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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, ladies and gentlemen. Welcome to the TELUS 2020 Q4 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 fourth quarter 2020 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 have remarks by Darren Entwistle, President and CEO; Jeff Puritt, Executive Vice President and President and CEO of TELUS International; and Doug French, Executive Vice President and CFO. For the Q&A portion of our call, we will be joined by Zainul Mawji, President, Home Solutions; Jim Senko, President, Mobility Solutions; François Gratton, Group President and Chair of TELUS Health and TELUS Quebec; and Tony Geheran, EVP and Chief Customer Officer. Darren will take the lead in the question session and allocate the questions out to our other speakers as appropriate. Briefly on Slide 2. This presentation and 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 we've outlined in our public disclosures, including fourth quarter and 2020 MD&A and filings with securities commissions in Canada and the U.S. With that, over to you, Darren.
Thanks, Ramirez, and hello, everyone. For 2020, TELUS once again achieved strong operational and financial results in both our wireline and wireless businesses. This is a trend that TELUS team has demonstrated over the longer term, and in 2020, realized against the backdrop of an unprecedented operating environment. Our performance in the fourth quarter and for the full year was characterized by our hallmark combination of robust, high quality and profitable customer growth, alongside strong financial results. The quarter concluded another year of industry-leading customer net additions of 777,000, including an all-time record for annual wireline subscriber growth of 240,000. Thanks to decisive action and active cash management. Our full year cash flow of $1.435 billion was within the $1.4 billion to $1.7 billion range that we initially targeted back in February of 2020. This was achieved alongside 5.2% revenue growth and 0.2% EBITDA growth for the full year. These results were realized due to our team's resiliency, including a relentless focus on improving our cost structure, whilst driving important growth opportunities to mitigate some of the downside pressures we were experiencing. Notably, TELUS was the only telecom provider amongst our national peers to report positive EBITDA growth for the year. Moreover, excluding the effects of COVID-19, we achieved EBITDA growth of 6% in 2020. Our industry-leading subscriber growth was driven by our team's passion for delivering outstanding customer experiences day in and day out. This in turn contributed to strong and enhanced client loyalty across all of our key product lines, including postpaid mobile phone, Internet and TV churn, all achieving a below 1% churn rate in the fourth quarter and for the year. This performance was backed by our highly engaged team, world-leading wireless and fiber broadband networks, strong digital capabilities and our superior service offerings. Let's take a look now at our wireless business. Fourth quarter network revenue decreased by 1% as our consistent focus on strong and profitable growth was offset by reduced roaming revenue. As a result, wireless EBITDA was down 1.1%, partially mitigated by an intense focus on cost management by the team. Doug is going to provide more detail on these financials in just a moment. For the fourth quarter, our team achieved 87,000 mobile phone net additions, up 17,000 over last year. In terms of connected devices, we realized strong net additions of 88,000, up 28,000 on a year-over-year basis, reflecting increased demand for our IoT solutions. Overall, wireless net additions, inclusive of mobile phones and connected devices, were 175,000 in the quarter, which was up 45,000 over this time last year. Importantly, our team delivered another quarter of best-in-class loyalty results. Blended mobile phone churn was 1.09%, representing 11 basis point improvement over the last year. Underlying this result, postpaid churn of 0.93% was better by 3 basis points compared to a year ago. Indeed, 2020 represented our seventh consecutive year of industry-leading postpaid wireless churn below 1%. As a key factor in this achievement, the efficacy of our ongoing investments in our globally leading broadband networks continued to be evidenced by major independent reports again in 2020. By way of example, TELUS' wireless network was recognized by U.K.-based Opensignal as the fastest in the world and by U.S.-based Ookla as the fastest and most expansive on a national basis. Both awards have now been received by TELUS for 4 consecutive years. In addition, for the second year in a row, Canadian-based Tutela placed TELUS first in respect of quality, latency and download throughput for our wireless network on a national basis. Building on these accolades, TELUS was recently named Canada's most respected mobile service provider in a survey of Canadians from coast to coast, conducted by U.K.-based Maru/Blue. This recognition acknowledges TELUS' reputation across customer service excellence, our team culture, our contribution to our communities, our diversity and inclusiveness and our overall brand trust. To close in our wireless results, ABPU and ARPU declined by approximately 3.7% and 3.4%, respectively, in the quarter. This, of course, reflects industry-wide pressure on roaming associated with pandemic-related restrictions and reduced travel. Partially mitigating this, we continue to thoughtfully migrate our base to our endless data plans, with more than 60% of rate plan changes in the quarter representing step-ups or remaining flat, whilst holding the line on our premium brand ARPU. This does set us up nicely for the increased commercialization of 5G and the opportunity to lead innovation and increase productivity in areas such as health care, smart cities and smart buildings, home automation and digital life and AgTech, whilst further monetizing our network investments across 5G and fiber. Turning now to our wireline results, where TELUS once again delivered a very strong quarter. Fourth quarter wireline revenues increased by 14% and EBITDA increased by 1.5%. These results reflect the increased contributions from TELUS' Internet growth and home and business smart security technology as well as growth from TELUS International, which I'm going to speak to in a moment, as will Jeff Puritt. TELUS' wireline financials were driven by data revenue growth of 22% through a combination of higher revenues from our diverse portfolio of services and solutions, including robust growth in Internet and third wave data services as well as a resilient performance from our TV offering. It also includes strong growth in home and business smart technology, inclusive of security. It includes increased revenues from the hyperscaling of our virtual health care solutions. And finally, it includes resilient performance at TELUS International, thanks to our TI team, and it's inclusive of organic growth as well as the successful Competence Call Center acquisition. Doug is going to provide more details on our wireline financial performance and the temporary COVID-related impacts that we've had to navigate, but we've navigated them successfully. Looking at our robust customer expansion in wireline, our company and our team achieved fourth quarter Internet net additions of 44,000. This represents an increase of 16,000 additions on a year-over-year basis. This was buttressed by a churn rate below 1%, which alongside a solid double-digit percentage increase in monthly recurring revenue for new customer additions continues to bode well for future lifetime economics for our growing Internet business. Also supported by churn being below 1%, we realized healthy TV net additions of 20,000, which represents a 5,000 increase over last year. Notably, residential voice line losses came in at 9,000 in Q4, representing yet another quarter below 10,000 and a 3,000 improvement again over last year. Furthermore, we delivered industry-leading growth in our security business, with additions of 23,000 up 8,000 on a year-over-year basis. And this is a North American industry-leading result as it relates to the excellence of our security operations and the team delivering these great results. In summary, total wireline RGU net additions of 78,000 were up 32,000 year-over-year. This represents our best fourth quarter wireline loading on record. These results underscore the unique and attractive bundled offers available to customers across our superior product portfolio and our team's focus on leveraging the competitive differentiation that is truly inherent in our PureFibre network. In that regard, at the end of 2020, our PureFibre coverage stood at 81% of our high-speed broadband footprint, up from 70% at the end of 2019. This is a positive progression for 5G as well, given the potent synergies between the 2 technologies that I've talked about for so very long. Like our wireless network, our fiber network continues to receive important recognition from independent authorities. U.S.