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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, everyone. Welcome to the TELUS 2022 Q3 Earnings Conference Call. I would like to introduce your speaker, Mr. Robert Mitchell. Please go ahead.
Hello, everyone. Thank you for joining us today. Our third quarter 2022 results news release, MD&A and financial statements and detailed supplemental investor information were posted on our website this morning at telus.com/investors. On our call today, we will start off with remarks by Doug and Darren. And they will be joined by the TELUS leadership team for the Q&A portion of the call.
Briefly on Slide 2. This presentation answers to questions contain forward-looking statements that are subject to risks and uncertainties and made based on certain assumptions. Accordingly, actual performance could differ from statements made today, so we ask that you do not place undue reliance upon them. We disclaim any obligation to update forward-looking statements except as required by law. And we refer you to the risks and assumptions as outlined in our public disclosures, including our third quarter 2022 MD&A, our annual 2021 MD&A and filings with securities commissions in Canada and the U.S.
With that, over to you, Darren.
Thanks, Robert, and hello, everyone. In the third quarter, the TELUS team once again demonstrated continued execution excellence, characterized by the potent combination of industry-leading customer growth resulting in strong operational and financial results across the business.
Our robust performance reflects the chemistry of our globally leading broadband networks and customer-centric culture, which enabled us to deliver total mobile and fixed customer net additions of 347,000, up more than 8% on a year-over-year basis and our strongest quarter on record.
This reflects strong demand for our superior bundled offerings and customer service over our world-leading broadband networks. Furthermore, our leading customer growth is underpinned by our consistent industry-best client loyalty across our mobile and fixed product lines.
Notably, again this quarter, and for 8 of the last 10 quarters, blended mobile phone, PureFibre Internet, security and voice churn were all at or below 1% on the churn front. Moreover, since the onset of the pandemic at the beginning of 2020, we've now welcomed approximately 2.5 million new mobility and wireline customers.
This represents a significant industry-leading results, outpacing our next closest peer by a multiple of more than 2x, underpinning our financial performance today and, of course, well into the future. In the third quarter, TELUS achieved strong consolidated revenue growth of 10%, whilst EBITDA was higher by 11%.
Strength in our core telecom operations continues to be complemented by growth in our highly differentiated technology-oriented businesses. Let's turn now to have a look at our mobile operating results. TELUS achieved healthy customer growth of 274,000 net additions. This included strong mobile phone net additions of 150,000, up 11% over last year, representing our best quarterly result since 2010. Notably, this strength was driven primarily by loading on our premium brand, reflecting our continued focus on high-quality and profitable customer growth. It also included record high connected device net additions of 124,000, which were up 13% on a year-over-year basis.
Importantly, our team delivered another quarter of industry-best loyalty results, which continues to be the hallmark of the TELUS organization and our customers first culture. Blended mobile phone churn was 0.95%. Moreover, our industry-leading postpaid mobile phone churn of 0.76% represents the 8th quarter out of the last 11 that we've achieved the churn rate below 0.8%.
Our consistently strong operational and financial performance is buttressed by our highly engaged team that is passionate about delivering superior service offerings and digital capabilities over our world-leading wireless and PureFibre broadband networks.
More than ever before, Canadians value fast and reliable connections. Notably, in August, independent global analytics company, Opensignal, named TELUS as Canada's best provider for consistent mobile network quality. This recognition makes TELUS the most awarded network in Canada and one of the most awarded globally by Opensignal, with this being the 11th consecutive award of this ilk.
Furthermore, in October, U.S.-based Ookla recognized TELUS as the fastest mobile provider in Canada in their Q3 Network Performance Report, also representing the 11th consecutive time TELUS has received this recognition. These acknowledgments alongside the numerous other third-party network awards that our skilled and dedicated team has earned reinforce TELUS' leadership in terms of offering customers the fastest, the most expensive and the most reliable service in Canada across both our wireless and our PureFibre networks.
Moreover, this recognition of TELUS' national broadband network leadership underscores the value of our significant generational investments in world-leading network technologies. These investments will continue to drive extensive socioeconomic benefits to Canadians as well as meaningful future free cash flow for decades to come.
Just like fiber is doing now and will do into the future, copper did in the past and look how long we generated those returns and dined out on them. What fiber did for us historically, it's going to be a fantastic performance for us on a go-forward basis in terms of the build that started way back in 2013 on the PureFibre front.
To close on mobile, third quarter ARPU was up 2.3% as compared to last year, continuing the year-over-year growth momentum that we have seen so demonstrably in recent quarters. This was supported by higher domestic monthly recurring revenue, driven by step-ups to our unlimited data offerings, including increased adoption of 5G-plus plans, as well as customers clearly recognizing the superior value inherent in our 5G speeds and the technology that underpins it.
ARPU is driven by our focus on premium customer loading. It's driven by our effective base management and it's driven by our continued strong IoT growth. In addition, to roaming revenues that we're now seeing returning to the organization as a result of increased international travel volumes as COVID restrictions have eased.
Notably, mobile phone lifetime revenue of over $6,200 continues to be significantly higher than our peer group, reflective of the combination of our consistent focus on high-quality customer growth and leading client loyalty.
Let's take a look now at our fixed operating results. TELUS delivered another quarter of industry-best wireline customer growth. We achieved healthy third quarter Internet net additions of 36,000. This is indeed a healthy result as we continue to deliver on our strategy of driving high-quality customer additions and multi-product penetration with the year-over-year decrease primarily resulting from continued normalization of the market, including higher churn in the post COVID restriction environment.
