© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
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 2021 Q4 Earnings Conference Call. I would like to introduce your speaker, Mr. Robert Mitchell. Please go ahead.
Hello, everyone, and thank you for joining us today. Our fourth quarter 2021 results news release, MD&A and financial statements and detailed supplemental 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; Zainul Mawji, EVP and President of Home Solutions and Customer Excellence; Doug French, EVP and CFO. In addition, for the Q&A portion of our call, we will be joined by Jim Senko, EVP and President, Mobility Solutions; Navin Arora, EVP, President of Business Solutions; Tony Geheran, EVP and Chief Operations Officer. 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 as outlined in our public disclosures, including our fourth quarter and annual 2021 MD&A and filings with the Securities Commissions in Canada and the U.S. With that, over to you, Darren.
Thanks, Ronaldo, and hello, everyone. Throughout 2021, TELUS again achieved strong operational and financial results across our business. This is a trend the TELUS team has demonstrated over the longer term and in 2021 was once again successfully 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 across our diverse portfolio of products, alongside complemented by strong financial results. The fourth quarter concluded another year of industry-leading customer growth with 960,000 total annual net customer additions representing our best result on record for TELUS. This included yet another year of leading and best-ever wireline customer growth of 255,000, reflecting the potency of our expansive PureFibre network and its inherent capabilities. Our industry-leading customer growth was driven by our team's passion for delivering outstanding customer experiences. This once again contributed to strong client loyalty across our key product lines, including blended mobile phone, Internet, Optik TV, security and voice churn, which were all below 1% again in 2021. For the full year, consolidated revenue and EBITDA growth of 9% and 6.4%, respectively, was in line with our targets for 2021. Furthermore, we achieved strong free cash flow for the year, slightly ahead of our guidance as updated in May to reflect our accelerated broadband expansion program. This robust performance continues to be driven by consistent operational execution, leading product offerings and client service excellence bolstered by continued strong operating momentum in TELUS International, TELUS Health and TELUS Agriculture. Impressively, looking at our 2-year performance from 2019 to 2021 through the pandemic period, our total revenue and EBITDA growth of close to 18% and 7%, respectively, as well as our more than 1.7 million net new total customer additions represented industry-leading performance by a notable margin.Turning to our fourth quarter. Industry-leading total mobile and fixed customer growth of 272,000 represented our best fourth quarter on record and increased by 19,000 over this time last year. This was driven by robust customer demand for our superior bundled offerings and our leading customer loyalty. We achieved strong fourth quarter consolidated operating revenue and EBITDA growth of 10% and 7.6%, respectively. Again, comparing the fourth quarter of 2021 with that of 2019 prior to the pandemic, total revenue and EBITDA grew by 26% and 7.4%, respectively.Let's turn now and take a look at our mobile operating results. TELUS achieved industry-leading customer growth of 193,000 net additions, up 10% on a year-over-year basis. This included 112,000 mobile phone net new customers, an increase of 25,000 over last year. Notably, this brings the sum total to an industry-leading 647,000 net new mobile phone subscribers achieved over the past 2 years.Importantly, our team yet again delivered another quarter of industry-best loyalty results, and this is the hallmark of the TELUS organization. Blended mobile phone churn was 1.04, a 5 basis point improvement from this time last year. Moreover, postpaid mobile phone churn of 0.74% for the year, a 4 basis point improvement over 2020, represented our eighth consecutive year of industry-leading postpaid churn well below 1%. This performance is backed by our differentiated customers' first culture that has served us so very well and our highly-engaged team delivering leading digital capabilities and superior service offerings over our world-leading broadband networks. What a difference that combination makes. More than ever, Canadians value of fast, reliable connection and the consistent recognition from independent third-party organizations, such as U.S.