continuity in respect of our growth initiatives, strong continuity in respect of our capital allocation initiatives and strong continuity as it relates to our deleveraging program.

And we have a portfolio of activities underway to achieve that, that we have well communicated to the Street. And I think this organization is intent on following through and delivering on those, whether it's the current administration or the prospective one. And we are excited by the catalysts that the delivering against these initiatives will entail in terms of value creation at the TELUS organization.

The next question is from Maher Yaghi from Scotiabank.

Great. Darren, I recognize you're going to be around for a while still, but I wanted to say it was a privilege to interact with you, and I wish you all the best in the next stage of your life.

That's very kind.

Of course, you mentioned that more will be shared in the transition process in the coming weeks. But could you provide just for us an understanding of what the Board was making sure to lock in by hiring Victor?

I think the Board was looking to lock in a great leader with a proven track record, a leader that's familiar with driving a complex organization, dealing with all sorts of exciting opportunities, but working through some of the challenges that come with that, whether it's technological or regulatory. I think they're looking for a leader that had a set of leadership values that reflected the culture that has served the TELUS organization so well. And so when I look at the excellent business acumen and strong leadership values that Victor exhibits, I think his propensity for customer service excellence our nomenclature is customers first will fit very well with the TELUS organization, supporting the type of world-leading churn rates that we have posted for decades.

I think the focus on growth through strength. So growth in combination with a robust balance sheet is going to be something that he'll continue to focus on and delivering against those initiatives. And then you heard in my comments, the link that I made to social purpose and leading the way in that regard, driving higher employee engagement, which leads to better business execution. And I think if we're known for one thing at TELUS, it's execution. We have done it well forever. And I think the grist for the mill there has been our culture. And I think Victor's affinity with social purpose and the importance that he places on people and culture is going to serve him tremendously well within the fold of the TELUS organization going forward.

And then I think down to them also to find their own future ideation and genesis. I'm excited to see what the new administration, and it's Victor and Victor's leadership team on their growth thoughts prospectively and new ideas and new opportunities and new things for the company to sink their teeth into. So they make their mark on the organization in a positive way. but make their mark on the organization in a positive way where it always comes back to putting customers first and doing right by the customer because we know if we do that well, we do it better than the competition, then all of our stakeholders, including our investors, are going to benefit from the value creation that, that delivers. And so I think that would have been kind of the hallmark that they would be looking for within a CEO.

Okay. Just a follow-up on the discussion about the pricing environment early this year and how it has evolved compared to Q4. I think one of the frustration that TELUS team has had was, as you mentioned, below-the-line discounting, especially on EPPs and stuff like that. You tried to correct the situation with some of your discounts on Public and Koodo. But I did notice that this week, you did some changes on your EPP plans, and we have seen them drop. The $15 below what the TELUS branded price is on BYOD and possibly even more if you go to the store. So I was wondering that change, is that also a reflection of your frustration? And could we see that be removed coming back to traditional pricing or the environment remains frustrating for you up until now?

Zainul, why don't you answer that, and maybe I'll make a closing comment.

Sounds good. Thank you, Darren. So I think we have seen some better economics in the industry. And I think when you look at plans like EPP or other plans that are a function of the premium segment, but catered towards a specific target market, whether it's EPP or SMB, there's a couple of elements. One is the eligibility. And so you do ensure that if you have very strict and tight eligibility of those plans that they play a meaningful role in the overall portfolio.

So what I would say is you will see that we will be more reactionary you will see that we will ensure that where we are losing some ground in value, we will want to participate effectively, whether that's in the value segment or in the premium segment. And you will see that we will drive the discussion around keeping certain promotions tightly managed so that they play their requisite role in the portfolio.

I think, Maher, from our point of view, if the mean time to emulate an irrational price move is measured in seconds, it instantly commoditizes any benefit associated with the aggressive pricing on a land grab move. And so if that emulation, speed of emulation drives instantaneous commoditization, then what was the point of it in the first place. And that's the type of discipline that Zainul is looking to instill in the marketplace, which hopefully should then drive a shift to differentiated value propositions that are more sustainable, that create value and at the end of the day, provide more benefits to customers over the long term and more benefits to investors. And I just think that's the hallmark of an organization at TELUS trying to do the right thing.

The next question is from Jerome Dubreuil from Desjardins.

First of all, congratulations, Darren, on an outstanding career. I wanted to ask about severing AI coming back to that conversation. I think last quarter, you discussed the strategy of chips ownership for your several AI initiatives. Owning the chips can be expensive depending on the model. So the question is whether the chip strategy is still the right one, if this investment is included in the guidance? And if it is, would the assets be on the balance sheet?

So yes, it's included in the guidance, and I'll comment a little bit more on that front. Yes, on the balance sheet as well. But why don't I pass it over to Tobias to make some comments. And then if there's any cleanup, I'll do it at that juncture. Tobias, over to you.

Yes. Thank you, and thank you for the question. And Darren, congratulations on your retirement, and thank you for all the unwavering support of TELUS Digital and our alignment throughout the TELUS ecosystem. So maybe I'll take a little bit of a step back in answering the question, Jerome. The -- when you think about TELUS Digital, what we accomplished in the fourth quarter and is part and parcel to our growing momentum that you see in the numbers is we've unified all our capabilities across web, app development, Salesforce, Google Cloud, data and AI and specifically our CX AI capabilities. around this positioning of winning the moments that matter.

As Darren said, serving the customer is everything. And for us, it's serving our clients across their entire customer journey. And every piece of that is now underpinned by AI. And so when we look at where we are -- where we have permission to be successful and what advantages we have versus other competitors, it falls into a couple of different categories. One is with TELUS, right? TELUS is a fertile testing ground for us. It's a real-life lab. It's where we show real capabilities in motion, in practice, things like reducing meaningfully first call resolution and save rates and where we partner on the full stack of sovereign AI capabilities that include the chips, as you mentioned.

The second area that we can differentiate ourselves in is CX AI. AI obviously impacts enterprises across the entire ecosystem. But an area where we are winning, should win is this concept of CX AI, where we have hundreds of existing clients, tens of thousands of seats we provide those clients, and we can partner with those clients to really deploy CX AI at scale and really focus on complex workflows where AI supports the humans doing those workflows. And particularly excited that we just received a Gold Stevie Award, which is their highest level for our B2B sales efforts with a major fintech customer, where we improved conversion rates by nearly 50%, generated over $100 million of incremental value for them.

But importantly, outbound B2B sales is an area where AI will support what we do because empathy is so critical. It's not going to be fully replaced by AI. It's going to be complemented by AI. And all of that then translates into what we're seeing. As Darren mentioned or Doug mentioned, we have a 44% increase in year-over-year in Q4, 35% growth for the full year related to our AI-enabling capabilities as we work towards that $2 billion target in 2028. And I would say the final leg of the stool here is how we're using AI to take costs out of the system. As noted, we have a $150 million to $200 million goal, and we're laser-focused on streamlining our cost structure and TELUS' cost structure to effectuate that, including both moving team members to the most appropriate geography globally; and second, through deploying our AI processes to accelerate workflows and reduce costs.