We continue to drive strong growth in TV with industry-leading net additions of 18,000. This is up 80% over the prior year despite modestly higher churn compared to the very low rates that were realized during heightened pandemic restrictions. Furthermore, residential voice was a very positive story this quarter, with Q3 line losses of only 6,000, down more than 45% on a year-over-year basis.
This led the industry by a wide margin and marks the best voice result that we've seen since the third quarter of 2004. Notably, this reflects our successful retention of a high-margin product line and the product intensity momentum that we continue to achieve and the inherent churn benefits.
Strong security net additions of 25,000 this quarter further supports our expanding product intensity. Overall, industry-leading external fixed net additions of 73,000 were relatively steady year-over-year in spite of modestly higher churn as the market normalizes post COVID restrictions.
This result and these performance attributes reflect the strength of our unique and highly attractive bundled offers across our industry best portfolio of products and services that is buttressed by our ever-expanding broadband networks, our leading customer-centric culture as well as our strong and highly differentiated social capitalism attributes that truly do underpin our TELUS brand.
Now let's take a look at our TELUS Health operations. Including 1 month of LifeWorks, we realized health services revenue in the third quarter of $225 million. This illustrates the meaningful scale of our health operations as we improve health outcomes for citizens to access the better data analytics that render better health information.
This includes our health care programs that now cover over 60 million lives, inclusive of LifeWorks and reflecting organic growth of 4.2 million lives over the third quarter of last year. It includes executing 143 million digital health transactions during the quarter, up 4% over last year.
And it includes earning 1.7 million new virtual health care members in the last 12 months, increasing our virtual health care members the $4 million, which is up 74% over the prior year. On September 1, we completed our acquisition of LifeWorks earlier than anticipated. We are pleased to welcome their employees and customers into our TELUS Health family.
And of course, we immediately commenced integration efforts to combine our respective skills and capabilities. This powerful combination creates a globally leading end-to-end digital first employee primary and preventative health care, mental health and wellness platform covering more than 60 million lives in Canada and well beyond across 150 countries.
Customers can now benefit from our team's steadfast focus on providing exceptional customer experiences over our world-leading broadband networks and the data that they generate. Customers will benefit from our consolidated engineering talent that will incorporate best-in-class data platform technologies to positively impact health outcomes for employees and their families.
And customers are going to benefit from our significantly expanded economies of scope and scale as we drive value creation in the significant expansion of our health capability set. This includes complementing LifeWorks international relationships with TELUS International's proven expertise in digital transformation and client service excellence as well as their expansive client base and delivery teams that span 30 countries to extend our offerings to customers well beyond the construct of Canada.
Our combined organizations guided by a shared set of values will provide employers with convenient, innovative and effective data-driven primary and preventative care solutions for employees and their families to proactively manage their health and optimize their wellness.
This includes support for their mental health so that they have the opportunity to lead their healthiest and most productive professional and personal lives. LifeWorks brings significant benefits to TELUS Health, and we are focused intensely on integration efforts aimed at crystallizing these benefits. These include meaningful synergies of $200 million or more over the next 3 to 5 years, inclusive of revenue synergies, and as well approximately $60 million in near-term cost and operation synergies.
Let's turn now to TELUS Agriculture and Consumer Goods. Our team drove revenue growth of 29% over the same period last year as a result of our ongoing efforts to integrate and grow this compelling business and all the assets that we are developing across agribusiness, animal health and consumer goods and trade optimization.
We are creating significant value as the leading provider of agriculture and consumer goods technology solutions around the world as we advance the sector's efficiency and effectiveness including food quality production, waste reduction, food and retail execution and trade promotion optimization, all being driven through better data analytics.
Let's now turn and take a look at TELUS International. Earlier today, TI once again announced solid double-digit revenue growth coupled with leading profitability and significant robust cash flow in the third quarter. Notably, revenue increased by 16% on a constant currency basis, whilst EBITDA grew by 15%.
These represent solid results against the backdrop of ongoing global macroeconomic and geopolitical uncertainties. TI's continued focus on quality, profitable growth, powered by an attractive end-to-end set of digital capabilities, position TELUS International as a trusted adviser for premier digital customer experiences and IT solutions for its over 600 global clients.
Last week, TI announced an agreement to acquire WillowTree, a full-service digital product provider that will significantly bolster TI's front end and design competencies and unlock attractive and significant cross-selling opportunities whilst adding new marquee customers and further diversifying TI's enviable list of client partners.
Importantly, WillowTree will augment our go-to-market transformation capabilities in respect of digital, cloud and software-based services that are going to be highly sought after as we progress toward a period of economic recovery in the months to come.
Furthermore, and extremely importantly, WillowTree's software development capabilities will enhance TI's ability to support and materially accelerate TELUS' own ongoing digital transformation and as well support key product development aspirations across our business, particularly within health and agriculture.
Doug is going to have an opportunity to provide further commentary on both TTech and TELUS International's financials in just a minute. In closing, significant ongoing investments in our PureFibre and 5G networks alongside digital capabilities and data analytics in high-growth markets are further enabling the continued advancement of our financial and operational performance, strengthening our confidence in the robust outlook for our business and the long-term sustainability of our industry-leading dividend growth program.
Importantly, the 7.2% year-over-year dividend increase announced today represents the 23rd increase since we initiated our multiyear dividend growth program way back in 2011. Notably, our program is now in its 12th year and was recently extended through 2025.