-based Ookla, reinforces the superiority of TELUS' world-leading wireless network. In January, Ookla ranked TELUS' mobile network as #1 in North America and fastest in Canada with a ninth consecutive time as our team, including our engineers and network innovators, work passionately to keep Canadians connected to the people and the information that matter most. TELUS intends to extend this global leadership position as we advance the development, the coverage and the commercialization of our 5G network and its inherent functionalities. This recognition from Ookla comes on the top of the multiyear accolades our world-leading wireless and PureFibre networks have consistently earned, earned for speed, reliability, user experience and expansiveness from numerous other independent network reports, including U.K.-based Opensignal, U.S.-based PCMag and J.D. Power, and Canada's Tutela. We are proud of the many ways in which our global best wireless and PureFibre networks are driving economic growth, driving innovation and creating jobs within our country. Moreover, our world-leading broadband network and technology are improving the lives of Canadians by enabling online health care, online education and total working flexibility during the pandemic. Furthermore, they are accelerating Canada's digital economy and digital society for heightened productivity, better competitiveness and better human welfare outcomes in the post-pandemic period.Finally, our broadband technology is supporting critical transformational change in respect of remediating the environmental state of our planet by bridging time and distance through technology virtualization. They're advancing agriculture efficiency and effectiveness and food quality production through better data analytics. And of course, our technology is bridging socioeconomic and geographic divide so that every member of our society has access to the technology and infrastructure that yields the opportunity for them to realize their full potential.These objectives for our economy and our society reflects TELUS' technology for good social purpose to progress the growth of skilled jobs, the physical and mental well-being of our citizens and the uplifting of marginalized constituencies as embodied in our brand promise, let's make the future friendly, for everyone. To close on mobile, fourth quarter ARPU was up 1% year-over-year, supported by higher roaming revenues, albeit below seasonal pre-pandemic levels, in addition to higher monthly recurring charges as a result of a greater mix of high-value customer additions delivered by the TELUS team. Alongside ongoing strength and customer expansion, this supported healthy mobile network revenue growth of 5% in the quarter. Notably, compared to the fourth quarter of 2019 or pre-pandemic levels, mobile network revenue increased by 4%, reflective of our consistent focus on high-quality customer growth and excellent customer base management. Let's turn now and take a look at our wireline operating results. TELUS delivered another quarter of robust wireline customer growth, which was yet again industry-leading. We achieved total fixed net additions of 79,000 for the quarter, which impressively represented our best fourth quarter wireline customer growth on record for the TELUS organization. This was powered by leading broadband customer experiences, inclusive of our unique bundles over TELUS' superior PureFibre network. Indeed, our robust wireline customer growth continues to be enhanced by the significant investments we are making in fiber and 5G wireless technologies, including our important accelerated broadband expansion, which is progressing very nicely, thank you very much. Looking forward, these generational investments will fuel enhanced customer growth and operating efficiencies at the same time and drive positive cash flow benefits as we complete our expedited broadband build and retire our remaining copper infrastructure. In a minute, Zainul is going to have an opportunity to provide further commentary on our industry-leading fixed results as well as our ongoing broadband expansion program. Now let's make a segue and take a look at TELUS Health. Our team drove double-digit year-over-year health services revenue growth for both the quarter and the full year 2021. Moreover, we achieved important milestones along the way as we continue to meaningfully scale our health operations. These milestones include covering over 20 million lives with our health care programs, an increase of nearly 22% on a year-over-year basis. They include realizing more than 550 million digital health transactions in 2021 alone, and they include earning over 1 million new virtual health care members, representing a 65% increase over the prior year. Indeed, TELUS MyCare is now the #1 virtual care brand in respect of familiarity and usage across all of the markets in which TELUS operates. We continue to leverage our leading position in health care technology solutions to deliver improved health outcomes for employees and citizens through access to better health information, which clearly has never been more critical within our