I'll just end with one example there, deployed in the fourth quarter fuel training tools, AI training tools to reduce our contact center agent proficiency by 50%. So the time it takes to become proficient is down up to 50%. And those are the kinds of costs that we're going to be addressing throughout TELUS and with our clients.

I think, Jerome, the other thing that is key is fortuitously, I think maybe here a bit lucky as well as smart, we had legacy data centers in Rimouski and Kamloops that unlike others, we did not sell. So we're leveraging that sunk cost. And down to the team, the architectural qualities of those data centers were such that we could make them fungible and turn them into sovereign AI factories with a minimum amount of capital investment to accomplish that outcome, which is exactly what we have done and why we can get it done within the CapEx envelope that's seen our CapEx intensity drift from 12 towards 10%. Even at the OpEx level, these sovereign AI factories will be run because of the technology prowess that we have by a skeleton crew. And so we're extremely cost efficient here at both the CapEx level and at the OpEx level.

The other thing that Tobias and Hisham have done is that we're balancing growth so that supply equals demand. So the rollout of these data centers, the enablement of the data centers, the investment in the chip construct within it is being bridled according to the pace of demand. And I think that, again, is a very smart way to drive this overall strategy. Fortunately, we cut a great strategic partnership with NVIDIA that gives us an advantageous and strategic position, both as it relates to new chips, but also in terms of cost economics and volumes that really play into our favor at the TELUS organization.

And then within our positioning back to what is truly sovereign about it, we are unique because every element of the sovereign AI thesis is controlled by TELUS, which is a real differentiating factor for us. So whether it's inference, whether it's models or whether it's training, this is all in-house at TELUS, which I think enhances the sovereign component to our story, which we know matters tremendously at both the customer level as well as at a government level. And then the other thing that's in our favor economically that Tobias referenced in terms of TELUS being the anchor tenant is we get to enjoy great economies of scope.

So when you think about the development of Gen AI applications on the copilot front and our world leadership on the fusion of CX AI, our copilots that have been developed for TELUS, whether it's agent trainer, copilots on retention, copilots on upselling, copilots on customer service, our copilots that are also going to benefit from the tribal knowledge that TELUS Digital is accruing because they're not just doing this for TELUS, they're doing it for 700 external clients.

And so the external clients get the benefit from the learning curve at TELUS and TELUS gets the benefit from the learning curve at the external clients. And when it comes to CX AI, we are the 800-pound gorilla, and that 2-way flow of learning is going to be terrific for the performance of the TELUS organization, whether it's go-to-market outcomes or cost efficiency outcomes.

Thanks, Jerome. Carl, I'm recognizing that we're through the hour, so we'll pause the call there. Thank you, everyone, for joining the call today, and please reach out to the IR team with any follow-ups.

This concludes the TELUS 2025 Q4 Earnings Conference Call. Thank you for your participation, and have a nice day.

Good morning, everyone. My name is Ryan Rice, and I'm an associate with the JPMorgan Healthcare Investment Banking team. Welcome to the session for TELUS Health. Presenting today, we have the President, Mohamed El-Demerdash. The presentation will be roughly 15 minutes, and then we'll have a few minutes of Q&A to follow.

With that being said, I'll leave it over to Mohamed to kick off. All right.

Thank you. Good morning, everyone. My name is Mohamed El-Demerdash. For those of you who don't know me, I'm an engineer. I've been in the med device industry and health tech broadly for the latter -- bigger part of 3 decades. And I got the opportunity to work all sorts of places around the world, developing products, got the opportunity to live outside of North America for about 10 years, delivering services and health care to many around the world.

And it really got me thinking and got me wondering, but from a technology standpoint and the spend, we spend a lot of time, a lot of money on the downstream delivery of acute care diagnosis and therapy. And when you start getting into places where people don't have access to acute care and the systems are so fragmented, you start thinking what if we had taken the same technologies and start spending it more upstream from a preventive standpoint and start taking advantage of the opportunities for helping people change the trajectory of their health journey earlier upstream. That is fundamentally what TELUS Health does, and that's what we do.

We're about preventative health upstream, looking at how we can change the trajectory of people's health and their health journey and improving the health and well-being of the workforce.

So what are we at TELUS Health? We're a global leader in workforce well-being and digital health solutions. When we talk about well-being, there are a lot of questions like what is well-being? Well-being is not just about the physical. It's about the physical, it's about the mental, it's about financial, it's about social, it's organizational. It's everything. And when you think of it from an employer or organizational standpoint, all of these factors come in, in a transfer function that yields an effective and positive workforce.

We deliver services for over 50% of the Fortune 500 companies that are out there. We serve over 160 million lives. Importantly, we are geographically situated just about everywhere around the world. We serve more than 200 countries. We have offices in over 27 countries out there. We deliver in local language. We have a large network of providers that serve.

So how do we get to this point of preventive care? So I talked about going upstream. So when you think about going upstream, we think about 2 different entry points where we can get to individuals out there at an early point before the conditions become worse and more expensive to treat. One is through employer and the second is through primary care. So I'm going to talk about both those things and tell you how we impact those and the importance of those.

So when we think about workforce and from an employer standpoint. One of our major entry points is from an employer standpoint. And let me start by giving you a couple of statistics that will give a good indication as to why this is important. So from 2019 to 2025, if we compare both of those workforces, there is a 2x to 3x increase in the number of people in 2025 versus 2019 that indicate that they have high amount of anxiety in work, and they are at risk of a mental health event, not too surprising.

Now this is the interesting one. If we look at those that are entering the workforce, so ages 20 to 29, 2025 versus those that are exiting the workforce, 50 to 59, there is more than 2x the rate of those individuals that self-report having high anxiety and difficulty at work due to one or more factors. And in fact, if you start breaking that down even further and start looking at all the different factors, the same difference between entering the workforce versus exiting the workforce on mental, social, well-being, physical, all of those factors are self-reported as being an issue that is affecting them in the workplace.

So when we think about from an employer standpoint, what we do at TELUS Health is look at the various different entry points into the life cycle of the individuals there. So if we think about a student in Vietnam, certainly, the way the problems that they might be encountering is very much different than an executive in San Francisco. The -- an individual from an indigenous group in New Zealand is not going to have the same solution space as somebody who is in Latin America, for example, or Western Europe.

So what we've been very focused on is building a digital solution that is going to self-navigate and help everybody go through to find the solution that's appropriate for them for that point in time, which obviously changes as they go through their journey. Whether it be helping, again, from a student standpoint at that level from a family perspective or helping somebody who just has a life change from a family, a new mother, new father or somebody that's going through cancer treatment, all of these different factors require a different solution. And what we're able to do is to develop a solution that is backed by humans to deliver these services across the board.

Importantly, we're able to deliver these services with local specificity. And when we say local specificity, the first thing that comes to your mind is language. Obviously, that is there. We have our solutions in 17 different languages, but not just about the language. It's about cultural awareness and actually being locally present. One of the things that is unique, and I'll show a bit more data about this here in the upcoming a few slides for TELUS Health is that we are geographically present around the world. We have a network that is one of one in our presence. pick a country, we are there physically available to deliver service.