Since 2004, TELUS has returned more than $22 billion to shareholders, including those shareholders that are saving for retirement or other life events or they're returning relying on this money for their income. This now represents over $17 billion in dividends since 2004 and this, in totality, equates to $16 on a per share basis.
Future dividend growth and the affordability of that growth is going to be supported by strong EBITDA and free cash flow growth, supported by value creation across TELUS International, TELUS Health and TELUS Agriculture and Consumer Goods businesses as well as significant reductions in annual capital expenditures beginning in 2023, leading to meaningful and sustainable free cash flow expansion.
Notably, it will also be supported by enhanced efficiencies resulting from the completion of our copper to fiber migration and continued retirement of our remaining copper infrastructure. This is complemented by our increased digitization and the other revenue and cost benefits that will come from fiber ubiquity, which represents a significant value differentiator for TELUS.
We lead on fiber expansiveness and we lead on digitization, and we lead on customer simplification. All of those attributes drive significant efficiencies for this organization at the OpEx and CapEx levels.
Finally, I'd like to recognize the way our TELUS team continues to demonstrate that when things are at their worst, the TELUS team is at their very best. This is highlighted by our team's support for humanitarian and disaster relief efforts just this past quarter alone and of course, that's the culture and heritage of our organization in action.
Thus far, TELUS, our team members, the TELUS Friendly Future Foundation and our customers have contributed nearly $1 million in cash and in-kind assistance supporting those impacted by Hurricane Fiona, Hurricane Ian, flooding in Pakistan and the unrest in Iran.
Indeed, as a leading provider of mental health and well-being services we launched a free 24/7 crisis support hotline through LifeWorks to support the Iranian community and their loved ones. Furthermore, to help customers stay connected to their family and friends we waived all long distance and text messaging fees for those at home in Canada, reaching out to friends and families in Iran.
I remain exceedingly grateful for the TELUS team's passionate efforts to support our communities across the globe as we strive to deliver outstanding results for all of our stakeholders further exemplifying our leadership in social capitalism.
And on that point, you note, I'll hand the call over to Doug.
Thank you, Darren, and hello, everyone. Our third quarter results build on our consistent and long tenured operating momentum, reflecting continued execution excellence and supported by our high growth and diversified asset mix. Mobile network revenue continued to show sequential improvement with Q3 increasing by 6.8% year-over-year driven by strong customer growth and higher ARPU.
Furthermore, as compared to the pre-pandemic Q3 2019 period, mobile network revenue has increased by 7.5%, showcasing our strong consistent growth in customer service excellence. We continue to see already a steady improvement in roaming revenue with the Q3 amount of approximately 113% in Q3 as compared to pre-pandemic levels and up from 103% in Q2.
These improving trends will continue to support ARPU growth as we progress through the remainder of the year and into 2023. Beyond roaming, we remain focused on driving sustainable ARPU growth by executing on our 5G monetization strategy, excellence in base management, maintaining our long-standing approach to smart profitable loading and leveraging our leading churn profile within the competitive landscape.
Fixed data revenue grew 5.4% year-over-year or nearly 7% when considering the divestiture of our financial services business towards the end of last year. Within fixed data, residential internet revenue grew by 11% year-over-year as we continue to drive market share gains alongside higher ARPU while customers continue to move to higher speed tiers and recognizing the compelling value and reliability of our superior PureFibre and bundled offerings.
At the beginning of September, our team successfully closed the acquisition of LifeWorks earlier than anticipated, accelerating the recognition of financial and operational benefits of the transaction. Health Services revenue increased by 73% in the third quarter, including an $87 million contribution from LifeWorks.
The earlier closing date also allowed us the opportunity to accelerate the integration process months earlier, advancing our ability to begin unlocking the significant synergies of the powerful combination of TELUS Health and LifeWorks, including leveraging TELUS International's extensive capabilities and client base.
Our planned acquisition of WillowTree significantly enhances TI's digital services portfolio, augmenting and scale in design and build capabilities and increasing its high-value digital services mix and revenue per team member. We expect the transaction to close in early January 2023. Together, these transactions represent important steps we are taking to scale our high-growth, technology-oriented business, further setting us apart from our global peer group and adding capacity for value creation and diversification of our business.
At the segment level, TTech external revenue was up 9.3% over last year and adjusted EBITDA grew 8.1%. For the quarter, LifeWorks contributed approximately 2% of the growth in revenue and 1% on adjusted EBITDA. DLCX external revenue was higher by 14% year-over-year, and adjusted EBITDA was up 36%, while margins improved 380 basis points to approximately 25%.
Altogether, consolidated revenue increased 10% year-over-year and adjusted EBITDA 11% with margins improving by 30 basis points to nearly 37%. Consolidated net income was up 54% year-over-year, while basic EPS grew 48%. The strong growth was driven by higher EBITDA and lower financing costs, partly offset by higher depreciation and amortization and, as it relates to EPS, higher shares outstanding.
During the quarter, we observed an unrealized benefit included in our financing expenses related to our virtual purchase power agreement totaling $151 million. On an adjusted basis, excluding this benefit, net income and EPS were higher by 20% and 17%, respectively.
Free cash flow of $331 million was -- in Q3, was up 63% over last year, driven by higher EBITDA and a decline in capital expenditures from lower investments as we near the completion of our accelerated broadband build, and as we start to align our run rate to our reduced '23 capital spend.