-based PCMag ranked our PureFibre network as best for gaming in 2020 given the symmetry and the quality of the network, and they named TELUS the fastest Internet service provider on a national basis. At a time when the speed, quality and expansiveness of our networks has become more important than ever for Canadians, these recognitions, both for our wireless and wireline broadband networks, are particularly resonant. I'm deeply grateful to the entire TELUS team for the exceptional grit they demonstrated during exceedingly challenging year and the way that their talent and commitment came to the forefront. Indeed, at the outset of the pandemic, many customer-facing team members were redeployed to support our clients virtually or pivoted to provide assistance remotely or through virtual installations and repairs. As a result, we avoided team member departures and continued to deliver outstanding customer experiences during the most challenging of times. This was evidenced by our industry-leading customer loyalty rates and by earning an industry-leading score of 75% in respect of consumers' likelihood to recommend TELUS' products, recommend our services and recommend our people. And when we talk about industry-leading on the customer service excellence front, it goes beyond national to global. Our team's ability to consistently earn enhanced customer loyalty and drive profitable growth over the longer term provides us with confidence in delivering on the 2021 target that we announced today on the back of strong fourth quarter and 2020 operational and financial performance delivered by our team. This includes industry-leading 2021 revenue and EBITDA growth of up to 10% and 8%, respectively, alongside free cash flow of approximately $1.5 billion that we're targeting in 2021. Whether it's revenue or EBITDA or cash flow, clearly, the financial parameters for TELUS are compelling, compelling today, retrospectively and prospectively. These objectives will be buttressed by smart broadband network investments and our highly differentiated and potent asset mix in combination with a strong balance sheet to support sustainable long-term growth. Furthermore, the unparalleled skill and innovation of our dedicated team underpins our industry-leading multiyear dividend growth program now, although it's hard to believe, in its 11th year and targeting annual growth between 7% and 10% through 2022. Finally, I'd like to address our recent IPO of TELUS International, which we successfully completed last week with TI embarking upon its next journey as a publicly traded company on both the Toronto and New York Stock Exchanges. This was undoubtedly a monumental achievement for our team, notably establishing an important growth currency for TI's continued global expansion with a market capitalization of more than $10 billion. It was indeed an historical accomplishment, representing the largest technology IPO in TSX history and one of the largest IPOs in the history of Canadian capital markets with total aggregate proceeds of almost $1.5 billion. Proudly, this also represented the fulfillment of an important aspirational goal for me personally. To achieve an enterprise value for TI exceeding the $8 billion market cap of TELUS 2 decades ago when we first embarked on our national growth strategy really is a fulfillment of an ambition. And when the progeny can outgrow the origins of the parent, there's something meaningful and poetic about it. Congratulations to the team in that regard. This significant value creation reflects the steadfast focus of both TELUS and the TI teams in emulating the parameters of TELUS' success. Over the last 15 years, TI has evolved into a digital customer experience innovator that harnesses the power of technology to provide truly outstanding customer and community experiences on a global basis. With TELUS retaining a controlling interest and a 55% economic stake, we remain extremely confident in TI's future as it continues to drive better business outcomes and grow value for all shareholders. Jeff will talk more about TI in just a minute. TI's success story reinforces the efficacy of our strategy of organic growth well executed, complemented by selective, thoughtful acquisitions as we look to build scale in exciting emerging growth businesses like TELUS Health, TELUS Security and TELUS Agriculture, evolving them into tremendous assets of consequence in the future. Our integrated and broad portfolio of data technology solutions within these growth verticals, combined with a strong financial growth profile, further enhances the highly differentiated value that we are creating for our investors. On that note, earlier this week, TELUS announced a strategic alliance with Google Cloud to co-innovate on new services and solutions that support digital transformation within key industries, including communications technology, health care, agriculture, security and our connected home solutions. This 10-year collaboration will accelerate TELUS' network innovation initiatives and our digital transformation journey, enabling further operational agility and truly enhanced customer experiences that differentiate us from the competition in a way that's meaningful for our customers. This announcement came to fruition in large part due to the strong partnership TELUS International and Google have enjoyed over the past decade. Notably, our international team has provided complex, next-generation digital IT and customer experience solutions to Google, while they, in turn, have helped to drive TI's digital evolution. TELUS' strategic partnership with Google will propel our digital leadership, whilst amplifying our customers' first priority, redefining how service is delivered in Canada and globally. In a year like no other, as we manage through the ongoing global pandemic, the TELUS team continued to do good in the communities where we live, work and serve as citizens. We expanded our TELUS Health for Good program with the launch of 7 new mobile health clinics in 2020 and an additional 2 clinics in January of 2021, bringing our total to 13 mobile clinics nationwide. Throughout 2020, our mobile clinics supported 28,000 patient visits, including administering 12,700 COVID-19 assessment and tests. Furthermore, our TELUS family contributed $85 million, and perhaps more importantly, from our hearts, 1.25 million hours of volunteerism to charitable and community organizations in 2020. Our team's leadership in social capitalism was once again recognized on a global basis with TELUS ranking 54th on the Corporate Knights 2021 Global 100 most Sustainable Corporations index for the ninth time, making TELUS the highest-ranking telco or cableco in North America. These are outstanding achievements, and I remain exceedingly proud of and grateful for the entire TELUS team. On that positive note, Jeff, I'll hand the call over to you to talk more about the exciting progress at TI and how brilliant the future you have.