Now I talked about 2 different entry points for preventive care. So at the employer standpoint, so a lot of people -- everybody attempts to be in the workforce, a lot of people in the workforce, so that captures a lot. Now the other entry point is through primary care. And if you think about the ecosystem of health and health delivery, yes, we all -- when we need some sort of medical intervention, we usually start from primary care, pharmacy, we have our health benefits, and we start inevitably kind of progressing through the health system until you get to acute care and the rest of that.

Think about how many times as we go through that system, we get asked the same questions. We get the same data, same tests done over and over and over because of the inconsistency and the fragmentation of the ecosystem and how data is transferred across the entire different sets. So what we've been doing at TELUS Health is building solutions, I'll call the Level 1 solution in the space, which is at the EMR level, EHR level, pharmacy management, benefits management. So at the fundamental entry point where we can have providers give better service to the patients that are coming through, have care-specific AI journeys that they can find them, think about heart health.

Primary care physician will usually not be able to diagnose much and will have to progress you to the system. Think about areas where getting to a specialist is going to take months and months and months. Can you provide solutions to that primary care physician that will help them prioritize the urgency of that individual based on data and based on a lot of the tests that would have already been run at that level.

Now past that, and here's where the magic happens. We've been able to build on top of that a platform that results in interoperability across all of these systems, right? Think of how many different systems, think of any city, state, country, province, territory. They're going to have purchased hundreds upon hundreds of different systems over the years. Data is found in different formats, different places. And what we're able to do is build an interoperability layer on top of all of these systems that connects it all together so we can truly have the opportunity to develop population health strategies and for the individual for them to truly own their data across the ecosystem.

And I'll share a few examples of where technology has brought all of this to life because a lot of what I just shared is kind of theoretical, but I'll talk you through some of the solutions that we have to solve for this. So from a mental health standpoint, we have agentic AI-enabled platform that supports an individual to help navigate through where they need to go. So it's going to take you through whether you need to get some videos, plan, et cetera, that will drive you through a solution or whether you need to actually talk to somebody with a human care approach that is underneath the platform.

We're going to be able to, through this application, start plugging in more and more care pathways. So we've got 23 different care pathways today that understand specific. So for example, first responders, first responder is going to require a different approach, as I mentioned earlier. They're going to have the same starting point through the application, but they're going to get specific solutions and specific attention to their needs. 94%, as you see on the slide here, of employees that used the application or report that it has helped them solve the problem and they gain benefit out of it.

Now when we talked about the second solution here from a well-being standpoint, this is a gamified physical health application that has very high utilization and adoption by those that use it. This helps you from what food to eat, et cetera, back to the heart health example that I gave, we're starting early to help change and bend that trajectory.

And then finally, an example here of this platform that I talked about earlier in the presentation around the interoperability. So in this case, province of Nova Scotia, over 600 different data down to the dentist offices that they have in the province. We are able to connect all of those through a single digital front door. So now think about it as a citizen, I can go to a single place, schedule my appointments, I can see all of my data. I can see all of the history of the data that I have.

And then from a provider standpoint and from the province, think about the things that they can do from a population health standpoint. If they want to ensure that the right mammogram screening is happening, that the right prostate screening that is happening at the right age in the right place, they can get down to the right individual, make sure that they're getting prompted and they can understand the population scenario for the entire province. And you can take that example and think about how that would scale globally in the different places that you can take them and the Agentic AI that could be built on top of that to start helping deliver faster services to the individual.

One of the things that I talked about earlier in the presentation that really is diversified or special about TELUS Health is our strategic approach towards how we've diversified our customer base and our sources of revenue. So when we think about sources of revenue, the interesting thing here is because we go upstream, we are not tied to a single industry. So from a resilience standpoint, we've got customers that use our products from aerospace industry. We've got consumer, hospitality, financial, health care, you name it, these needs and these employee expectations are there as well.

So when we talk about 14% of our revenue comes from our top 10 customers. Only a single industry, the highest takes up 20% of our -- of the total of our revenue. From a geography standpoint, we've got revenues coming from every region around the world and continuing to diversify more into outside of North America being in 200 different countries around the world. So from a resilience standpoint, we find ourselves in a position where we can be very hardened against any issues or standards that could happen out there.

TELUS Health in conclusion, global scale, capacity to grow. We're a team that is focused on preventive health. We have a tech-enabled platform that is AI-driven to help get upstream into the preventive health side. We're a trusted brand. We've got a massive focus on cyber. There's a lot of data, as you can imagine, coming through. I didn't really have time to talk through it in the previous presentation or previous slide, but the cyber and data protection side becomes really important, especially as we talk about the global footprint that we have.

And we have a team that is mission-focused, mission-driven around this belief that we have that everybody deserves care. And everybody deserves care where they need it and when they need it and how they need it, which is not the situation that we have around the world today. And it is our goal to change that trajectory for everybody else out there. And that is what we do at TELUS Health. Thank you. Questions?

I'm fascinated about the interoperability layer. And I don't know a question to ask, but what are the other use cases? Are you talking to payers about it?

Yes. So yes, when we think of our customer base, payers, providers, a big portion of it. So the underlying connecting point between all of that is data. And every single pillar across that. If you think about the provider, they're interested in the data so they could provide better health cheaper. When you think about the payer, they're certainly wanting to understand it so they can provide the appropriate care to the appropriate place. So that is absolutely where we look at from doing this.

So the example that we have is in Canada, this is -- we're talking about a single payer model. So it essentially goes to that in that case, the payer, whether an insurer or the provincial government in that case is essentially the same output, but it is a big interest for everyone. And even when you get down to the primary care physicians or the providers, they're interested in seeing the data even down to the research level.

When did you launch it?

So this was about 9 to 12 months ago, and we are in process of launching in a couple of other provinces as well. So we're really bullish about the opportunity here of taking what we've been able to do in these scenarios and take that from a global perspective. Other questions?

Yes. Mohamed, technology clearly plays a big role in your business. Can you just expand a little bit more on the role of AI in the business going forward?

Yes. So listen, I spent a lot of time in my career on AI and when the starting point of everybody having a lot of fears of what it's going to do and take my job and the rest of that. So the way we look at AI is a foundational component to drive outcome. So we're not in the business of just saying, hey, let's just do AI for the sake of AI. So we start by the outcome that is needed, go back to the starting point of the technology then and say, all right, this is where AI can actually play a role, and this is where AI can make a difference for us. And this is where we become very hyper-focused on preventing or getting outcomes, both for our members, so our customers and our clients.

So when they use our solutions, when they consume our solutions, it's helping them navigate better. It's helping them get better outcomes, our primary care physicians and the like, but also internally. So for us, operational effectiveness is a really important portion of the company. We run a pretty large organization and operation globally. So eliminating waste and understanding where that is, is really important. AI plays a massive role for us as well internally.