As outlined in our press release today, we are updating our consolidated financial targets for 2022. Our domestic core telecom business continues to perform very well, benefiting from our world-leading wireless and PureFibre networks and customer service excellence. We expect LifeWorks to have a similar TTech monthly percentage impact on revenue and EBITDA in Q4.
Our customer wireless contracts from lower mobile handset sales volumes were lower as a result of fewer customers requiring a new handset in our customer growth and within our existing base as well as the success of our certified preowned handset sales. This resulted in less handset revenue year-to-date and is expected to be lower than planned for the full year when we set the guidance back in February. This trend will be accretive to free cash flow as less handsets need to be financed or subsidized than planned when we set our original guidance.
At TELUS International, the current macroeconomic environment is influencing customer spending in the near term, leading to a TI update on their outlook for 2022. Importantly, TI continues to target robust double-digit revenue growth and eating margin and cash flow profile. Please see TI's announcement earlier today. As we consider the inclusion of LifeWorks, the strong results that we saw in our current business, the impact from the lower mobile equipment revenues as well as account for TI's updated outlook, we are now targeting, for the full year, consolidated revenue to be approximately 8%. We tightened the range on adjusted EBITDA growth to 9% to 10%. Capital expenditures for '22 will be expected to be $3.475 billion, including additional capital for LifeWorks and free cash flow now being increased to approximately $1.3 billion, above our original guidance range of $1 billion to $1.2 billion, more than offsetting the increase in capital.
LifeWorks did not have any impact on our higher free cash flow outlook for the quarter and the year outlook. For full year impacts in 2023 of LifeWorks and WillowTree, we will be included in our February guidance release. During Q3, the team successfully issued $2 billion in new debt securities across 3 different maturities, including our third sustainability-linked bond, making TELUS the largest issuer of sustainability-linked bond in a Canada. This offering was met with high investor demand within a very dynamic market environment and further demonstrates our strong success and access to the capital markets as well as advance our growth strategy.
Importantly, our balance sheet remains strong. At the end of the quarter, the average cost of our long-term debt remained at a low 3.95%, reflecting how our team has successfully leveraged the low interest rate environment over the past decade to accelerate our growth strategy, including our meaningful investments in wireless spectrum and our generational PureFibre build, which is nearing completion.
We have a strong debt maturity schedule with an average maturity of our long-term debt of over 12 years and no significant debt maturities until 2024. Our balance sheet strength will continue to be further enhanced in 2023 with a meaningful increase in free cash flow generation.
At the end of 2022, our accelerated broadband build will conclude, setting up TELUS to see meaningful positive free cash flow for 2023. And capital expenditures declining to approximately $2.6 billion, inclusive of approximately $100 million CapEx related to LifeWorks.
Importantly, our capital investments are going to long-term infrastructure-based assets that will yield positive operational and financial results for decades to come. As we progress through the quarter and for the rest of the year into 2023, our team remains highly confident of our growth trajectory and long-term strategy to plan and further advance our leading growth profile, building strong value creation along the way. Robert, back to you.
Thanks, Doug. Melay, we're ready for questions.
First question comes from Maher Yaghi from Scotiabank.
And I'd say it's hard to find a telecom company with -- in a mature market with this type of growth. So congratulations. But I have -- when looking at the balance sheet and, Doug, you mentioned the strength that you see going into next year, but one has to maybe question a little bit how fast can you deliver the balance sheet because we've seen your debt-to-EBITDA ratio go from 3.15% to about 3.6% now if I include the most recent acquisition, WillowTree, so up 0.5% approximately in turn. In terms of the balance sheet, how should we look at your delevering process, how quickly can you deliver that balance sheet? And in terms of the share count, also we're seeing an uptick because of the DRIP. So maybe if you can give us a sense of where should we look at those 2 metrics in 2023, especially with the spectrum auction coming up?
And my second question quickly on churn. Can you maybe give us a view as to what caused the increase in churn? Is it mainly prepaid? Or you also saw an uptick in postpaid churn?
Okay. Doug will take the first part and then Jim will take the second part.
I'll start at the back of your and move forward. The DRIP, we're going to keep in place until after the spectrum auction is over at the end of next year, and then we'll make an assessment after that date. From a delevering perspective, all the investments we've made are extremely strategic.
There have been smart investments that provide long-term benefits, as Darren highlighted, and I highlighted, in fiber, 5G spectrum and acquisitions that diversify our organization, build for future growth and generate very, very significant free cash flow into the future.
The reduction of the capital that we had discussed also leads to 2023 acceleration of free cash flow. So we will continue to delever very quickly starting next year. TI, and you would have seen their leverage go up to 3.0, and it will delever very, very quickly as well as they always do with low capital intensity.
So from that, the fact that we've got the reduction in capital, we have growth engines from health to ag to TI, all contributing. None of them are in the negative J-curve anymore contributing to positive growth. the execution within our base and the capital reduction, we're very confident that we'll continue to delever in a very quick and appropriate way. And that's why we have the ongoing confidence in our balance sheet and the ongoing confidence in our business.
And on churn. Postpaid churn was 0.76%, which was pretty much flat year-over-year. Prepaid churn was at 2.36%, which was up 31 basis points and that was largely due to some transient activations during the Rogers outage and a bit of the traveler segment. So we were pretty comfortable.