Thanks very much, Darren, and hello, everyone. It is indeed a very exciting time for the entire TELUS International team with our successful IPO last week on both the New York and Toronto Stock Exchanges. February 3 marked an historic milestone in our company's 10.5 years long journey from a single delivery location in the Philippines to a globally scaled digital customer experience leader operating in over 20 countries around the world. The success of our IPO was a validation of our long-term digital strategy, our focus on customer service excellence and our internationally recognized social purpose impact, making TI, as Darren just mentioned, the largest tech IPO in TSX history. My heartfelt gratitude goes out to our 50,000 highly engaged team members around the world, our more than 600 valued clients, and of course, to TELUS and to Baring Private Equity Asia for their guidance and unwavering support. As a leading innovator that designs, builds and delivers next-gen solutions for global and disruptive brands, TELUS International has a unique approach to combining digital transformation and CX capabilities across the full customer experience value chain. Our highly engaged global team continued to execute very well in Q4. Our ability to leverage our carrier-grade infrastructure to help bring our differentiated culture to life in a virtual environment has been a source of our strength. As a result, TELUS International has proven to not only be resilient through the prolonged pandemic, but we've also demonstrated our ability to continue growing our business. In connection with our IPO, TI disclosed preliminary results for 2020, which highlighted our performance. With estimated 2020 revenues of approximately USD 1.6 billion, representing year-over-year growth of circa 15% and adjusted EBITDA margins of circa 24%, TI is expected to report strong year-end results for 2020 when compared against 2019 on a pro forma basis, including our CCC acquisition. Worth noting here these impressive results do not include our recent Lionbridge AI acquisition, a leading global data annotation business fueling AI algorithms for the world's largest technology companies. This acquisition closed on December 31 and integration is well underway. In this regard, I'd also like to take a moment to welcome our newest team members into the TI family. I am so excited about our combined capabilities, including the natural adjacencies that exist within our trust and safety practice in particular. Indeed, we are continuing to define a new category at the intersection of digital IT and digital customer experience. And we expect to amplify and accelerate our go-to-market strategy through demonstrable scale, proven digital capabilities and a differentiated culture. Let me now turn the call over to Doug for a detailed update on TELUS' Q4 financial results. Doug, over to you.
Thank you, Jeff, and hello, everyone. Consistent with our prior quarterly results, we continue to deliver on high-quality subscriber growth with mobile phone net additions up close to 25% over last year. More importantly, the mix of our customer base continues to shift towards our premium TELUS postpaid brand. And more and more, our customers are choosing Peace of Mind unlimited data plans. We continue to ensure we get the most out of our cash COA and COR spend, including reducing traditionally nonrecoverable subsidy and obtaining a reasonable economic payback within the customer's contract term. This consistent and thoughtful approach has and will continue to benefit our financial position as evidenced by our leading financials, including strong network revenue trends. Additionally, the quality of our loading is enhanced by the bundling of our mobility and home offerings, contributing to high customer loyalty. Network revenue declined 1%, including the impact of $63 million related to lower roaming revenue. Excluding this impact, our network revenue would have grown by more than 3%, reinforcing the quality of our loading profile, but more importantly, the quality of our subscriber base. Our current assumption is that roaming recovery will begin slowly in the second half of 2021. However, the roaming recovery will be largely dependent on the pace of the global vaccine rollout and the easing of travel restrictions, notably between Canada and the U.S., and we expect this will not be in a full recovery until 2022 at the earliest. Mobile phone ARPU declined 3.4%, representing sequential improvement from 5% decline in Q3 and a 5.8% decline in Q2. The trend is in line with our high-quality loading and customer mix over the past 12 to 24 months. When excluding the roaming impact, our ARPU would have grown by approximately 0.6%. Our Q4 wireless adjusted EBITDA declined 1.1%, reflecting the flow-through of the lower roaming revenue. This result represents a stable and sequential improvement from Q3 and Q2. Wireline revenue increased by 14% year-over-year and wireline adjusted EBITDA growth of 1.5% remained in line with the previous quarter. These results reflect continued strong performance from acquisitions as well as our organic growth across our business. Related to the acquisitions, we're also working through some near-term J-curve impact as we look to integrate and elevate the value of our recent acquired assets across TELUS Health and TELUS Agriculture. While we saw some recovery in Q3 and into Q4, we continue to see temporary impacts on some of our business customers as they navigate their own pandemic-related headwinds. In addition, we've had to absorb the impact to TELUS Health and earlier in the year, to TELUS International operations on temporary site closures and restricted access. With the strong customer growth in both segments that we have spoken about, there's also upfront costs associated with that. However, we're encouraged by the underlying trends with improving monthly revenue for both new and renewing customers and increased product intensity across all our product set. And as always, we are relentlessly focused on strong cost containment initiatives across our organization. On a consolidated basis, Q4 revenue grew 5.2%, bringing our full year revenue growth to 5.5%. And on a consolidated adjusted EBITDA, showed a slight decline of 0.2% in Q4, but our full year adjusted EBITDA was up 0.2%. Free cash flow for the quarter was up more than 60%. While for the full year, free cash flow totaled $1.435 billion, an impressive accomplishment without making any sacrifices to our capital expenditures. I'm pleased to say that we achieved the revised expectations that we set in our Q2 2020 release, which was made at a time when there was a significant doubt on where the economy was going. Our consolidated targets announced today reflect the confidence we have in our business. These targets are underscored by their consistent strategy and superior execution. We will continue to drive economically accretive loading, which will support positive financial outcomes and sustainable cash flow. As well, we're excited about the growth profiles of our unique asset mix and product offering. With the potential for heightened wireless consumer activity in 2021, we currently estimate an increased cash requirement of approximately $200 million related to device activations and upgrades as we estimated there was deferrals during the pandemic. As this represents a cash outflow, our free cash flow definition reflects the impact of that working capital. As previously announced, our 2021 capital expenditures are expected to remain within line of 2020. With regards to our leverage, we remain committed to investment-grade credit ratings, and we are confident and consistent on our track record with our growth strategy, including participating in upcoming spectrum auctions, and we will continue to produce strong free cash flow. Importantly, we'll continue to work towards delevering over time, primarily through EBITDA growth, along with the proceeds from the IPO of TELUS International and in the near term, continued free cash flow growth. Before we move to the Q&A period, I just want to provide an update on our reporting changes that are coming later in the year. I've spoken about this in the past and we are transitioning to new reporting segmentation to align with how we manage our business and how our business is evolving. One segment will represent TELUS International and the other segment will capture the rest of TELUS. In the upcoming weeks and subsequent to TI reporting its financial results for the year, we will provide a revised IR supplement to demonstrate how we will -- how this will look, including the past 8 quarters of historical information to help the transition. This disclosure will also help with any definition differences between TELUS and TELUS International and the treatment of intercompany balances. With that, let me turn it back to Robert to begin the Q&A.