So as a couple of very simple examples, when we think about our clinicians or counselors when they take calls in, there's an AI agent that is up there that's listening to the call that is prompting and filling in some of the forms for them so they can focus on the individual that they're talking to and not have to spend time typing everything in, taking it and making sure that they've actually captured it. The same thing that we have for -- same technology for our EMR solutions, so the physicians and the nurse practitioners, when they see a patient, it's listening in as well and helping them fill up. So we get the opportunity to take the technology and use it in multiple ways.

In the U.K. where the organizations are looking for holistic solutions, covering well-being, definitely, but also health care and other paradigms of health like chronic disease management, early disease detection, chronic disease, et cetera. How do you bridge that gap in various territories? And also, how do you think about the clinical and regulatory challenges?

Love the question. So our point of view is that we're setting the foundational level. What we are going to be able to do at an employer level as well, by the way. It's easier, as I describe it, to do at a physician or nurse practitioner if somebody is coming to you with some sort of symptoms, some sort of condition, something that you need to do. What's more interesting for me is at the employer level, so the heart health condition that I just talked about or that care pathway, if I can take that a lot earlier, our solutions are monitoring through wearables, your exercise, your heart rates, the rest of that stuff.

If I can start integrating at that level solutions that are able to identify earlier on before Jimmy or Mary at age 24 know that they actually have an underlying heart condition or something. If I can start guiding them from that point on, to a better path, maybe the clinical event that was going to happen to them at age 40, maybe it's predetermined it's going to happen anyways. But maybe it's pushed out to age 50 because I was able to early on tell them eat better, exercise better, do this, catch this, go do that test. We are not there yet.

But when we think about from a vision standpoint and what we can do with the fact that we are so penetrated from a foundational layer, both from an employer standpoint and from a primary care standpoint, we're thinking through how do we build out of that specific care pathways. And we think through heart health, we think through brain health, we think through women's health as well as some of those primary ones where we think we can actually impact it from an earlier perspective.

You asked about regulators and regulations. That's a challenging scenario, but we believe that if we do enough from a preventive standpoint. So I don't think we need to get to the point where we're diagnosing, we're prescribing, we're doing that. But if I can get to a point where I can actually just nudge somebody towards a better path that is specific and personalized to them, we think we can bend that curve for many people and reduce cost in health care over the long term.

One more here. Can you expand a little bit more on your growth strategy in relation to global expansion? What are the key near-term opportunities and markets you're looking at making the biggest impact?

Yes. So I'll actually go back to one of the stats that I shared on the 2x to 3x increase from 2025 to 2019. Interestingly, there is obviously a range there regionally around the world. It is much higher in Europe and Southeast Asia than it is in North America. It is high across the board. But the -- if we look at the range, it's more like 4x in those regions as far as the impacts increasing. And the access to solutions and support around these various different challenges that they have are not present.

We are very much systemically and strategically getting into these markets, knowing that there's going to be growth. I'll give a couple of examples in Japan. Japan is a market where you -- the government mandates a stress check on -- every company has to do for every employee that they have as long as they have more than 50 employees every year. So there's a mandate to drive towards that. There's not a whole lot of advancement from a technology standpoint on what to do with that data once they have it, right?

Korea is another one where there's a very high level of awareness of the needs. Regulations are starting to get in place, but there's still not a whole lot of technological sophistication to do something there. So these are all places where we think there's going to be a lot of growth.

By and large, because it's all industries, all segments eventually, I get asked the question frequently on what's your TAM. And I don't know, bazillion is the TAM because what do you limit? It's every employer, every human being out there has these challenges. We all know it and our families know it as well. So it's a matter of getting the awareness up to that level. And there's just a whole lot of opportunity outside of North America.

I'll just add one last thing here. We find ourselves in position to take advantage of that better than most else or anybody else because of the presence that we have around the country.

All right. Thank you all for taking the time to listen.

Good day, everyone, and welcome to the TELUS 2025 Q3 Earnings Conference Call. I would like to introduce your speaker, Robert Mitchell. Please go ahead.

Good morning, everyone. Thank you for joining us today. Our third quarter 2025 results, news release, MD&A, financial statements and detailed supplemental investor information were posted on our website earlier this morning. On our call today, we'll begin with remarks by Darren and Doug. For the Q&A portion, we will be joined by Zainul, Navin, Jason, Tobias, Hesham. Briefly prepared remarks, slides and answers to questions contain forward-looking statements. Actual results could vary from these statements. The assumptions on which they are based and material risks that could cause them to differ are outlined in our public filings with securities commissions in Canada and the U.S. including in our third quarter 2025 and our annual 2024 MD&A. With that, over to you, Darren.

Thank you, Robbie, and hello, everyone. In the third quarter of 2025, TELUS delivered another period of strong customer growth and financial performance powered by our team's relentless focus on operational excellence. Our results showcase the compelling value of our comprehensive bundled services across mobile and home solutions. And we're doing that in a complementary fashion with the strategic rollout of TELUS PureFibre connectivity to homes and businesses nationwide. We are delivering far more than connectivity We're empowering Canadians with transformative digital experiences, including AI-powered smart home energy solutions, including cutting-edge tech-enabled health care and well-being services and as well comprehensive security offerings at the dispositions of our clients. These offerings are revolutionizing productivity and enhancing quality of life for our customers.

Indeed, this quarter, we achieved an industry-best 288,000 total mobile and fixed customer additions. A close to 21 million customer connections reflects an industry-leading 5% growth as compared to the same period a year ago. Furthermore, our sustained focus on delivering exceptional client experiences continues to drive leading customer loyalty metrics. This was demonstrated by our industry-best postpaid mobile phone churn of 0.91% this quarter as we progress through our 12th consecutive year below the 1% level, truly a hallmark of this organization and our culture.

Looking at our financial results, we achieved solid and resilient TTEC EBITDA growth of 3%. In mobile, we drove healthy phone net additions of 82,000 and leading connected device net additions of $169,000. These results were supported by our ongoing focus on profitable margin-accretive customer growth. This is once again evidenced by our consistent industry-leading customer lifetime revenue underpinned by our industry best churn result, which remains clearly the hallmark of the TELUS organization and the financial results that we derive from it.

Let's turn now and take a look at wireline. TELUS delivered another quarter of industry-leading total fixed customer additions. Indeed, we have consistently delivered positive wireline net additions every year since the third quarter of 2010. This is a remarkable 15-year track record in that regard. This included an industry-best 40,000 Internet net additions underpinned by our leading PureFibre offering. Our consistent strategy of leveraging our superior and growing portfolio of bundled products and services on a national basis continues to differentiate us from the competition in a way that is relevant to customers.

Turning to TELUS Health. We continue to execute against our global growth strategy, generating revenue and adjusted EBITDA growth of 18% and 24%, respectively. Moreover, we've now extended our reach to over 160 million lives covered on a worldwide basis. This global scale of our TELUS Health footprint stems from a variety of factors, including smart, targeted strategic investments, it comes from continuous product innovation with a digital and AI thesis, it comes from broadening our sales channels with strong cross-selling execution that is paying off for us, and it comes from disciplined cost optimization through technology integration and synergy realization.