We had very strong lifetime value again. And the one thing that I would like to mention is we continue to focus on premium loading, which is what's helping our domestic ARPU. And in the quarter, our premium brand net ports were up dramatically, and we had 2x the premium net ports versus any of our competitors.
And maybe one just quick top up to my answer, just to reinforce, our maturities next year are less than $500 million. And after that, again, it's a balanced maturity ladder. So we have very little needs or requirements for financing over the next 2 years concurrently.
Next question comes from Stephanie Price from CIBC World Markets.
Just following up on Maher's question around the fiber investment cycle nearing completion. Hoping you could talk a little bit about your thoughts on the uses of excess capital around ag and health and return of capital to shareholder versus future M&A, et cetera.
Stephanie, I'll take this one. You're quite correct. If you look at our fiber footprint, the copper component within that is in the low single digits as a percentage. And of course, that's going to unlock significant value for us on a go-forward basis.
Number two, we are entering a period where the sources of cash are going to chronically exceed the uses of cash. In terms of this organization, we like our dividend growth model as the most efficient and effective form of returning cash to shareholders.
Secondly, we want to retire debt along the way. I think it's interesting to note that when we began the fiber build program over a decade ago, our cost of debt and our average term to maturity at that time, the cost of debt was over 5%, and the average term to maturity, I think, was about 5.3 years.
Now we've got a cost of debt around 3.95% on average, and the average term to maturity is 12.1 years, which profiled quite well the return of the fiber in terms of revenue and margin generation versus the expense on the capital investment to bring it to fruition.
And then thirdly, we want to put the money to work on selective M&A to support the continued scaling and value creation at TELUS International, at TELUS Ag and at TELUS Health. So we would see us taking excess cash and putting that money to work as it relates to the key growth engines of the organization beyond the excellent value that we're creating right now within our core business.
The interesting thing about that latter comment is while we spend money to invest in the scaling and growth at TI, Ag and Health. Ag and Health like TI are also poised to return capital as those valuations from a scaling point of view, come to fruition and we think about undertaking public market events for both the Ag and the Health businesses. So I think it's quite an exciting 2-way story in terms of investment in value and scale realized and cash returned yet again to shareholders.
And that's what really differentiates TELUS on a global basis because I would challenge you to find another company in our sector that does as well as what we do on core growth, whether it's operational loading and customer service or the financial results that accompany that or the fact that we have 2 growth engines, one on wireline and one on wireless. And then complement that with exacting and exciting value creation on emerging businesses from TI to Health to Ag.
And then complements that with a dividend growth program that is now going on from 2011 through to 2025. I just don't see that diversified performance at core the exciting prospects and possibilities across TI, Health and Ag and then returning cash to shareholders at a level that really has no parallel. I think that collective combination really does make us unique.
That's helpful color. Maybe just one follow-up for me on the fiber rollout. Just curious about your thoughts on the homes in your footprint that were not originally targeted by the fiber and how you think about rolling those out over time?
What do you mean the homes that were not originally targeted by fiber? Are you're talking about homes outside the fiber footprint that we would reach with 5G wireless, HSIA?
Or converting those to fiber in the future, I guess, is more of the question.
Okay. Why don't I take a break then and hand it over to Zainul? She's got a particular passion on this piece of subject matter.
Zainul, why don't you kick in and answer Stephanie's question?
Okay. Thank you. I think the first thing I would say is that while our footprint completion or our footprint is nearing completion on fiber, we're continuing to make pure fiber investments. So as new home growth continues, there are pockets of build that we are continuing that are within our capital guidance that Doug spoke to.
So we will continue to see footprint expansion within our PureFibre footprint, and we'll continue to drive the copper to fiber migrations with the speed and alacrity that we have done so far. The second point is that we have a healthy wireless high-speed opportunity that we developed several years ago, and that will expand with the rollout of 5G and that will continue to enable us to be at the forefront of leveraging new footprint in rural areas, particularly.
And then the third thing I would say, and where our passion really lies, to Darren's point, is around ensuring that we continue to drive rural and indigenous footprint. We've been very assertive in our applications on the Universal Broadband Fund.
We are -- we have a high -- the highest level of completion against that portfolio against our peer group in terms of completion of actual connected customers and it's a significant drive in our social purpose to ensure that we continue to achieve connectivity for our rural indigenous customers.
And then there's such a great synergy there with the rest of our capabilities when you look at ag tech, when you look at health. So we will continue to drive those investments and leverage our assets across fiber and 5G.
It's interesting, Stephanie, because you've struck a chord with me perhaps something that I didn't realize. Within the $2.6 billion capital envelope prospectively in 2023, which will excitingly for investors see us take our CapEx intensity down into the low teens. I didn't think I'd still be here to say that, but there you go.
You hang around long enough, sometimes good things like that happen. But included within that $2.6 billion envelope is hundreds of millions of dollars that we'll still be spending on fiber expansion. And perhaps we haven't been as definitive about that as we should. When we talk about expansion copper, it's easy for people to assume, okay, we're just now going to halt our fiber build and stop.
That's not the case. We will still be spending hundreds of millions of dollars on fiber expansion as well as fiber upgrades to XGS-PON along the way. so we can take 1 gig and 2.5 gig services to 10 gig. But I think that's exciting for investors to say, well, you can take your CapEx down to $2.6 billion, and you're still making material investments in both fiber upgrades and fiber expansion, which, of course, will eventually also reduce in time along the way.
