TELUS Reports Strong 2025 Performance Amid Persistent Regulatory and Valuation Concerns

What happened

TELUS delivered robust Q4 and full-year 2025 results, highlighted by strong mobile and fixed customer growth, 9% EPS growth, and record free cash flow of $2.2 billion, exceeding guidance. The company is progressing on its deleveraging strategy, with net debt to EBITDA at 3.4x and targets to reach 3.3x by end-2026, aligning with the DeepValue report's emphasis on balance sheet health. However, underlying risks from the CRTC wholesale FTTP mandate effective since 2025-02-13 remain a significant headwind, potentially pressuring wireline economics as noted in the report. TELUS has set ambitious 2026 targets, including 2-4% service revenue and EBITDA growth, reduced capex, and higher free cash flow, which could support the dividend but depend on execution. Despite these positives, the valuation appears full at ~34x P/E, and key catalysts like towers monetization and 5G SA enterprise traction are still pending, maintaining a balanced risk-reward profile.

Implication

The strong operational and financial performance in 2025, including record free cash flow and customer growth, reinforces TELUS's ability to sustain its high dividend yield of ~7.7%, providing downside support as highlighted in the DeepValue report. Deleveraging progress toward a net debt to EBITDA target of 3.3x by end-2026 addresses a key concern, but the planned minority towers sale must materialize on favorable terms to achieve the ~3.0x goal by 2027. Regulatory risks from nationwide wholesale FTTP, which could erode wireline EBITDA, remain unresolved and require monitoring of CRTC pricing decisions and challenger uptake. TELUS's 2026 targets for revenue and EBITDA growth, coupled with reduced capex, suggest capex normalization is underway, but execution on open RAN savings and 5G SA monetization is critical to offset potential pressures. Overall, while the results bolster confidence in near-term cash flow, the full valuation and persistent overhangs warrant a neutral position until clearer evidence on regulatory impacts and strategic catalysts emerges.

Thesis delta

The news confirms TELUS's free cash flow recovery and deleveraging trajectory, slightly reducing balance sheet concerns and supporting the HOLD/NEUTRAL thesis with improved fundamentals. However, regulatory risks from wholesale FTTP and high valuation persist, meaning no major shift to a more constructive stance is warranted without progress on towers monetization or benign regulatory outcomes.