Importantly, these factors are all solidly anchored in our customers' first promise. Our LifeWorks integration has now delivered $417 million in combined annualized synergies, $329 million from cost efficiencies and $88 million from successful cross-selling strategies. Notably, this is nearly 3x above our initial target of $150 million that we set when we first acquired LifeWorks in September of 2022.

Across our B2B portfolio, we have a potent story of differentiation and diversification. We are the market leader in Canada in respect of IoT, private wireless networking and 5G solutions. Moreover, we have a leading cybersecurity practice that is at the forefront of how AI is changing the cyber threat and cyber protection landscape.

Over the years, through a thoughtful and cohesive data-centric strategy, we have significantly and successfully built high-value diversified lines of business. These global business verticals include TELUS Health, TELUS Agriculture & Consumer Goods and of course, TELUS Digital. This is enabled business resiliency through the diversified portfolio approach whilst providing global scale and diverse sources of revenue and EBITDA.

Notably, at the end of October, we completed the acquisition of TELUS Digital, making a significant upward move on our data and AI competency set and this marks a significant milestone in the strategic evolution of our organization. We expect this integration to generate approximately $150 million to $200 million in annualized cash synergies and will deliver the $150 million within the 2026 financial year, and that will be driven predominantly through operational efficiencies.

Let's make sure we can do here what we did on the LifeWorks synergy realization front. The synergies coming from the privatization of TELUS Digital include accelerated digital and AI transformation, they include smart business simplification strategies, and they include strategic cross-promotion of our industry-leading product portfolio and services. This will further strengthen our financial performance and yield significant shareholder value creation.

Our well-established AI-enabling capabilities across TELUS will continue to be an integral part of our business and increasingly critical to our success. These capabilities are driving materially better outcomes within our organization and in turn, TELUS can be leveraged as an innovation lab as a product creator as a testimonial to commercialize these capabilities to support our external customers on their own AI journey to win in their respective markets. Indeed, the opportunity at TELUS is substantial. Combined across TELUS, our AI-enabling capabilities are approaching $800 million in revenue in 2025. This is expected to increase to approximately $2 billion by 2028, representing an annualized growth rate north of 30%. Notably, this is composed of solely external client revenue, and it excludes other parts of our global B2B portfolio such as health and agriculture and consumer goods.

Supporting this growth, our 4,000 dedicated professionals and AI engineers delivering digital products and solutions that help clients transform their businesses and to do that transformation at scale. One component of this growth is our September launch of Canada's first sovereign AI factory. This firmly establishes TELUS' leadership position in this space as we have ready. Today, the infrastructure and compute ecosystem to help Canadian businesses broadly deploy AI.

We are the first North American service provider to become an official NVIDIA cloud partner, utilizing our state-of-the-art data centers to support customers and partners such as OpenText, League, EY, Accenture and Rail town, to name but a few, who immediately benefit from our sovereign AI compute solutions. TELUS is providing the secure sovereign foundation or country needs to create made in Canada solutions to accelerate growth and to advance our competitiveness in the global digital economy for generations to come.

To wrap up, our Q3 performance reflects the strength of our core operations and the power of our differentiated strategy. The liability of our results demonstrates our team's dedication to delivering superior customer experiences, across our industry-leading wireless and pure fiber broadband infrastructure and technology. Our substantial network investments enable positive social and economic outcomes for Canadian communities nationwide, while continuously enhancing our operational performance, our financial results and our customer satisfaction.

Moreover, these network investments are powering Canada's digital sovereignty through our pioneering and leading AI infrastructure and technology. And as we look ahead, we are positioned for sustained success, underpinned by ongoing EBITDA expansion and disciplined capital deployment. But together, generates substantial free cash flow growth for our organization and our investors. Our strong financial foundation supports our industry-leading dividend growth program where today, we increased our quarterly dividend at a moderated rate of 4% to $41.84. This is reflective of our ongoing commitment to delivering sustainable shareholder returns.

Furthermore, we continue to progress considerable deleveraging initiatives. Notably, we remain on track to achieve our leverage target of 3x by 2027, whilst at the same time, stepping down and importantly, eliminating our discount dividend reinvestment plan. In September, we closed our transaction with La Caisse establishing Terrion as Canada's largest dedicated wireless tower operator. This unique partnership [ would enhance ] wireless connectivity for Canadians whilst unlocking significant value for TELUS shareholders by strengthening our balance sheet, accelerating our deleveraging program and providing another growth vector for TELUS to leverage.

The team is working hard to quickly operationalize Terrion, which already has 3,000 wireless sites across the country. Moreover, it's begun construction of its first multi-carrier tower in the Nimo BC with more planned in the months to come. Finally, in closing, with Remembrance Day approaching, I would like to offer, on behalf of the entire TELUS organization, my heartfelt gratitude to our veterans here in Canada and around the globe. These brave individuals, including my own father Desmond, who served with the Royal Canadian Navy in the Second World War, demonstrate immense courage to preserve the rights and freedoms of all Canadians. I hope you join me and [indiscernible] copy as we pay tribute to those who serve and who continue to serve so that we and our future generations can enjoy a better life. And on that note, I'll turn the call over to Uncle Doug.

Thank you, Darren, and hello, everyone. Mobile network decreased slightly, consistent with the second quarter at 0.6%. This performance reflects mobile phone and connected device subscriber growth, a 9% increase in IoT revenue, offset by lower mobile home revenue -- or ARPU, sorry, ARPU continues to improve, declining 2.8% in the quarter, a 50 basis point improvement sequentially. We continue to see improvements quarter-over-quarter across new activations, rate plan changes and customer renewals, reflecting our ongoing efforts to mitigate network revenue pressures. Fixed data revenue grew 1% year-over-year, making us the only provider to report positive growth and making our 19th quarter of that positive -- positivity.

Within Consumer, data revenue increased by 4%, driven by a 6% increase in residential Internet revenue, reflecting continued customer growth and higher ARPU alongside higher security and automation revenue. In business, fixed data decline with variability from year-over-year events and customer contract changes. This was primarily offset -- this was partially offset by continued small -- growth in small and medium businesses leveraging our differentiated and diversified portfolio of solutions. TTech adjusted EBITDA, excluding Health increased by 2%, alongside a margin expansion of 210 basis points to 43.4%. These results were driven by our consistent emphasis on profitable growth alongside our ongoing focus on cost reduction and our increased adoption of TELUS Digital solutions, resulting in meaningful competitive benefits.

In Telus Health, operating revenues and adjusted EBITDA grew by 18% and 24%. This growth was driven by global business acquisitions, including Workplace Options as well as organic growth in payer and provider solutions, reflecting strong performance in collaborative health records and recurring revenue in electronic medical records and virtual pharmacy solutions. TELUS Health adjusted EBITDA margin expanded 60 basis points to 17.1%, slightly lower than Q2 as we begin post acquisition and integration work associated with Workplace Options.