And the neat thing for us now in terms of fixed cost infrastructure is that the incremental expense to upgrade to something like XGS-PON to get to those 10 gig speeds, it's a de minimus investment. So we really have broken the back of this challenge, but it does continue to include significant investments in fiber expansion and upgrades.
Next question comes from Drew McReynolds from RBC Capital Markets.
Yes. So 2 for me. First, on the fixed data services revenue growth. And I guess in the deck you exclude [ T A T H ] from that. I mean, obviously, very good looking at your core telecom business. So I appreciate that disclosure. And I think Doug, in your remarks, you talked about 11% growth in consumer residential, so the question around that dynamic, I think qualitatively, we all understand the drivers of that, just because we don't know the ebb and flow. Is this something you're confident in sustaining through, let's say, the next year or so?
And then secondly and separately, obviously, cost inflation is something that needs to be managed by everyone. But when I look at TELUS, it does appear that you're further along your peers on digitization in that journey for TELUS and stuff like cloud migration, et cetera. So just doing if you can give us an update on where exactly you are on that journey as you look forward.
All right. Doug, why don't you hit the 7%, 11% and the diversity of quality performance that underpins the sustainability of that number?
We do expect to see a sustainable proportion to that as we're getting more of the -- our customers on fiber. As we've talked about, you do get a higher ARPU in addition to the other benefits of cost reduction and churn reductions. We have seen good loading on our Internet and security base through that period.
And having the product sets that we have that we're able to bundle on the FFH side through the products that's the best in market, we're going to continue to see that growth at very good levels along the way. And then you are seeing a selection to the higher rate plans and unlimited speed tiers as we talked about. So seeing benefits of our fiber initiative is going to continue to drive that for the foreseeable future.
And on the inflation front, and I think for me, this is maybe the most exciting set of attributes as it relates to value creation at TELUS versus our peers. We like what's going on wireless in terms of what we're seeing on the ARPU improvement front, both absolutely at TELUS and relative to our peers, given our focus on quality and our strength as it relates to both bundling and retention.
We like the upside in terms of roaming. But as I noted in my comments, recurring revenue within the domestic context continues to be quite strong and I am very bullish on our 9-digit IoT business within the 5G construct. And so I think that looks pretty healthy. Then I turn and look at the cost infrastructure for our wireline business, and that confidence grows.
Clearly, as a result of bundling, we're enjoying cost economies of scope. And given the broadband connectivity that we have, the marginal cost as it relates to adding new products to that continuum, is extremely attractive. And we will be adding new products to that continuum.
Now we're also launching a new entertainment platform with our OPUS project that will materially reduce our cost infrastructure in terms of entertainment delivery. Then you look at the conversation that we've just been having on fiber. And just plow through the attributes, the average margin per home on fiber is 20% better than our historical copper footprint, but the lifetime revenue on fiber is 30% better. The cost to serve on fiber is significantly reduced.
The facilitation of digitization, to your point, and the entire automation of the product and service continuum is made a hell of a lot easier by fiber. Geez, even if I take an ESG investing bent to this the energy, the appetite, of fiber versus copper is 80% less. And so that's quite a compelling set of attributes.
Then you look at the B2B component, which was a pretty unique TELUS story. It was a hard road to hoe for us since 2014 with the economic impacts in the West and Alberta, economic impacts on the sectoral front within oil and gas that business was profit dilutive for many, many, many years since 2014. And that business now has turned profit accretive.
And nice to see the profit trajectory on B2B being a 3% EBITDA growth. And I would look over the next 12 to 24 to 36 months for us to take that EBITDA growth to 5% or greater. We are much further progressed on our digital program at TELUS than our peer group. And it's not dissimilar to the story on fiber. We're not saying that we have some intellectual property. We're not saying that we know better. We just started early and stuck with it. The reason why we are where we are on the fiber front right now is we had the guts to make that decision in 2012 and 2013, and we were early movers on digital.
We're a customers' first organization, and we've got a great leadership team that's dedicated to strong execution. And we just leaned into it, and we've made a hell of a lot of progress along the way. And we did it with a purpose. It wasn't just digitize, digitize. It was digitization to do 2 things: improve customer service excellence and simplify the organization because we were overly complex.
And with simplification, it's a 4-point game. You get better customer service and you get better cost reduction. And then next to that, we've got very attractive post-acquisition integration synergies on LifeWorks. I think you might have noticed it used to be $150 million, then it was $200 million. And I was quite purposeful in the comment saying it's $200 million plus now. And we're off to a pretty quick start on $60 million of near-term operational and cost synergies.
And of course, then we've got our own TELUS cost efficiency program. When you marry that up with our LifeWorks post-acquisition integration synergies, that's a $400 million to $500 million cost improvement program that we want to bring to fruition over the next 36 months.
And then next, we've got TI. I mean, who -- what other the Telco in the world do you know that has an organization like TI supporting it? So when I talk about why we lead on digital, TI is a big, big, big answer to that solution. They have been aiding and abetting the acceleration of our digital program. What a fantastic resource to have at our fingertips, and they help us from hygiene to self-actualization.
On the hygiene front, they help us with labor arbitrage and what it does. And on the self-actualized state, they accelerate not just our digital progression but our cloud transformation. And they do it with the quality bent. TI is not cheap and cheerful, it's all about customers first, customers first in terms of the excellence that they bring. And you can see that within their own margins, they're highly differentiated in that regard.