Thank you, Doug. Mihai, can you proceed with the question period, please?
First question comes from Aravinda Galappatthige from Canaccord Genuity.
One for Darren and one for Doug, please. So for Darren, obviously, with the growth that we're seeing in TI, TH and the acquisitions you've made on the AgTech side, that portion, let's call it, the high-growth portion of the business is sort of developed to a meaningful part of revenue and EBITDA tracking towards low to mid-teens depending on how you estimate it and one can argue tracking towards 20% on a value basis, given what the market values are for these assets. Is there -- as we kind of look at TELUS sort of breaking away from the rest of their peers on that front, are there any medium to long-term targets that you have in mind for the combination of these 2 components in terms of their mix within the overall TELUS consolidated numbers? Because, obviously, that has implications for the stock and valuations down the line. And then if I may just ask the question from Doug straightaway as well. Obviously, with the reporting changes, Doug, that you're talking about, it gets a little bit difficult to discern profitability around wireline as well as sort of free cash flow generation on legacy wireline. Now that we have a sense of what TI is, there's obviously a lot of moving pieces with AgTech and some of the other items you talked about. How can we get a sense as to how TELUS is achieving sort of some of the wireline margin improvements that the company has set for itself over the last couple of years?
Okay. Thanks for the question. To be explicit about it in terms of, are there medium to longer-term targets that I have for our TELUS Health business, our agriculture business and our security business? Yes, there are quite explicitly, actually. Secondly, those targets are clearly not something I'm going to disclose within this forum. They're competitively sensitive, but they are specific, and they are ambitious. I think it's also perhaps maybe helpful to the Street that you can draw inference from what's happened with TELUS International with the milestone culmination of the IPO, and then what we're going to do prospectively to support significant future growth, leveraging the transaction currency that we've just established. Whilst there are some differences between TI and health and ag and security, there's a tremendous number of similarities between the 2. And I think you can draw inference from what's transpired at TI in terms of what it portends for our emerging growth businesses prospectively. To give you some detail behind it, as it relates to health, agriculture and security, my medium to longer-term goals are all about profitable scale. So it's value creation, centered around profitable scale to build tremendous assets of consequence within those businesses. And that's what we're setting out to do with a very specific game plan in that regard. The other thing that is, I think, more and more clear to people is the synergistic nature of TELUS Corporation's focus on technology and data-centric digital strategies that are getting imparted to our emerging growth assets on the health, the ag and the security front. It's all about our digital progression. And then lastly, the form that bringing these particular emerging growth businesses to fruition into the value-centric assets of consequence that I've just articulated, it gives us tremendous optionality and not just in the future, but currently in terms of how we can leverage those assets, their growth profiles, their makeup in servitude to the growth ambitions that we have for them along the way, be it organic, be it third-party partnerships or be it acquisitions to create the right composition of capabilities on a global basis that's going to support the growth profile that we would all like to see. So that's the mentality here. And the only thing I would add to close is that we will be giving the Street increasing insights into our health and ag businesses and security as well as the 2021 year unfolds and beyond that into 2022. And we'll start with an examination of our health business and its parameters in greater detail in the month of May, and then we'll follow-up on the ag front and security front thereafter. But to have that optionality, that differentiated optionality that's so synergistic with our technology and data strategy is key. Doug, I'll let you finish off.
Thank you, Darren. Yes, so we will be continuing to show, call it, very relevant and key metrics so that analysts and shareholders alike will be able to do a proper and effective assessment of the value proposition that TELUS is generating across our multiple product sets. So within the reporting stream for telecom, for a better term, at the moment, we would include still ARPU, loading and key metrics, which, to Darren's point, will also include metrics on health care and AgTech over time. We could be including revenue and gross margin for certain of those product sets as well, and that would be very direct to the product offerings in which we're delivering. And so as we roll that out, you'll be getting more and consistent approach for those reporting streams. With the convergence of broadband and when you think through how we deliver our services, there is a point where a lot of the cost structure that you have below those product sets and those product deliveries become allocations. And as we go through and deliver the best broadband service to Canadians, irrespective of the wireless and wireline old categorization, that we are going to deliver it, and we're going to have the best customer service and the best networks either way. So we will then just show that consolidated telecom segment for conclusion, but the KPIs will give you what you need to be able to do a formal assessment of the value drivers.
And what the delineation on the CapEx front on fiber, 5G and digital mean specifically to our emerging businesses on health, ag and security.
Next, we have a question from Drew McReynolds from RBC.
Just 2 for me. First, on the mobile connected devices that you began disclosing, you're kind of closing in on about 2 million of them, obviously, another strong quarter. I guess, Darren, starting off with you. Can you maybe give a little more granularity as to how the loading mix has evolved, the base of devices by type has evolved? Are you able to help us out on any service revenue impacts? And then second question on the agreement with Google, really kind of reads very interesting, still trying to assess the magnitude of this. So could you flesh it out a little bit more in terms of specifically where it is unique relative to your Canadian peers or maybe even North American peers?
Jim, why don't you take the first part? And then Tony, you and Zainul can finish off with some color on Google, and I'll mop up thereafter.