societies. Furthermore, in TELUS Agriculture, through our team's ongoing efforts to integrate and grow this unique area for our company, we drove strong double-digit revenue growth across our 3 lines of business, namely agribusiness; food, beverage and consumer packaged goods; and animal health. Indeed, our close to 7,000 customers located in 50 countries around the world, including 6 of the top 10 food and beverage suppliers and 9 of the top 10 agriculture companies globally, are making a meaningful difference in scaling our operations and leading the way from a market share perspective in the chosen markets that we serve. For 2021, we slightly exceeded our annual revenue objective with revenues in agriculture, including telecom connectivity, of over $400 million. This is illustrative of the significant value we are creating as the globally-leading provider of agriculture technology solutions and data analytics. We look forward to expanding our disclosure with respect to agriculture for 2022 and beyond, which we are confident will reinforce the value and assets of consequence we are creating in this important area within the global dominion.Overall, fourth quarter operating revenue for our TTech segment increased by more than 6% on a year-over-year basis, whilst organic EBITDA was up over 7%. Doug is going to have an opportunity to provide further commentary on TTech performance in just a minute when we hear from Uncle Doug. Let's turn now and take a look at TELUS International. Earlier today, TI announced strong double-digit revenue and profitability growth for the fourth quarter, concluding their first year as a public company with impressive financial results that surpassed their financial targets for 2021, a good start in the post-IPO period.Continued robust results at TI, including the strong performance targets that they've set for themselves for 2022, demonstrate their consistent execution and position as a leading partner of choice for premier digital and cloud transformation experiences and IT services for its more than 600 clients on a global basis. These clients rely on TI's talented and engaged team, along with its deep end-to-end digital capabilities, to deliver a superior customer experience, including a unique and unparalleled mix of content moderation and artificial intelligence capabilities. Doug is going to have an opportunity to also provide commentary on TELUS International shortly. To conclude, our team's ability to consistently drive strong and profitable customer growth and financial results for the long term on the back of our differentiated asset base, our world-leading networks and the unique growth drivers that our asset mix represents provides us with the confidence in delivering on the annual targets for 2022 that we've announced today that are best-in-class. This includes industry-leading operating revenue and EBITDA growth of 8% to 10%, alongside free cash flow growth of $1 billion to $1.2 billion, inclusive of the final year of our accelerated broadband investment program. These targets and their industry-leading revenue and EBITDA growth rates will be complemented by the double-digit revenue and EBITDA growth anticipated at TELUS Health and TELUS Agriculture for 2022 as well as the robust guidance for 2022 that TI announced this morning with strong double-digit revenue and EBITDA growth for that organization. Notably, as compared to 2019, our targets for 2022 represent 25% to 27% revenue growth and 15% to 17% EBITDA growth versus the pre-pandemic period. That represents quite a forward-looking story for the TELUS organization, tremendous value creation, but also illustrates how strong we navigated the pandemic period. Furthermore, the unparalleled skill, innovation and grit of our team underpins our leading multiyear dividend growth program, which now quite unbelievably is in its 12th year. Since 2004, we've returned $21 billion to shareholders, including close to $16 billion in dividends, representing some $15 on a per share basis. Moreover, we look forward to updating you on the extension of our multiyear dividend growth program commencing in 2023 at our upcoming Annual General Meeting in May in a few months' time. Throughout 2021, our team demonstrated an unwavering dedication to leveraging our technology innovation in concert with human ingenuity that create positive outcomes in the global communities where we live, where we work and where we serve. Indeed, in 2021 alone, our TELUS family volunteered over 1.3 million hours of service in our communities and gifted circa $90 million to charitable and community organizations as we strive to make the future friendly for all. I remain exceedingly grateful to the TELUS team for exemplifying our leadership in social capitalism as we deliver outstanding results for all stakeholders, not just our shareholders, but all stakeholders. And on that note, I'm going to hand the call over to Zai.