Next, it's not just an OpEx story, it's a CapEx story. We purposely forecasted for 2023, that holistically, wireless and wireline, we're heading into the low teens for capital intensity. And I think 2 things, the maturation of our major investments in broadband and the fact that our assets composite at TELUS is changing because of TI, Health and Ag and the digitization of the organization. And increasingly, we are becoming a Software-as-a-Service organization. And again, I think we lead our industry in that regard.
And then the last thing in terms of inflation fighters and the like, we've got emerging value and scale and margin and profit accretion coming from Health and Ag. They're not dilutive right now, and they'll become just increasingly accretive in the future, and we're looking to those businesses to deliver double-digit EBITDA growth across the board.
Next question comes from Jerome Dubreuil from Desjardin.
I guess with the WillowTree acquisition, this signals a bit that growth will increasingly come from the tech side, that it's a total surprise, but if you can please discuss a bit how you see the exposure of TELUS to telecom evolving in the longer term?
Okay. We've got Jeff on the call and given that he's dedicated now the rest of his life to growing value from WillowTree. Jeff, why don't you answer that question?
Thanks, Darren. Happy to. Thanks for the question, Jerome. WillowTree's client base is rather complementary to TELUS International in a number of ways, including, in particular, we only have about 5 shared customers. So whilst they certainly do support clients in the tech sector, they also have clients in communications and media, in health care and life sciences, financial services, consumer goods, travel and hospitality.
So we don't see that actually intensifying our client concentration around existing verticals, particularly tech where we're today, circa 60% of our customers at TI between tech and games and e-commerce and fintech, they actually improve our client concentration profile by about 500 basis points.
So we see this as very complementary. And as I shared on our WillowTree specific investor call last week and as I commented, on the TI earnings call just barely an hour ago, we think the revenue synergy opportunity by cross-selling WillowTree services into TI's customer base and in particular, helping to accelerate and amplify our support for TELUS' own digital transformation journey that both Darren and Doug spoke to earlier as well as all of our other clients.
And then vice versa, our ability to sell TI services into the WillowTree base. And just by way of example, we had a customer diligence call as part of the transaction, where I spoke directly to one of WillowTree's long-tenured existing clients. And when they learn a little bit about the combination and TI trust and safety and content moderation capabilities, in particular, they got quite animated and excited. There's a reason why we think this transaction is going to be so exciting for us both, down the road.
Great. And while we're talking about TELUS International, maybe for managing the workload at TELUS, with the more uncertain demand at TELUS International, can you maybe use excess capacity to accelerate the LifeWorks integration? Or is it more time to proceed with caution maybe?
So we work diligently to keep our entire global workforce as fully utilized as possible. And notwithstanding the macroeconomic uncertainty and some slowdown in some of our larger tech clients, e-commerce and fintech lines in particular. The business is still out looking 16% to 18% growth top line revenue on a constant currency basis.
Where we have some programs slowing or ramping down, our first port of call is to absolutely repurpose those talented team members into other areas of opportunity. And that absolutely could be supporting and accelerating the LifeWorks integration and transformation, the other parts of the TELUS organization. We look to cross-pollinate some of our expertise and experience serving TELUS to non-TELUS accounts and then vice versa repatriating best practices in order to be a better partner to both TELUS and all of our other clients.
What I can tell you as a customer of TI, we are extremely excited by the WillowTree acquisition and what it can do for us on the design and build front and how that's going to get manifested within our digital, cloud and software development platforms.
And I think it's also exciting to highlight that whilst the WillowTree customer list is highly complementary to TI, there's a greater and a beneficial overlap between the WillowTree customer list and the customers at both Health and Ag, there's a very interesting overlap there that we are looking forward to exploiting.
Next question comes from Vince Valentini from TD Securities.
Question on TTech segment adjusted EBITDA margins. Additionally, in the first quarter of this year, they were up 30 basis points year-over-year. Second quarter they're up 50 basis points. Now in this quarter, they're down 40 basis points year-over-year. Is that just a LifeWorks dilution, Doug? Or is there anything else we should think about there?
And then maybe more importantly, can you give us any thoughts on how much of an upward ramp there should be in that in 2023 and beyond, especially when fiber homes, as Darren just said, a 20% higher margin than copper homes. And your work is to be done in the copper. So should we see a big step function up in those TTech margins soon?
Yes. So -- yes, it is substantially the LifeWorks weighting into our results. And -- yes, we see upside in margin both as Darren discussed, but also the other areas. We talked about health care and Ag as being accretive, and that's a double-digit accretive on EBITDA going into the future, which was not the case in the past.
And you'd see business in the business segment, we talked about also having slower growth that is recovering very, very well. And so -- looking forward, we're very optimistic on that margin enhancement. There might be some weighting impacts along the way, and we'll try to be very transparent on that as we move forward. But the overall water level will continue to increase.
And just to clarify, Darren, did you say $400 million to $500 million in incremental cost savings from new efficiency programs?
Yes, I did. The combination of what TELUS is doing in our own right, added to the synergies on LifeWorks. That's exactly correct. Yes.
Sorry, Vince. One just small top up. The only other thing was our revenue on handset revenue did increase a bit in Q3 from Q1 and Q2. So as we add a few more renewals during the back-to-school special, they would actually be low margin as well. So a little bit attributed to that in addition to LifeWorks.
Fair point. Like your tiny clarification, Doug, there. the accelerated CapEx for this year was $750 million was the plan, I believe $691 million has been spent through the first 3 quarters. Does that imply it falls off significantly in the fourth quarter to only about $60 million and then you're done?
