Telus cuts staff to bolster free cash flow

Telus plans to cut 6,000 jobs in a bid to support free cash flow growth and earnings in the coming years, becoming the latest in a growing line of international telcos looking to save cash by shedding staff.

There are a lot of potential drivers behind the Canadian operator’s decision; it references the macroeconomic situation, competitive and regulatory pressures, and digital transformation, among other things, alongside its plan to reduce headcount. But ultimately, it’s about making the balance sheet look healthier and keeping shareholders happy.

“It is…with a very heavy heart that we are seeking to reduce 6,000 staff positions across our global footprint, representing approximately 4,000 reductions at Telus and 2,000 at Telus International, including offering early retirement and voluntary departure packages,” said Darren Entwistle, president and CEO of Telus, in a lengthy statement accompanying the operator’s second-quarter results announcement.

The numbers made for interesting reading. Entwistle talked up a “robust performance” at the telco’s core telecoms business, and indeed, customer growth looked pretty strong across the board, including 110,000 mobile phone net additions. But while revenues were up – a 12.4% year-on-year increase to C$4.95 billion – profits slid. Net income was down 60.6% to C$196 million, while earnings were virtually flat at C$1.59 billion.

The job losses will cost Telus as much as C$475 million in restructuring expenses, but it is eyeing annual cost savings of more than C$325 million.

“While this will temporarily and modestly dilute our free cash flow in 2023, importantly, it will support strong free cash flow expansion in the years ahead, as well as the progression of our leading, multi-year dividend growth program,” Entwistle said, speaking the shareholders’ language.

Free cash flow increased by just over 36% in Q2, incidentally, to C$279 million. However, for the full year Telus has reduced its FCF guidance by C$500 million to around C$1.5 billion to reflect the costs its restructuring.

As Telus announced last month, its updated guidance also shows lower revenue and EBITDA growth for full-year 2023 than it had originally projected. It sees operating revenue growth of 9.5%-11.5% this year, having previously aimed for 11%-14%, while adjusted EBITDA will increase by 7%-8%, a couple of percentage points lower than its previous 9.5%-11% target. Those adjustments came after global IT services arm Telus International revised down its annual targets citing global macroeconomic pressures leading to declines in demand from certain large customers and difficulty converting sales in the pipeline due to those same pressures at its customer base.

It’s a familiar story globally.

Job cuts announcements have been coming thick and fast in the industry of late, on both sides of the Atlantic. Of particular note were the announcements from Vodafone and BT in May, a couple of days apart, the former looking to shed 11,000 staff as part of a turnaround plan, while the latter revealed it will axe 55,000 employees, or 40% of is workforce. We have also seen hefty layoffs from the tech giants, infrastructure companies, and telcos, including Verizon, in recent weeks.

While Telus’ plan is not at the scale of that of BT, for example, it is big enough to ruffle some feathers. 6,000 staff amounts to getting on for 6% of its workforce, which stood at 108,500 active employees at the end of last year.

This is far from being the most shocking job cuts announcement in the industry, although that will come as scant comfort to those affected. It’s essentially a ‘more of the same’ story. And there will likely be others in the not-too-distant future.

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