Sounds good. So in the connected devices portfolio, we're seeing more of a mix towards IoT-type connections. In fact, this quarter our tablet net loading declined slightly. So on the IoT front, it's everything from transportation to enabling home security. So a wide variety of IoT applications, the installation of modems, smart hubs and specialized devices. This category is growing, and it's going to become more and more important as 5G rolls out as we'll start to see even more applications happening with low latency. And also this category is going to really help accelerate the investments we're making in AgTech and in health. In terms of service revenue, I don't want to give an exact number, but suffice to say, these are lower ARPU connections, but very high margin because you don't have any device subsidy and very little cost to support them. So it's very accretive from a margin perspective. And as it's growing, it's becoming more material in ARPU.
Tony?
Thanks, Darren. Yes, so let me tell you a little bit about the Google relationship as it's evolving. Over the latter half of last year, Google reached out and asked if TELUS would be interested in participating in their Google digital transformation partnership program. And we set up 2 joint executive teams through Q4 to do some due diligence on what this would look like, and we followed a structured framework that Google have. They conducted maybe 12 of these partnerships annually with global leading players that have an alignment in culture, in aspirations to transform segments of an industry or an industry to deliver beneficial consumer or customer outcomes and drive some social good. And so the 2 executive leadership teams were working through Q4 to construct a framework that would create a number of swim lanes of activity where we would co-create capabilities that would transform, one, our telecom business as well as putting more fuel into the fire on the transformation we're already well under the way on. And as you can see by our results throughout 2020, despite massive channel disruption, our digital capabilities allowed us to drive peer best performance on customer loading. It also allows us to focus on some of the exciting new growth areas that Darren articulated, particularly around the AgTech and the health space, where Google's ability to drive digital transformation, leveraging their data analytics capabilities, along with our combination of smart assets can bring together some really transformative outcomes that will propel the global capabilities that we want to deliver, particularly in AgTech and in health. So we think it's an exciting opportunity. We've co-committed for a 10-year arrangement where we will invest substantively, both parties. But we expect to see a 4 to 10x investment return as we power those areas of focus into driving go-to-market initiatives that will deliver value for both organizations. Zainul, maybe you'd like to top-up on some of the specific TELUS-related capabilities that you're focused on?
Thanks so much, Tony. So I think we are all incredibly excited about the opportunities to co-develop and transform our core businesses and our emerging businesses through leveraging the assets that Google can bring to the table. If you look at our home solutions environment and the way in which we are driving digital life experiences, leveraging our superior PureFibre and mobile networks, we're working to think about all of the solutions a customer might need to enhance their efficiency and effectiveness in the home and out of the home. And if you look at the transformation that COVID has driven in that context, there are numerous opportunities to drive improvements across different services when you look at health care or security and automation or the evolution of IoT. We've demonstrated that we are already an aggregator of choice, and we have platforms to deliver that, such as in our unique and differentiated TV environment. And now we want to take that to the next level and think about a more data-driven personalization and digitization of all of our activities so that we can drive better experiences for our customers. So we're really excited about that co-development partnership. And we're excited about the fact that the core capabilities Tony referenced are going to unleash some cost efficiency and other accretive economics so that we can invest in that innovation.
And this builds on the long-term significant strategic partnership that's been existing and deeply fruitful for both organizations between TELUS International and Google, and that really has provided the foundation for us taking the next step in this relationship at the TELUS Corp. level.
Next question comes from Vince Valentini from TD Securities.
I would like to try and clarify and clean up a couple of things that have already been discussed and then a big picture question for Darren. Just on the last one on Google. Can you just clarify, is there anything here that pigeonholes you into having to deal with Google exclusively? Because I think one of your competitors has done some kind of partnership with AWS, another one's announced something with Azure. Does this mean everybody sort of picks their hyperscaler partner and moves forward? Or do you still have flexibility to deal with anybody you want when it comes to the new world of 5G and whatever other services? So that's one clarification. Another -- Doug, I'm not sure if you're circling around it a little bit, but can you be specific? I mean will we see TELUS Health as one of the line items that we'll get revenue for on a consistent basis starting when you move to the new reporting, assuming that's in Q1? Or is it still going to be somewhat anecdotal on TELUS Health disclosure as it's been in the past? And then the bigger picture question for you, Darren. Phenomenal -- I think you've achieved faster than I expected and maybe faster than you expected to have TELUS International's market cap be higher than what the original TELUS-BC Tel merged company was way back when you took over. So kudos to you on that. I will remind you, I think you said at the time that that's one of your objectives to achieve before you'd even think about moving on and seeing who would succeed you to run this fine company. So I'm wondering if you can close that circle for us. Does this mean you're getting close to thinking about passing the reins? Or do you still have a lot of -- several years of life left in you? That would be great to get your perspective.
Thanks for that description, Vince, of several years of life left in me. So in terms of the question with Google, no, it's not exclusive. No, we're not pigeonholed by that. There are ecosystem considerations that are important for us in terms of having the flexibility that we need. But I would say the opportunity with Google is enormous. And we've got a great track record to date to build upon with TI that's been tremendously beneficial for both TELUS International and Google. And we're excited by the value that we can create. We've put a target of $800 million of value creation through this partnership, and we think the strategic fit on the digital front between both organizations is tremendously compelling and synergistic and serendipitous in a way. If you look at the focus on health, there's a commonality focus. On ag, there's a commonality. If you look at the focus on the automated home and the digital life within the home, there's a terrific commonality. As it relates to what TELUS is ingesting internally at the network and the IT level, we're already going through this digital transformation. So we're really bending into the momentum in that regard. And so we think there's a huge amount of value to be created here. And we like the symmetry in the relationship, the reciprocity on a back and forth basis. This is not something that's asymmetric when you look at what Google and TI have been doing all along. So that's that. I'll let you -- get Doug to answer the next question before I think up a good final answer to your third question.
So we are -- Darren and I are finalizing the KPIs that we will put through on and show on Q1. Revenue is on the page as a discussion of a relevant KPI that we would consider showing for health, but it's still to be finalized. In addition to obviously other KPIs that are very relevant, such as any of the virtual [ care-type ] measures that would be needed to assess the success over the long run. So we'll come back more formalized when Darren and I have locked on that, but definitely is part of our discussion on relevant metrics that we think analysts and shareholders would want to know to be able to do a proper assessment of our organization, and especially the health and ag areas, which are different than our typical offerings.
My answer is yes. Darren, please let Doug disclose it.