Thank you, Darren. As our fourth quarter results demonstrate, our customers' first strategy, world-leading networks and superior product diversification across mobile and home continue to yield positive outcomes. We delivered record fourth quarter results with respect to fixed customer growth with an industry-leading 79,000 net additions, bringing our full year results to a record high of 255,000. Notably, for the fourth quarter, this far exceeds the 46,000 we delivered in the pre-pandemic 2019 period. These results build on our track record of consistently delivering strong customer growth and are reflective of our strength across segments, inclusive of Navin's team on the B2B front. Together, over the last 2 years, we have added an industry-leading 495,000 fixed customer additions, including 306,000 Internet customers, 105,000 TV net additions and 165,000 security customers.The success of our whole home bundle, an unmatched package of differentiated products and services, is bolstered by Jim and his team's leading mobility performance and drives an average of over 3 products per household within our pure fiber footprint. In turn, this is leading to high brand affinity for our services and lower churn. As demonstrated in the 2021 annual CCTS report, customer complaints against TELUS were a fraction relative to our national peers, solidifying our #1 ranking of the fewest customer complaints among national carriers for the 10th year in a row. This leadership showcases how our team puts our customers first at every opportunity, generating customer loyalty and building trust to further intensify our base. For the fourth quarter, Internet net additions of 40,000 reflect the ongoing demand for our unparalleled TELUS PureFibre Internet services across homes and businesses. We continue to drive robust TV attach rates with TV net additions totaling 18,000. Notably, due to our high content engagement, we remain the only provider in North America to consistently deliver positive TV growth. Customers continue to recognize the unique value of our flexible packaging, breadth and depth of content and fully integrated over-the-top streaming. Residential voice net losses of 10,000 remained low and stable as we successfully leverage our expanding PureFibre footprint, bundled product offerings and strong retention efforts to retain these high-margin services. Our industry-leading security and automation net additions of 31,000 were up 8,000 over last year, reflecting the strength of our digital capabilities, innovations in virtual and do-it-yourself installations and our capacity for acquiring and integrating new assets on a national basis, post the acquisition of ADT Canada. The recent expansion of our home security and automation bundle to now include our cybersecurity solutions with TELUS online security further exemplifies the diversity of and potential for this product portfolio. As part of our accelerated broadband build, we connected 278,000 homes and businesses to our PureFibre network in 2021, ending the year covering more than 2.7 million premises to our globally leading broadband network. We also continued our rollout of PureFibre X, Canada's fastest Internet speed tier with upload and download speeds of 2.5 gigabits per second and the capability to deliver up to 10 gigabits per second on a cost-effective basis. More than half of our PureFibre footprint is now enabled with this latest technology, further advancing our network leadership position and speed advantage. To that end, we continue to successfully drive more households to tiers at or above 1 gigabit per second, achieving improved Internet revenue accretion and paving the path for future service adoption. During the quarter, we migrated 36,000 copper customers to our PureFibre network, bringing our full year migrations to nearly 140,000. At the end of 2021, only 11% of Internet and TV customers within our PureFibre footprint remains serviced by copper. As we have shared previously, moving our copper customers to PureFibre improves customer lifetime value on several dimensions, including an increase in product intensity of 25%, higher ARPU per home by nearly 15% and a churn profile that is 25% lower. Furthermore, PureFibre's higher reliability leads to a reduction of over 60% in truck rolls and lower call center volumes, along with improved self-provisioning and troubleshooting. Our differentiated products and services truly set us apart relative to our peers. In consumer health, we continue to drive growth through TELUS Health MyCare and Living Well Companion, providing critical virtual care to Canadians for their primary care, mental health, allied health and personal emergency response services, respectively. Our service quality ratings are consistently rated at 4.9 out of 5 by our patients, and we continue to expand our service offering, now including digital pharmacy.As we progress through 2022, we will drive further growth through our superior bundling, we will ramp our digitization efforts and transform our service platforms to drive cost improvements. Backed by the efficacy of our PureFibre network and our team's passionate focus on putting customers first, we are well positioned to continue achieving positive financial outcomes, including higher margins and cash flow this year and beyond. With that, I'll pass it over to you, Doug, for additional insight into our financial results.