Looking at TELUS Digital segment. Operating revenue grew 5% with solid performance across many industry verticals. Across the service lines, we continue to see strong performance in our AI and digital solutions. However, pressures on TELUS Digital's profitability persists with adjusted EBITDA margin at 11.1% for the third quarter. We remain focused on mitigating the operating margin pressures while making targeted investments in customer quality and planned initiatives to transform our operations through tech enablement and greater efficiencies globally.

Near-term synergies of the TELUS Digital privatization include the elimination of public company costs, lowering borrowing costs as we leverage TELUS' stronger credit position and the operational efficiencies as referred by Darren. These digital -- TELUS Digital remain a segment presented in our financial statements to the end of 2025. We'll review TELUS Digital as a segment and provide more update when we release our Q2 results in February of 2026.

On a consolidated basis, net income in the quarter of $431 million and EPS of $0.32 were higher by 68% primarily driven by the gain on the purchase of long-term debt in respect of our tender process that closed in July 2025. On an adjusted basis, net income of $370 million decreased by 10%, while EPS of $0.24 was down 14%. Capital expenditures, excluding real estate, declined by $16 million or 2%, driven primarily by the elimination of certain -- by the completion of certain projects for wireless and fiber networks in addition to our continued investments in AI.

Overall, capital intensity was 12%. That was an improvement from 13% in the prior year and continues to lead the industry. Free cash flow of $611 million increased by 8% compared to the same period a year ago, driven by TTech EBITDA growth, lower capital expenditures and lower contracted wireless volumes.

Looking at our guidance for 2025, our target for TTech operating revenue, including our Health segment, is expected to be at the lower end of our target range of 2% to 4%, with variability on mobile handset equipment revenue as we go into a high-volume fourth quarter. Importantly, all other targets remain unchanged. These targets demonstrate the resilience of our business and the effectiveness of our operational execution.

Following TELUS Digital's completion of privatization, we began to execute our integration plan. The guidance that we previously issued for TELUS Digital will no longer be relevant and will not be updated for the rest of the year.

Turning to our balance sheet. The average term to maturity of our long-term debt stands a little over 13 years and our weighted average cost of capital is 4.61%. Our leverage ratio has improved to 3.5x, a decrease of 20 basis points sequentially from the second quarter of 2025. The improvement was driven by the cash received as a result of our partner, on Terrion, and as we -- and we did the repayment of the TELUS Digital credit facility in the third quarter. We anticipate leverage in the fourth quarter to increase slightly as we pay for the TELUS digitization -- TELUS Digital privatization. We remain on track to deliver our leverage ratio of approximately 3x by the end of 2027, while thoughtfully stepping down our discount on our dividend reinvestment program beginning in 2026 with a full removal by the end of '27.

Our financial position will continue to strengthen and will continue to drive shareholder value throughout 2025 and beyond. We'll continue to focus on EBITDA growth, moderating capital intensity as we progress to our target of 10%, robust free cash flow generation and our active asset monetization program including securing partners when appropriate for TELUS Health and TELUS Agriculture. With that, Robert, back to you.

Thanks, Doug. Karl, we are ready for questions, please.

[Operator Instructions]

The first question is from Maher Yaghi from Scotia.

Great. Maybe a first question on wireless and the second one on Terrion. So Doug, you mentioned, in your prepared remarks, how ARPU has improved a little bit sequentially. But can you give us maybe an overview of what you think will need to happen to return to growth on the ARPU front. And maybe just some views on the outlook for churn. You're running at a low churn, but it's starting to -- we saw a slight increase in the quarter, maybe just what's driving that behavior just on the wireless.

And the second question on Terrion is how should we think about the capital needs for the business going forward? Are you looking to transact and acquire towers or is just going to be building new co-location towers in different parts in Canada and maybe the accounting of how we'll see the cash flows from that business flowing into your free cash flow calculation?

All right, Doug. Go ahead. Second on the last one, you're the Chair of Terrion. So we'll do Terrion on and then maybe pass to Zainul for ARPU. No, I think you should do it all. Go ahead.

All right. So on Terrion, I think the best way to describe it is, yes, we are looking at acquiring towers where appropriate to do so, and that could be either outright purchases and/or partnerships on bringing more partners into our overall partnership. We will continue to build, and we have a densification of our network and building our capacity, as even Darren highlighted, some of the new ones that we've already started.

Cash flow out of the gate that any of the build costs are coming out of Terrion. And so any distributions that would be coming out of Terrion would be net of that -- and so as we consolidate Terrion into our books, you will see 100% of the CapEx. And then you'll see a lower distribution. And as we define our free cash flow definition into the future, we will make sure that, that is very clear on the ins and outs as you see that in both pieces. So I think that will be very clear and it will be transparent when you see anything of materiality. Terrion has only been in play for 2 months. So there has been a minimal impact this quarter.

And ARPU growth, I think it's going to be the continued hard work that we see from the team on step-ups and the prices that we're seeing on new acquisitions as well. We've seen a little bit better on device subsidy as well. But as we get into the fourth quarter and you see Black Friday and back -- in Christmas, specials that will come in, in any, say, aggressive specials, could obviously slow that down. But I think it's momentum. Once it's 3-year base, it's going to be slow and steady back on the way out. And so, so far, good momentum. But I think it's to be determined that if that holds or not as we move into the fourth quarter. And so I think that would be my best assessment.

Just two top-ups on that, given that we don't entirely control our own destiny on the ARPU front. I think it's important that we continue to improve our profile on unit cost to serve. So you've seen us make some good progress there getting into the double digits on the cost reduction front. I think we need to keep going down that particular path and lower our unit cost to serve. And that's one of the attractive aspects of having TELUS Digital now fully in the fold so that we can leverage AI technology to really drive down unit cost to serve within our consumer and our B2B wireless operations.

And then the other thing that is a great antidote to ARPU pressure as we hope for better days ahead. is product bundling. We've got the best product portfolio in the industry to the extent to which we can increase our product intensity in our customer relationships through progressive bundling. That's going to give us a holistic outcome with the client in terms of overall economics that's extremely appealing.

And just to be clear, Doug, on free cash flow any distribution that Terrion is going to be making to its equity shareholders will be deducted from your free cash flow calculation?

We're going through that as we speak, but it will be transparent of where it is, but it will be how we assess the capital item because when you think through the capital item as well, we're not paying for 100% of the capital we have to consolidate it. So I need to make sure that, that is very clear on both the capital that we're accountable for and then the distribution, but we'll make sure you see the net on both.

The next question is from Jerome Dubreuil from Desjardins.

The first one is on the partner build model. If you can please discuss the implications from a financial standpoint, maybe just throwing ideas out there, but maybe the margin profile is going more toward a wholesale model, but lower CapEx, just the right way to think about it or if you can discuss the different return profile of owner economics sources of partner build, please.