And then to answer your question specifically, Vince, to be fair, when I gave that particular view on what I wanted to get done, there were 5 parameters that I set out. TI was one of them, but there are another 4 that I'd like to get done while I can still add value. And I'm fortunate because the quality of this leadership team is really second to none. So I don't want to clog the arteries, but my commitment at TELUS right now is for a multiyear longer term, so to be very specific about it. Secondly, in terms of what I'd like to get accomplished, which I think is exciting for investors. So not what's -- so much what's relevant to me, but what's relevant to the investment community. I would like to do with health, ag and security some semblance of what we've done with TI. I won't be satisfied until we realize that particular outcome. Secondly, I want to work and support Jeff and his talented team for the other shoe to fall on TI. This is, as I said in my remarks, a milestone not an end game on the TI growth strategy, and I think there's huge potential still to be realized. And we want to lead the world, and that's always been our orientation. And I really do believe the best is yet to come as it relates to TI growth and value creation, and I would like to try and help out with that. The other thing that's critical for me is I would really like to complete the fiber and the 5G journey. And that would let me rest easy because with that broadband infrastructure in place at a near ubiquitous level, it really does institutionalize our competitive advantage at TELUS and set us up for all the value that we can create for new services and all the cost that we can take out of our business because of the efficiencies and the economies of scope of fiber and 5G technology. And so getting that done will let me rest easy. The second to last thing is customer service. We're not done on the customer service excellence front. I think it's great to have the leadership. I want to extend that leadership position, and there's 2 attributes to that. One is what we can do with our culture and the second is what we can do with everything from our digital capability set to process engineering and automation. And I'd like to put a tick in that box. And then the last thing is, and maybe it's a little bit of the Canadian in me, but wouldn't it be great if we could get to the point where the perception marries up with the reality that we are the world leader when it comes to social capitalism. There's no organization that puts the words to work like we do in terms of, to do well in business, we need to make a difference and do good in our communities, and that's what we do day in and day out. And to amplify that on a global level and drive that perception home so it marries up with the reality is the final thing I'd like to do. So that's what I'm up to, and hopefully, that's very relevant to investors in terms of value creation.
So next we have a question from David McFadgen from Cormark Securities.
A couple of questions, if I may. I was wondering if -- just on your guidance, if you could give us the breakdown between TELUS and TELUS International. So when you look at, say, the revenue growth, 8% to 10%, would, say, 6% be from TI and the balance from TELUS, so can you give us those kind of parameters? And secondly, just on the fiber build. So you finished 2020 at 81% of your footprint. What's the target for the end of, say, '21? And then I don't know if you can provide this, but I was just wondering what percent of your broadband footprint that is not covered by fiber overlaps with Shaw? I was just wondering on that front.
Okay. Doug, given the sensitive nature of TI right now, I'll let you handle the first part of the question. And then the second part of the question, Tony and Zainul, as it relates to our fiber build and what it means to our go-to-market capability, I'll ask you to address that. And maybe with that expansiveness of the fiber build, François, you could comment on what it's going to mean to our health business to have that broadband underpinning and what it means to our ag business as well.
So on the first one, TI is going to be releasing its final results in the next 10 days, give or take, and so I will not be breaking out TI or TELUS from a guidance perspective at this stage. And when TI is ready to put out its own guidance, it will do that and the split will be more evident. The only thing, as we break out the segmentation discussions, we do need to remind you that when TI discloses, it would include revenue from TELUS. TELUS' disclosures do not have that because of the segmentation eliminations that will happen on a consolidated basis. So as we do the multiple disclosures, we will definitely help get the elimination entries right along the way. And we look forward to when TI is ready to give its guidance back to the Street for that purpose.
Thanks, Doug. Tony, Zainul, François?
Thanks, Darren. David, when we set out on the PureFibre build, we assessed the market opportunity relevant to our -- back then in 2013, our broadband infrastructure as it existed, and we set a scope out that we would get to circa 89%, 90% coverage of our wireline footprint. As we've gone through the last 7 years and the build has been extremely successful for us in driving market share leadership in HSIA and rapid catch up on TV, where we were by far and away a smaller party to the market, we've expanded the view of where is addressable as we developed our techniques. We've also encompassed where we can leverage well-managed federal and provincial funding schemes to drive economically viable extension builds to more rural and remote communities. So there's kind of a bit of a moving target as to what the end state looks like. Suffice to say where there is opportunity to build over our legacy brownfield copper infrastructure, we have plans to do that where it makes sense. We've -- everywhere we've gone, we've seen that, that makes a significant transformation in our market share position and drives an unassailable position relative to other networks that aren't fiber to the premise. And they may say fiber somewhere, but they're not fiber to the premise, and that our customers clearly recognize as a value prop. So we will continue to invest where it makes sense, and we have a plan to roll out to those remaining footprint areas as we go forward over this year and beyond. But the substantive investment is behind us, and now it's really targeted, focus build where we see great opportunity. Zainul, I'll pass it you.
Thanks, Tony. Maybe 2 top-ups. So I'll add a little bit of color where we compete and a little bit of color of where we don't actually. So we certainly know that quarter-over-quarter, more new and existing customers are choosing the superiority of PureFibre. I think that's indicative in our results. We're also seeing that, of course, they're deciding to take higher speed tiers and more integrated video packages as well as our distinctive offers around security and automation, notably consumer health and cybersecurity as well. And of those latter 3 portfolios, security and automation, online security and consumer health during the pandemic, not only are these services unique and differentiated to the competition, but they're offered nationally, and they're also offered in areas where we don't compete head-to-head. And they're the fastest -- we're seeing the fastest customer growth in the country across these 3 portfolios. So our PureFibre network investments have continued to deliver great results. We have double-digit ARPU growth for new customers that we added in Q4 relative to last year. We have industry-leading churn and product intensity, and we also have a lower cost to serve and a path to digitization. So a triple play customer delivers about 5x the lifetime revenue of a single play customer, and the lifetime value of a fiber customer is up 80% year-over-year. That's where we compete head-to-head. We also have a very strong and significant wireless high-speed offering, and we continue to offer the same capabilities in terms of product intensity and bundling and realize the same capabilities from a perspective of our superior customer service and our digitization. So we see a tremendous growth opportunity and accretive economics on our wireline segment across both these portfolios. And we also see significant expansion and are excited about the speed and adoption of our expanding services in the security and automation, consumer health and the cybersecurity portfolios.