Thank you, Zainul, and hello, everyone. Our Q4 results extend our proven track record of leading financial and operational results led by smart, strategic growth initiatives and our strong and consistent execution. In December, we successfully completed the sale of the Financial Services business for $500 million. This amount is not included in our operating revenue or adjusted EBITDA. It's in the other income line. In the quarter, we continue to see growth coming from all our business areas. Mobile network revenue growth improved sequentially for the sixth consecutive quarter, increasing by 5% compared to 3.7% in Q3. This network revenue result included a $27 million year-over-year increase in roaming revenue as travel activity increased. Roaming revenue exited the year just below 70% of pre-pandemic levels. And assuming trends related -- travel trends related into the future, we anticipate a recovery gradually throughout 2022. As we continue to see the strong adoption of unlimited data plans, overage charges have now declined and data overage represents only less than 2% of mobile ARPU. The strong adoption of our unlimited data plans has driven increased customer satisfaction as well as lower calls to our call center, fewer bill credits, and that is leading to a benefit in our direct mobile contribution, which improved by 120 basis points in Q4.On the fixed side of our business, data revenue growth was above 10% for the sixth quarter in a row with Q4 growth coming in close to 12% and up 26% over Q4 2019. Underlying this result, residential Internet revenue grew an impressive 20% year-over-year, driven by double-digit growth in residential Internet ARPU and continued market share gains. Notably, we also continued to see good traction on our B2B front and drove positive consolidated B2B EBITDA growth on a year-over-year basis for both the year and the quarter. This positive trend sets us up for strong momentum going into 2022 as Navin and his team continue to look to build and accelerate our B2B growth, including the monetization of 5G. Overall, TTech adjusted EBITDA came in at 6.7% in Q4, and organic growth was at 7.3%. TELUS International continued to drive impressive operating momentum with double-digit revenue and adjusted EBITDA growth for both the quarter and the year. DLCX grew -- growth was driven by TI's industry verticals and particularly strong growth from tech and games, e-commerce and fintech, including double-digit growth from services to TELUS. Our Q4 results bring our annual performance within our guidance ranges for both revenue and EBITDA despite a dynamic operating environment. Free cash flow also finished ahead of our year-end guidance as we executed on our capital acceleration plans, effectively managing COA and COR with valuable and profitable loading and retention while continuing to increase our copper to fiber migrations and digitization efforts leading to improved cost structure. Looking ahead, we announced robust consolidated targets today with an operating revenue and adjusted EBITDA growth of 8% to 10%. Notably, these leading 2022 targets are driven by organic growth of all product areas, including the growth in health and ag, effective cost management as we focus on profitable loading and a consistent strategy that we have followed for many years. While we continue to drive economically accretive loading across all our products backed by expanding our PureFibre and 5G networks, which will support positive financial incomes, outcomes and sustainable free cash flow. With COVID restrictions being present for the significant part of Q1 2022, Q1 will have a lot of the same pandemic impacts of the second quarter of 2021. We anticipate our growth profile to steadily improve subsequent to Q1 2022, aligning with our expectations of the economic recovery.Notably, when we compare 2019, our guidance implies, as Darren highlighted, pre-pandemic levels of 27% operating growth and 17% adjusted EBITDA growth. Impressively, since 2019 through to the end of 2022, we anticipate to generate cumulative EBITDA growth of almost $1 billion. This industry-leading result is attributable to our strong operational execution, delivering on our strategic initiatives and the quality of our asset mix. Furthermore, the more than 1.7 million customer additions that we have added over the past 2 years demonstrates the significant economic value created for our stakeholders, supporting future strong revenue and EBITDA expansion. For 2022, we are targeting free cash flow of up to $1.2 billion, representing a potential increase of more than $400 million. Included in free cash flow, we have our 2022 accelerated capital spend of $750 million to $790 million that is the remaining amount of our $1.5 billion acceleration. In addition, we expect handset investments to increase with upgrades that were deferred during the pandemic. Our free cash flow outlook includes anticipated capital expenditures of $3.4 billion, a slight decline relative to 2021 while still delivering all of our original operational targets. Importantly, we remain committed to CapEx moderating to a baseline of $2.5 billion or less beginning in 2023. Detailed assumptions of our '22 targets can be found in Section 9.3 of our posted MD&A. Our balance sheet remains very healthy heading into 2022, including available liquidity of over $2 billion, while our net debt-to-EBITDA ratio ended the year at 3.17x, down from 3.45x one year earlier. Excluding the impact of spectrum license fees since 2019, our EBITDA leverage ratio would have been 2.68.With regards to our leverage, we remain committed to investment-grade credit ratings, and we are confident that our outlook, combined with the 2023 significant decline in our capital expenditures, will hit those targets. I look forward to continuing our strong operating momentum and further advancing our leadership growth in 2022. Robert, back to you.
