TELUS Ag and Consumer Goods Business: Is it on the Chopping Block?

Author

Shane Thomas
March 29, 2025

Telus Corp. shares sank Friday after a downgrade by Bank of America over concerns that the company could be challenged to reduce its high leverage and meet dividend payout goals in its targeted timeframe.

TELUS has a debt and cash flow issue.

Q4 2024 earnings call, executives stated that to manage it, they would do the following:

The plan includes EBITDA growth and cash flow expansion alongside of reducing capital intensity as well as the continuing of programs such as real estate and copper initiatives, partner opportunities within our growth businesses, divestiture of non-core assets and surfacing or some value – servicing value in our infrastructure where appropriate.

This comes ~6 months after I highlighted another TELUS challenge surrounding the value creation of their non-core spinout businesses:

Three years ago, (TELUS) launched the first in what was expected to be a series of initial public offerings by selling a portion of subsidiary Telus Digital Experience. Feeble stock market performance, has thrown a wrench in the plan. Telus Digital’s share price is down 88 per cent since its debut.

The CEO now faces a dilemma. A decision that makes all sorts of financial sense – buying back all the shares in Telus Digital for a fraction of the IPO price – would kibosh Mr. Entwistle’s plans for further spinouts. Why would anyone buy the next IPO from Telus after watching investors lose money on the last offering?

It’s relevant to highlight because the logical way for TELUS to create shareholder value with its Ag and Consumer Goods software division was to spin-out the business into an IPO, netting the proceeds and a portion of the future upside performance (they would likely maintain some shares), like they aspired to do with Digital and Consumer Health.

Now, not only has the spin out plan been challenged because of poor performance in the TELUS Digital business (and greater macro economic challenges), TELUS has a need for more cash flow. Then we layer on the fact that one has to assume TELUS Ag and Consumer Health has underperformed even their executives conservative expectations in a non-core segment.

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