Correct.
Right. Next question comes from Aravinda Galappatthige from Canaccord Genuity.
Two for me. Just to go back to LifeWorks and synergies, Darren, that you talked about. When you kind of look at the next 12 to 18 months, call it, low-hanging fruit, what's achievable during sort of the near term there and maybe some granularity around where that could come from?
Is it -- is the plan to originally sort of attack the Canadian opportunity given those enterprise relationships? Or is sort of the U.S. sort of ripe for some revenue synergies as well, almost straight off the bat? I wanted to get your thoughts on that. And then my second question, a smaller one, on the B2B number that you provided, the 3%. Is -- are you able to kind of -- is that including wireless? Or are you able to provide ex wireless number there? Just kind of give a sense of what the enterprise wireline trends maybe.
Okay. Thanks for that. Michael, we've got our Chief Operating Officer for TELUS Health on the call and he's been leading the LifeWorks integration and the realization of the synergies. So I'm going to ask Michael to comment. And I'll ask Michael also, in addition to synergy realization and the sources as it relates to the synergies, I would also let Michael to speak to the significant and exciting cross-sell opportunities that exist between TELUS, TELUS Health, LifeWorks and TELUS International.
Michael, over to you.
Thank you, Darren, and thank you for the question. Well, perhaps let's start with -- at this time, demand for health and well-being services has never been higher. And the combination of TELUS Health and LifeWorks will improve health outcomes and provide a better preventive health and wellness experiences for people worldwide.
Our teams continue to successfully navigate the early days of integration. And we have a solid start behind us to continue to drive momentum on significant growth opportunities as we go to market as one team. Now we're confident that we will hit the $200 million of total synergies over the next 3 to 5 years given that we've already identified $60 million in near-term cost synergies thus far.
And moreover, our collective sales teams in collaboration with TI and TBS have already identified more than 130 joint sales opportunities in the 8 weeks since close. And I would just add that our focus, of course, is Canada and North America and then exporting from our North American strategy to rest of world.
Okay. And for the answer to the next question, just given you asked the clarification, that 3% EBITDA growth was holistic. So that was wireless, wireline combined. And it was holistic across our B2B segment. So from small business to mid-market to enterprise and public sector. But Navin, why don't you give a little bit of additional color on that front?
Yes. Thanks very much, Darren. So our B2B business continues to accelerate profitable growth and is actually growing not only EBITDA but also revenue and cash. So we continue to retain and grow our customer base given the reliability, coverage and speed of our global lean networks, both wireless and PureFibre and of course, our industry-leading customer experience and are positively differentiated solutions.
So Aravinda to your question, we're continuing to outrun our legacy service revenue declines, with strong growth in both market share expansion as well as increased product penetration, both in wireless and wireline. Our churn remains strong and low, and we're well positioned to lead in new 5G IoT and industry solutions capabilities. So we expect to see continued acceleration of our profitable growth as we close off the year and progress our energy further into 2023. And that profitable growth is going to come from both improvements in or fixed or wireline segments as well as our wireless segment. So thank you.
Next question comes from David Joyce from Barclays.
I just wanted to follow up on one of the questions earlier on the capital expenditure plans and your footprint. Granted, you can still do some more fiber expansion with new home builds. But how can we think about long term, how much more of population or a geography. However, you could help us quantify it. Can you expand? What's your allowable territory where you could still be growing fiber over the -- or once 5G has a viable alternative? Just how do we think about that expansion of your footprint from here?
Not really given any public guidance on that. But maybe I can help you with some quick parameters. Firstly, we don't have a singular broadband solution in fiber. We've got 2 broadband solutions, one fiber and one 5G. And I think it's really down to the organization to determine what is the pareto optimal combination of expanding fiber but also leveraging fixed wireless along the way.
So roughly speaking, over the longer term across the totality of the population within our build territory, seeing fiber get to maybe 75% of the population, where we would use wireless broadband to cover the remaining 25% of the population, I think that's not a bad rule of thumb along the way. There are some adjustments to that. If you look at what we can do on government programs and leveraging government programs to expand our fiber footprint, I think that's an opportunity that would allow us to take fiber penetration deeper into rural communities.
If you look at what we would do maybe on joint cost sharing, in terms of fiber expansion on rural, whether it's with the community or whether it's with the electricity company, those are also exciting opportunities to leverage scope economies along the way or stronger commitments of the communities.
Tony Geheran and his team have done a fantastic job in terms of our indigenous coverage. If you look at TELUS, we are a global leader in bringing broadband and digital capabilities to indigenous communities in rural areas across Canada. We have a footprint that's second to none in that regard.
So again, that would see us expanding the penumbra of our fiber footprint. And then lastly, it's down to some hard economics. How much bandwidth do customers need? How many services are they going to take? And if the bandwidth and the services justify it, then we can expand the fiber build along that particular path.
And of course, the other thing that gets forgotten is that fiber and 5G fixed wireless are not just for consumers, to the extent to which we can leverage B2B opportunities, particularly within the SMB space or certain public sector areas as well, that gives us an opportunity for further expansion. But that would give you a sense of how far we could go on the expansion front and how we could smartly leverage wireless broadband to close off the final mile.
Thank you, David, and thank you, everyone, for joining us today. Please feel free to reach out to the IR team with any follow-ups. Take care, and have a nice weekend, everyone.
Everyone, this concludes the TELUS 2022 Q3 earnings conference call. Thank you for your participation, and have a nice day.