In 1998 I was responsible for scanning the rates of B.C. Telephone at a rate hearing held in Vancouver.Within months it was to become the new Telus. And it has grown tremenduously since then.Originally it was Alberta Government Telephones and then it acquired both Edmonton Telephone and Quebec Telephone.Then in 1998 it acquired or merged with B.C.Telephone.Consequently, Telus had annual revenue of about $10 billion in 2011 but in 2025 it had annual revenue of $20.4 billion.This is an annual growth rate of 7% over the entire period.But in 2024 the growth rate has dropped to about 2%.B.C. Telephone, now Telus,is a regulated telephone utility.It's rates are regulated by the federal government.Rates on regulated telephones never go down and the number of subscribers always goes up although only slightly so.This is an equation for consistently rising revenues and usually also net income.But in 2025 both net income and the rate of return on equity were much lower.And in 2026 the expected rate of return and net income is expected to be only slightly higher.
Land Lines and Mobile Phones
Back in 1998 the regulator was primarily interested in land lines.Mobile phones and iphones were a smaller part of the overall picture then.Now the picture has changed.Telus has 10.2 million phone subscribers while only 3.7 million connected device subscribers.
Mobile network revenue ,which has unregulated rates, was about $7 billion in 2025 while connected device subscribers which are regulated produced about $8 billion.The remainder of annual revenues comes from fixed data,which also regulated, is about $5 billion.The potential for growth from mobile phones is greater and more volatile.For example,in 2024 Telus added 315,000 new subscibers or a 3.7% gain.Mobile phones are in a competitve market and margins are lower than on regulated rates for land lines which have no competition.In fact, the reason land lines are regulated is because they are an essential service with no ready substitutes or competitors.
Telus is a Conglomerate
Telus was originally called Alberta Government Telephone and at that time their business was purely concerned with providing telephone service.Since then it has added many new services such as radio services,healthcare and selling telephones.In fact, it is almost a conglomerate operating 3 or 4 distinct businesses.The problem is that some of these services that have been added along the way have a lower margin than land lines and mobile phones.And the margin on mobile phones is now less than that on landlines.And also the margin on selling mobile phones has diminished as the mobile phone market has become very competitive. The first thing this blog will recommend is divesting some of these non-core operations.This will provide funds needed for capital expenditures and raise the average operating margin.Then it will be "a leaner,cleaner telephone machine".And the management required to direct a purely telephone company is different than that of a conglomerate with telephone assets.Furthermore some of these divested services could be pooled into a partly owned subsidiary that trades separately on the stock exchanges.
Secondly the mobile phone business has become very competitive. Telus has contracts with several telephone providers including Samsung.This blog recommends that it pick one or at the most two providers that can supply all it's needs.By buying in volume Telus can get a better unit price for it's mobile phones.
Summary
2026 has been a bad year for Telus stock.In fact, the stock price has fallen by almost 70% since the start of the year.Telus management has stopped the slide in the stock price by cutting the dividend by almost 60%.This amount of loss of equity cannot be remedied by a change in the dividend alone.However this will give them the funds to make some changes.But this blog feels that there has been systemic damage done over the last 2 years by management adding bits and pieces to the core operation.Some of which do not blend with the core.Only deep analysis can inform management of what should be saved and improved and what should be jettisoned.This will gradually remedy the drop in the price of Telus stock.This blog feels there will be no improvement in the stock price until the next quarterly report.Management must show investors the changes made that will improve profitability.
Darren was Around for 26 years
Darren Entwistle was CEO of Telus for 26 years ,that is, from 2000 to 2026.He was not an engineer as he had a background in business and finance.Under his watch Telus has become a little overweight.Telus needs to go on a bit of a diet and streamline itself.Then gradually Telus will return to a familiar price range.But it does need to show investors it's improvements.
Dale Mcintyre is a freelance writer that writes for several financial brokers.
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