RE:RE:Andrew Willis, MorningstarMilhouse123 wrote: Dibah420 wrote: On 18th March, 2024
Meanwhile, with the bulk of capital spending complete for Telus, the company’s free cash flow should rise significantly in the coming years – and just might be able to afford risker bets - so Telus can become more than a Telco.
For Morningstar, I’m Andrew Willis.
While Telus has announced, in the past fortnight, a capex plan through 2028 of $57 billion.
Ontario $24B Alberta $16B B.C. $17B
I kind of find these press releases that T is going to invest $X in Ontario, Quebec, Alberta, and BC a bit confusing/misleading but I understand the reasoning behind it.
If you look at each of the press releases, a statement that regularly included says, "That is why we are investing more than $X billion in network infrastructure, operations and spectrum..."
Operations is not capex, it's opex. And spectrum spend typically doesn't fall under the annual capex guidance/reporting.
I suspect the reasoning why T makes these announcements is to promote the fact that they are investing in and paying taxes in Canada when (1) the Bank of Canada bemoans the lack of investment causing the country to be less productive and (2) the public complains about big corporations not paying their fair share of taxes.
The annual reports show that T's capex spend (excluding spectrum spend) has hovered around $2.9-$3.0B since 2016 but peaked at about $3.5B in 2021 & 2022 mainly in support of building out its fiber network and 5G network. Capex spend dropped to $2.6B last year with similar guidance this year and likely beyond. Capex intensity (or the percentage of revenue going to capex) has dropped from a high of 23% in 2016 to 14% last year. And they are talking about it dropping to about 10% by 2026 by growing their revenues. That revenue will flow through to Free Cash Flow to drive dividend growth and reduce debt. My SWAG is that FCF will possibly hit just under $3B by 2026.
Thank you for your thoughtful comments. Your points are well taken that these "investment announcements" are to be seen as a P.R. exercise rather than financial guidance. However..
From my simple understanding (and I am not an accountant) it matters little where the pros place say spectrum spend; capex or opex. In the context of FCF a spend is a spend, is a spend...
The drastic decline in s/p from the mid thirties to the low twenties might suggest that the company is in palliative care. But I don't believe that to be the case. I have put together a table for annual revenues and admittedly it is only a single metric, nonethelesss an important one. I hope it sheds some light.
YEAR REVENUES CHANGE %
2016 $12B
2017 $13.3B 11%
2018 $14.4B 8%
2019 $14.7B 2%
2020 $11.4B Pandemic
2021 $13.4B 17.3%
2022 $14.1B 4.73%
2023 $14.82B 5.33%
2024 Q1 $3.61B (0.92%)
2024 I suspect will come somewhere between $14-$15B and with the major reductions in head counts (opex) and a slower capex intensity your number of $3B for FCF by 2026 seems about right.
Cheers