Zainul, just -- David, one last top-up. As we expand our fiber footprint, this is obviously very synergistic to our 5G ambitions because everywhere we're placing fiber to the premise, we're providing fibers available for our small cell and 5G coverage. And I think this gives us a critical competitive advantage in the areas we've built relative to our competition.
Yes. And Tony, that's probably certainly true in health and agriculture if you think about where we're pushing in the future and working hard on right now in terms of digitizing the patient provider experience, introducing new layers of bio and imaging analytics or taking virtual care from what it is today, more of a consultation, primary care, mental health care or allied care perspective, down to new use cases in the future where you actually see medical interventions being done over either your fiber connectivity or as Tony rightly said, in more rural aspects over 5G connectivity in the future. Similarly, in agriculture, you're seeing the advent of soil sampling, weather monitoring capability that cannot be done at their utmost point without connectivity. But even more in the future, you see things like precision agriculture allowing us to be able to assess the quality of what's going on at the plant level and have the farming community do better intervention in terms of chemical spread in a more reduced fashion, again, down to the plant level. So both in health and ag, you can't do this without an underlying first-grade telecommunications infrastructure. And therefore, there are great synergies with the pushes we're making in health and ag and your fiber question here, and as Tony noted, down to the 5G connectivity points.
Next question comes from Jeff Fan from Scotiabank.
I just want to go back to Darren's comment about building profitable scale. And maybe to get you to expand a little bit on what your vision of that may look like, are we talking about building a simple telecom platform that apps sit on top of? Are we talking about like a software platform that aggregates various apps that sit on top, apps like -- that spans across agriculture, health, maybe even across customer segments? And then maybe tie it back to the reporting and disclosure that Doug mentioned, are we talking about -- when you say telecom segment, are we talking about the combination of wireless and wireline into one segment now and you're going to report business in consumer? Or you're not going to get down to the wireline, wireless EBITDA line? I'm just wondering in that new world, whether -- how things will change from a reporting perspective for telecom.
Okay. To be very explicit on the stratification -- and François, I'll ask you to top-up with some specificity of the specific empirical parameters on health and ag because I think it would be good for the street to see the magnitude of what we've already accomplished. But Jeff, as a prerequisite to that, we're talking about a digital platform with, yes, a software overlay on top of it as it relates to building service ecosystems on both health and ag, underpinned by broadband technology. So that's the stratification of what we are creating here. And François, why don't you just quickly provide some of the empirical parameters of the ecosystems that we've built on that digital platform and where we're taking our software capability set with our application ecosystems, again, leveraging our broadband technology, and in particular, our data analytics related to that and the dynamic insights that we can glean.
Thanks, Darren. So I'll provide that quick overview. So as you all know, we've been investing in health care, as an example, for the past decade or more than $3.2 billion across the end-to-end health care ecosystem. And we've observed an increasing emphasis on chronic disease management, a focus on consumers and employers optimizing wellness and the potential benefits that our network and innovative technology can deliver. We've built an extensive digitized health care environment in Canada, building the backbone to enable more seamless and efficient flow of information across the health care spectrum. Let me give you a few examples and a few KPIs of actually the reach that we've built. Our technology solutions actually handle health benefit management for over 12 million lives in Canada, so over approximately 1/3 of Canadians. We've developed primary care solutions like electronic medical records or practice management solutions that service today, 28,000 physicians using our solutions across the country. We've developed through the pandemic and before the pandemic virtual care capabilities that have been seeing exponential growth over the last little while, whether it's our EMR solutions, virtual visit solutions that have seen hundreds of thousands of consultations in a very short time frame or our virtual care solutions that are seeing now close to 1.7 million or 1.8 million subscribers, seeing 500% growth year-over-year from 2019 to 2020. Similarly, in agriculture, but over a shorter period of time, over the last 18 months, we've assembled a suite of assets through a number of acquisitions that is second to none now in the world in terms of pure-play software technology that is targeting one of the biggest social challenges that we have in our lifetime, which is the access to good quality food for all. And that issue is going to be compounding itself as the global population continues to grow over the next decades. And so in a very short time frame, we've assembled a team that is now servicing customers in 57 different countries and that has over 160 million acres under management, reflecting the incredible scale we've built over a short period of time, powered by 1,200 team members in 14 countries that are providing digital solutions to 6 out of the 10 food suppliers, the top 10 food suppliers globally or 9 of the top 10 agriculture customers globally. And here, what we intend to do through our software capabilities is not just allowing farmers to be more efficient in producing better yield for the air crops, but also be able to follow the safety the quality of your food from the time we put a seed in the soil to the entire food value chain down to your plate so that we can improve yields, reduce wastage and as I said at the beginning, allow better food access for everyone across the globe.
On your second one on segmentation, yes, that would mean that telecom would be one EBITDA, but there would still be relevant metrics, both on a KPI perspective, a revenue breakdown and where relevant, the high-level COGS breakdown to allow that top level assessment. And I think what the -- as we've had more and more convergence of our wireline and wireless operations, and we've been talking about this for years, more and more of the cost becomes shared. And I'd use the analogy that when we changed our reporting on subscribers to connected devices to mobile, it changed the behavior in our organization of focusing on what mattered most, and I think you can see that in our results. And this is another example of the focus points we're putting on the organization to deliver and deliver strong results and make sure we maximize the value and reduce any of those shared costs or the portion. And I think that will allow us to continue to manage our business, allocate capital effectively and continue to lead in the metrics that we've been leading to, to date. And so we'll make sure that we do a strong and meaningful transition with our IR supplement so that there is no stumble along the way, so you'll still be able to interpret and see the value of all of our operations.
Next question comes from Simon Flannery from Morgan Stanley.
A number of the U.S. broadband carriers have suggested that on broadband in 2021, we should think about more like 2019 being a reasonable comp rather than 2020, given some of the impacts from COVID and the pull forward of demand. It'd be great to get some thoughts about how you see it for TELUS. And then thanks for the update on 5G. Good to see the coverage expanding. Any early learnings on cost performance, on usage patterns, enterprise interest that you could share with us?