So just on the fiber side, I assume that's the partnership you're referring to. The economics are that we would end up either signing a lease for, call it, a dark fiber lease and/or we take a community as it's built and it's our initiative to ramp up and scale it. And so the economics are based on, I would say, similar to what you would see on any third-party fiber lease or fiber wholesale arrangement. And the third party is making their money just as we would if we were wholesaling our fiber to someone else. So it's a very similar structure, and we just have a couple of different scenarios out there of how we lease, but it would be a fair market value for a lease arrangement would be on any kind of fiber transaction.

And overall, our goal is to ensure that when we're leasing or when we're renting fiber on a wholesale basis, the return, the total economic return is equal to or better than the economic return that we derived historically from our own fiber build in Western Canada. And the reason why we've set that Axiom and think that it's doable, is clearly, we have much greater scale today on the fiber front. So we should be better positioned to seize those economies of scale. We have better technology deployed than what we had historically during the fiber build time in the West from 2014 to 2020 that improves both operational efficiency and operational execution. And we have far more products when we started to build fiber in the West, the revenue returns were very much around Internet and TV.

Now our business still has the Internet and TV components, but we have the security component. We have smart home automation. We have smart home energy services, so on and so forth. So again, leveraging the limitless bandwidth of fiber. We're also looking to secure economies of scope by creating new services over that rented fiber and getting a better return than what we did originally on our own build activities.

Second one for me is, can please provide clarity on the, I think you call it, AI-enabled revenue going from $800 million to $2 billion. You can discuss maybe what are those lines of business? Is this replacing other existing revenue? Or is there a kind of a direct line of revenue here that's going to be going from EUR 800 million to EUR 2 billion.

Okay. Let me tackle that. And then if you want to have a follow-up for additional detail, we can go there. Looking at the base right now at the $800 million level, that base, in terms of the question that you're asking is comprised of a variety of revenue sources. They include SaaS solutions that we're providing. They include our cloud solutions. They include the myriad of Gen AI applications that we have developed, both within TELUS proper as well as within TELUS Digital. They include our data annotation business and they will include -- it's very minor right now, but it will grow to be major prospectively, our sovereign AI, GPU compute solutions. We like the position that we're in here because we are extremely unique in that TELUS controls the entirety of the AI compute ecosystem.

And that is significantly differentiated from our North American peer group. So it's all in-house at TELUS, whether you're talking about AI inferences, whether you're talking about AI models or whether you're talking about AI training. And we would believe in terms of what supports our revenue going forward that our holistic in-house solution aided and embedded by our partnership with NVIDIA creates a series of superior attributes that's going to drive the revenue model progressively in terms of getting from that $800 million to $2 billion.

And so when you look at these components: number one, I think we are fairly unique in that we explicitly qualify in terms of a desired Made in Canada sovereign AI solution consistent with the white paper that the federal government has just published. And I got to believe that, that is deeply relevant. I also believe it's important in terms of revenue generation as to where the government is going to place their business be it at a federal provincial or municipal level because that's going to be the qualifier on the RFP.

The other thing that I think is distinct about us and our relationship with NVIDIA and our strategy of going from $800 million to $1 billion is that we're taking a modular build approach. And you can look in the papers this morning and then look back historically, there's an Oklahoma land race to build infrastructure. And then 2 weeks later, people are worrying, "oh, this is going to be a bubble and we're going to have over-investment and too much infrastructure, and we're not going to be able to move the inventory." And it's oscillated back and forth in that regard. We think whilst the supply and demand component is still getting figured out. Our modular build approach is the right way to address the market opportunity but do it from a responsible CapEx investment point of view.

The other advantage of the modular build rather than big bang is that we can continuously take advantage of improvements in chip technology, leveraging again our NVIDIA relationship. And as the chips continue to get better, we're not locked in on a bulk basis with last-gen technology. We can leverage next-gen technology. And that makes difference on compute power, but it also gives us advantages in areas like power consumption and cooling, which are, of course, nontrivial as it relates to their importance. And because we control the entirety of this ecosystem, I would imagine your next question is, well, if you're going to go from $800 million to $2 billion, what's the margin? Well, I'll tell you, the margins are: a, attractive and they're more attractive to the organizations that control the totality of the compute ecosystem from inferences models all the way through to the training capability component. And so that's an exceedingly attractive aspect for us. And we don't have to share our economics with a myriad of partners that have to buttress our solution because of our capabilities to do it in-house, aided and abetted by TELUS Digital.

From a specificity point of view and going from $800 million to $2 billion across those product lines that I've just articulated from SaaS all the way through to the sovereign AI component. As it relates to the sovereign AI component, we're forecasting that by 2028, we will be circa 25,000 GPUs supported by 50 megawatts of power. And our model will be a cluster as a service model. It's a rental model on per GU basis within the cluster construct with a dollar charge on a per hour basis. I'm not going to get into pricing on this call. But you can work through the economics as to how big that will be on a revenue basis and how attractive it can be on a margin basis, given the control of our ecosystem.

And then the other big area that we see contributing to the $2 billion, but I think, again, is entirely unique to TELUS, almost fortuitously so, if you will, but we will lead the world in the combination of customer experience and AI. We will lead the world in the fusion of AI with CX on the client experience front and we will be developing AI capabilities from bots to specific copilots for lines of business to both help TELUS and our external clients leveraging the developments on the back of TELUS in terms of humans in the loop aided and embedded by copilot capabilities across specific lines of business that drive better selling outcomes better service outcomes, along with lower churn, better agent training outcomes that really support a superior client experience in terms of growth, service as well as the economics because of the AI contribution to the human performance factor and will drive this contribution right through to the agentic level as well.

And we expect that to be a big source of growth on a go-forward basis because we already have a huge client base, a legacy CX client base within the TELUS Digital organization where we have well over 650 clients some of the world's largest organizations that are crying out for a CX AI transformation strategy and for us to help them along that particular journey. And so that's the color on the $2 billion in terms of specificity and where it's coming from.

The next question is from Vince Valentini from TD Cowen.

Darren, great answer. And you're right, you would have predicted that the next question may have been margins. But you closed after that would be CapEx to achieve the $2 billion, especially when it comes to the sovereign AI factories. Can you talk a little bit about how much you have to invest and clarify to us that this definitely still fits within the 10% CI target that you have?

So yes, it would still fit into our bucket based on the module approach that we talked about, we see this as a very digestible but strategic and well laid out plan over the next few years. And I think because we already have the land, we already have the data center infrastructure set up in both the East and the West. It will allow us for that easier transition.

And I think the other attractive aspect of the modular build approach as it relates, Vince, to your question on cash flow. We'll be able to recycle the attractive margins that we make on GPU utilization and recycle that back into the funding of the next module and bringing new GPUs online. And so it's a philosophy of mentality that we will eat what we kill leveraging of the progress that we're making and the inventories that we're building.

Okay. Sorry, did you say earlier that there's potentially partners involved with the build as well to those, so it may not be all on your balance sheet? Maybe I misheard you in your opening remarks.

We're looking at partnerships as well as our own data centers. So looking at opportunities that would allow for even further expansion as required. And so I would say, yes, we are looking at partnerships where applicable and it would go well beyond our just our Kamloops and our [indiscernible] data centers.