Thanks, Doug. Mehai, can we proceed with questions, please?
First question comes from Jerome Dubreuil from Desjardins.
Two for me, if I may. First, Doug, you mentioned that overage was now approximately 2% of ARPU. That's in the context of heavily limited data consumption. Do you think we could expect this to be bottoming approximately at this level? Or you think there's more to go with the transition to unlimited? And then a second question would be the rationale for selling the financial solution business, you're intact. Is this not something you wanted to pursue or different competitive environment? So if you can provide context on that, please.
So we'll let Doug handle the second question first, and then we'll hand it over to Jim for commentary.
So we've continued to look at our maximizing the value of all of our asset base. So we've talked numerous times about our copper to fiber migrations and how we can monetize real estate in the long term. We looked at the financial services area, and it has great potential, but is not core to us. And so we found that it was a perfect win-win as an opportunity for the purchaser and for us to remain our focus in our strategic areas of health, ag and TI. And so that's why the sale happened and we will continue to use those resources to invest in our strategic growth areas.
I think an interesting stat as well on that, if you look at that asset that came to TELUS by the acquisition of Emergis back in 2008, if you look at the proceeds from the financial services disposition plus the EBITDA that we've been able to secure over the past years, we effectively got the Emergis Health business for free, and I think that's smart financial management and a good concentration of our strategy on the growth opportunity going forward within the health area. And then the other thing that I think is important is that we've retained a commercial relationship with that asset. So we can provide them with TELUS' services that supports what they want to do on the financial services front, so it will be a legacy commercial relationship that will continue on. Jim, over to you.
Yes. Look, our TELUS brand unlimited mix increased significantly year-over-year, up 34%. And the majority of our TELUS brand is now on unlimited. I think where you see data overage is still on the flanker space, but more and more of our Koodo customers are migrating up to TELUS, which is great news. And I think you got to get back to we continue to see benefits from the consistent high-quality customer additions, which is moving that mix to unlimited, and then our base management activities have really been minimizing the volatility around our rate plan changes. And so feeling really strong about where our ARPU is. And I look at the remaining 2% in the flanker space, has a huge opportunity to drive upsell and move customers towards unlimited, especially with the 5G device life cycle coming through, and that's a real opportunity for driving that upsell.
Next question comes from Drew McReynolds from RBC.
And obviously, congrats on the results and the outlook. It certainly exceeded my expectations. A couple for me. Maybe just starting with you, Doug, on the guidance. Thanks for the additional granularity just in terms of COVID impacts. Just remind us just kind of where the pockets of headwinds are lingering here for you in 2022. And then second question, maybe for you, Zainul, on the multi-gig kind of symmetrical household for Internet. Can you give us a little sense of really what the demand or how the demand for that is evolving within your fiber footprint? What do you see in terms of adoption and penetration of just the multi-gig and the importance that households put on the symmetrical side? And then lastly, just could you give us an update, maybe for you, Doug, just where you are with respect to assessing strategic scenarios or options for TELUS Health and TELUS ag?
Okay. Doug, why don't you kick it off? And then over to Zainul. Thank you.