Okay, Simon. As it relates to the comment on 2019, I think that's fairly accurate. If you look at how we set our budget for 2021, we did a normalization of the COVID impact in 2020, and we drew inference from 2019 to do our target setting for 2021. Of course, the caveat being that we still have the COVID legacy and its restrictions impacting us. So I think it was a smart move not to set a budget where we're unduly benefiting from a 2021 over 2020 delta just because of the COVID dilution in 2020. So we did a normalization exercise in 2020, we drew inference from 2019 to make sure that we were setting stretching ambitious targets for 2021. And then we moderated them according to our assumptions as to how long the legacy on the COVID front would last and the implications associated with such. But the other thing that we did is to say, okay, we're getting better and better and better at dealing with COVID. So our ability to manage COVID in March of 2021 should be a lot better than in March of 2020 because we've been recycling the tuition value in terms of what we've learned along the way. And I talked a lot about that within my remarks. I've also talked about the way we're leveraging our technology and our digital capabilities and the way that we've been able to pivot our team to work in a more virtualized environment so that we can deliver on the shareholder outcomes, the customer outcomes that we think are appropriate. And if you look at our year-over-year loading on either mobility or wireline in 2020 versus 2019, it's a pretty strong story to say the very least. And we delivered very strong financial results to boot in that regard, whether it's top line revenue, whether it's making it across the finish line into the black at the EBITDA level, which is quite a unique outcome or the fact that we squeaked over the line on the free cash flow front as well related to our original 2020 guidance. And so for TELUS, we got the mentality that let's not use COVID as an excuse, let's use COVID as a digital acceleration opportunity because that's where we're going with our business strategy and technology in the first place. And boy, isn't it great that we've got digital businesses like TI, TELUS Health and ag that can do that. And then a smart team on the wireless and the wireline front to answer the challenges that they're facing and innovate and invent new ways deliver our solutions to customers that were better in 2020 than they were in 2019. And so I think that bodes well for the future. On the 5G front, I think people should have been -- and we try -- if you go back and look at our comments, I don't know how many times we made the comment that 5G is a marathon, not a sprint. And one of the mistakes, I think that's been made in various jurisdictions around the world is setting premature, expedient and super high expectations on what 5G is going to deliver. And what you've seen in certain markets is a little bit of lunch bag letdown because people have not lived up in the near term to the expectations. 5G is fantastic and it should have lofty expectations, but the time line to realize those lofty ambitions and commercialize them into services that are deeply meaningful first on the B2B front, and thereafter, more ubiquitously on the consumer side of things, it's going to take time. These things will come to fruition when larger swaths of contiguous spectrum are made available as we go through mid-band to high band. So this is about not just 2021, what we can do from a coverage footprint point of view, but what can we develop in terms of profitable products over '22, '23 and '24. And that should be the way that we are positioning 5G and educating the market accordingly. For us, we exited 2020 with about 30% coverage on the 5G front. That represents about 81 communities. And we now have about 21 devices in terms of various models that are leveraging 5G at the handset level, and you can expect us to continue that progression ardently over the course of the next 3 to 4 years. And I think what's important is to know how TELUS operates. So what's the axiom for us as it relates to network performance? And the axiom for us is that we're going to continue to lead on speed, symmetry, low latency, coverage and reliability. So what Opensignal or Ookla or Tutela has said about us retroactively over the last 3 to 4 years, you can expect them to be the same thing about us prospectively. And the recipe for success at TELUS is let's combine network leadership across all the parameters that I've just articulated, with the best customer service in the world, enabled by great value propositions because 5G will be all about peace of mind for us and then innovate in terms of our channel strategy, including digital. That is the simplicity of the recipe. And the other thing that people need to notice is that as we roll out 5G, don't forget to look at 4G because our LTE 4G network is outperforming a lot of 5G networks on a global basis. So we've got a one-two punch in that regard as we go through the transition to 5G along the way that is particularly potent. And then look at the way 5G fits so beautifully with our automated home, consumer digital life, as François was saying as it relates to health or ag or as Zainul was pointing out on the security front. It's going to be a lot about enterprise solutions for us. When you think about mobile edge computing and what we could do with network slicing and private networks that will support areas like manufacturing, fintech and the like. We think we can take our security business and do great things on smart cities and smart buildings in terms of the commercialization of that, again, on the B2B front. When you talk about scale, I've spoken at length about scaling health and scaling ag and security, we want to scale our IoT business, and that's going to be deeply enabled by what we do on the 5G front. And then one of the things I don't hear people talking about on 5G and fiber is cost reduction. And so the cost per gigabyte, driving that down, driving that down, driving that down on an absolute basis, and then combining that with economies of scope. So getting more and more and more and more services over our 5G and fiber connectivity, our synergistic 5G and fiber connectivity to really take cost out of our business. Because if that can support a higher ARPU or ARPH, it can support better multiproduct penetration, if it can lower our churn, if it can reduce failures or fewer truck rolls along the way, and if it can allow us to simplify our network and make it more of a digital, automated, self-serve network, that takes a lot of cost out of our business. And even when you think about the synergistic complementary deployment of fiber and 5G, just within our fiber footprint, within the next 2 years, we're going to completely decommission copper. And that's going to give us better simplicity, better homogeneity as we rip out our DSL infrastructure, better energy outcomes in terms of less energy consumption, but a lot of goodness in terms of that network simplification that's going to benefit the combination of fiber and 5G. And then lastly, we need to make sure that as we are generating voluminous data and how we construct those data hierarchies in a meaningful data that we mine that data and extract value with our dynamic insights. And make sure that we commercialize that component of our business to serve whether it's the B2B environment across all the verticals that I just talked about or interesting things that we can do with consumers on digital life. So it's exciting, but it's a modular program. And it's starting with some nice speed steps forward in 2021 in availability of devices, but the best is yet to come on that front as well. And people need to be patient as the products get developed along the way.
Thank you, Darren, and thank you, everyone, for taking the time to join us today. Please feel free to reach out to the IR team with any follow-up questions you may have, and take care, everyone.
Ladies and gentlemen, this concludes the TELUS 2020 Q4 Earnings conference call. Thank you for your participation, and have a nice day.