Okay. And if I can ask one other follow-up, just to clarify something. Your lease costs -- or lease principal payments came down 20% year-over-year. It's nice to see. But can you explain, Doug, how that happened? And is there any way that that's related to Terrion and leases for towers moving to a different subsidiary or something?

No. It was just -- we can get more detail after, but it's -- we've restructured some of the leases, and it's actually under the benefit of free cash flow. So we're trying to manage our cash flow more effectively and that was the whole move.

The next question is from Drew McReynolds from RBC.

Maybe one question on sovereign AI from my perspective. Are we going to see this ramp-up in revenue here through the fixed data services line? Does it kind of spread out through other lines just in your financials, just so we can kind of understand the moving parts there? And then secondly and separately, can you just speak to some of your success you're getting on Internet and the broader kind of product portfolio in Eastern Canada. Do you see any differences in terms of what you're able to do in the West versus what you can in the East in -- just maybe an update on where you're getting more success on the product intensity portfolio and where there's more wood to chop in terms of commercialization?

Maybe I'll kick it off and hand over to you, Doug, where you can look for the manifestation of the revenue created on our sovereign AI factories is twofold. You'll see it within our TELUS Business Solutions organization, and you'll also see it within TELUS Digital. And we would intend in February to give additional guidance on how we'll report TELUS Digital as a business segment. On top of that, we will provide additional ad hoc disclosure, so you'll be able to assess the process that we are following and the yield that we're getting off the sovereign AI factory and the GPU investment. So we'll give you clarity into that specifically.

And within some of the product reporting between fixed data and others, we'll get even more insights as well of where that's showing up. On East-West, unloading. We've seen good loading across the board, and it's both East, both West and then business within the small business area is contributing to those Internet loads. And on a bundled basis, we are seeing obviously a little bit more bundling still in the West, but gaining momentum in the East.

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

I was hoping you could talk a little bit about your strategy on device financing and how that's flowing through to the TTech service revenue? And on to be more broadly how you think about TELUS' positioning in the wireless market at this point?

Couldn't hear the first part, what was it.

Device financing.

Oh, device financing. So device financing is really the flow through on the balance sheet. So you'll see it build up over that 2-year period. Where the -- how it hits your P&L will be depending on how much of a handset subsidy you give. And the handset subsidy then is prorated between upfront hit and an impact on your ARPU based on an allocation from the accounting rules. So it takes a fair market value of the handset, the fair market value of the monthly recurring revenue and allocates it to both. And so you'll see from a cash flow perspective, lower handset financing obviously is impacting positively on cash flow. And then what goes through your P&L is really only impacted by whether you give a subsidy or whether you make a margin and that's what you would see in our financials on any quarterly basis.

Okay. And then just on a follow-up. TELUS has announced they're an MVNO partner for Cogeco's wireless launch and BC recently announced fiber expansion into Alberta and B.C. I understand financial details aren't disclosed, but hoping you can give some color on the financial profile versus the TTech segment? And what kind of impact we can expect to see from this over time.

Yes. So on the Cogeco one, it's all going to be based on roaming. So we will get that through roaming revenue, and it will build as their volume grows, and it'd be at a wholesale rate, a commercially driven wholesale rate. I think on the bell side of reselling in the West, I think the -- as we've highlighted, we are obviously supportive of competition. And the wholesale revenue that you get comes at a higher margin, and you don't have the success-based capital, but you don't get the product intensity. So you would have a fast payback, you'd be earning margin and really good margin right upfront. And then you would not have that success-based capital, so it would take pressure off the capital number concurrently. And there's a good chance either customers that we would not have gotten. So it is a benefit to us.

So over time, you could build up a base just like wholesale and wireless, and it is high margin, and it's contributing obviously to our P&L. But from a customer experience perspective, we still want to, obviously, win in retail and our bundling and our product superiority will continue to compete well there.

Thanks, Stephanie. Karl, we have time for 1 more question, please.

The final question is from Matthew Griffiths from Bank of America.

I was wondering if you could maybe just talk a little bit about the outlook for health. I know the growth has been strong this past quarter, partially helped by the acquisition. But just if you could make some comments on like the underlying performance that we've assumed going forward. Just help on the modeling front. And then on the comments about -- you gave a lot of information on the AI topic. So I don't really want to open that up too much. But you made the comment about government versus enterprise and that government is being well positioned given their physician paper that they would be buyers. I mean is your starting assumption in that $2 billion revenue target sort of heavily weighted towards government adoption of these services with maybe a lag to enterprise? Or are you assuming sort of just an equal adoption across the kind of the main buckets of customers?

Yes. So the answer is the latter. Wider distribution not anchored on the government front. It would include government but equally or even more broadly, enterprises would include start-up organizations that would want to be able to leverage the compute access that we can provide. You could think about research opportunities. It really is a broadly distributed portfolio of customers that we would be going after. And there's aspects of exploration as well. We've got the capability. Let's see how it develops related to market need along the way. And because we've done it on a modular basis, we can be agile and responsive. But the answer is no, it's not anchored on government. Navin, do you want to maybe speak a little bit about the view on health prospectively from a growth point of view?

Yes, I'd be happy to. Thanks, Darren, and thanks for the question, Matthew. I would say we're seeing good acceleration in the health business in terms of operating revenue. So we saw that improve to 18% in Q3, and that obviously was helped by a full quarter of Workplace Options this quarter. And when I look ahead, I see some strong organic growth in the business, both in the employer and payvider business, and we're seeing that because of strong churn performance and as well as really strong sales bookings. So as an example, the employer business, sales bookings are up 72%. Clinics are also up 44% and the payvider business is up 18% all year-over-year. And so that bodes well for that revenue coming online in the future.

And when we think about the WPO integration, not only are we seeing good organic revenue growth from that part of the business, what we're also seeing is their really strong operating model is driving EBITDA margin expansion as we migrate more and more of our former TELUS Health operations onto the WPO case management system. And so we're expecting even further improved churn, improved stickiness through customer experience, the opportunity to really drive improved product intensity tied to that improved experience. And then as I said, improved margin contribution from that business.

And then also prospectively, we really like the global footprint that we've developed and the markets that we're playing in have very strong growth opportunity. And as products like EAP, employer well-being services, employer well-being platform, capabilities and the gamification of well-being, mental health capabilities as those capabilities continue to improve in terms of importance in those markets, we're going to ride that market growth wave tied to that. So feeling very good about that.

And then maybe the last thing I'll close with is on the Payvider side, we've seen some very good organic growth coming from deals tied to Platform as a Service, our data capabilities and our ability to monetize the analytics coming from the data, and we're starting to see strong growth there. We also sold our largest pharmacy management system deal recently. So feeling very good about the prospects of continued growth in the health space. So with that, I'll pass it back to you, Darren.

Okay, Robert.

Okay. Thank you, Matt, and thank you, everyone, for joining us today. Please feel free to reach out to the IR team with any follow-ups. And with that, back to you, Karl.

This concludes the TELUS 2025 Q3 Earnings Conference Call. Thank you for your participation. Have a nice day.