So on the headwinds, obviously, roaming is going to be the largest as we look into 2022 and the speed of what recovery of way that may happen. We have highlighted that with a lot of the lockdowns in the first quarter, that roaming has fallen off a little bit from the trends we saw in the fourth quarter. So you'll see that pressure out of the gate, but we believe it will rebound as the year progresses. The flow-through impacts to health care and some of the transactional services have been a bit of a headwind with COVID but are improving substantially as the year ended. We haven't seen that slow down a lot with the recent changes, but it is a potential. And then probably the last one being business, and business is always going to be more volatile depending on the recovery plan. Navin has a lot, and maybe we can ask Navin to top up in a moment, Navin has a lot of plans on how we will actually turn biz and keep the momentum that we currently have in biz to overcome any of those headwinds. On the health and ag one and our future potential, we'll continue to assess it, and we'll bring back to you when the timing is right. But what we're going to continue to build assets of consequence. And any partner, any IPO, any timing around that will be a win for ourselves, a win for the organization to drive it further. And it will be strategic, not financially, make that decision.
Zainul, do you want to go ahead?
Sure. Absolutely. Drew, thanks for the question. So I think you had sort of a 2-part question, one on the adoption of 2.5 and the PureFibre X as well as what we're seeing in terms of upside on 1 gig and beyond. So I'll address those 2. Essentially, Drew, one of the things to think about is we've always made really smart capacity investments in our network. And so that the PureFibre X has certainly provided that speed advantage and the halo product of the 2.5 and beyond opportunity, but it's also driven by some capacity upgrades that we needed to do. So we're future-proofing our network, and we're doing it on the back of being able to provide incremental speed tiers. In terms of the take rate, Doug highlighted the revenue growth that we've enjoyed on the Internet front, particularly on residential, and what I would say there is that we still have a proportion of our customers that are not taking 1 gig, but a higher mix of our new loads that are trending to take 1 gig and more. So we have a ton of upside potential as we push customers up the curve in terms of taking those higher speed tiers. And in terms of customer demand for symmetry, we've seen that, I would say, explode through the pandemic. In the context of prior to the pandemic, I don't think a lot of customers would have recognized we were putting a lot of work into educating customers on the benefits of symmetry, the capabilities of PureFibre. But now that's a recognized benefit, and it's a valued benefit to pull customers into the PureFibre footprint. So we're seeing a lot of customers recognize and want the value of PureFibre in terms of the capacity to have multiple streams in their household, multiple video conferences, and of course, with our security services, multiple video feeds as well. So we see that demand continuing to increase, and we see the value potential and upside potential is very high.
Drew, just on the health front, and I've said this before, but I can't emphasize it enough, you can really draw inference from the model that we followed on TI as to what the future portends as it relates to both TELUS Health and TELUS Agriculture. The next thing is this is very much front of mind in the here and now for us in terms of that future and how we cultivate the optionality. And maybe just some elements that might be helpful to you. If we were going to do something with those businesses in the future, our desire, of course, similar to TI, would be to establish a transaction currency in servitude to the strategy. And the better the transaction currency, the better the addressable market of opportunities that we have. If we're going to get a great transaction currency, that's going to be down to the multiyear track record that we developed in advance in terms of double-digit revenue, EBITDA and cash flow growth for those assets. Secondly, we want to focus on scale. These assets have to be meaningful for us, what we call a TELUS asset of consequence, and creating that large yes is something that's very much front of mind for us. We are, and I highlighted this in my comments, we are pursuing market leadership. We don't want to be a player. We want to be the market leader in the select markets on health and ag, and we want to do that both domestically and prospectively at the international level. And of course, we're already with a foot in that camp on the ag front.And then the last thing that you can expect from us is we're going to bring our customer service excellence game to bear that has helped our core business so very much. And then every tech move that we make, when we think about fiber, 5G, our digital leadership, our cloud transformation and then the fact that we've evolved to being a broadband software-as-a-service company, that particular paradigm is going to be inculcated within the thesis for health and ag because they're going to be data analytic businesses.And then the other element that you can watch for is how we leverage the TI asset to support the growth of health and ag given the ambitions that I've just laid out, but this is very much for us here and now. We're thinking about it day in and day out because the results that we generate now set up a great transaction currency tomorrow because that's what the valuation is going to be predicated upon, including as well, obviously, the future earnings potential as well.
Next question comes from Jeff Fan from Scotiabank.
Just a follow-up first on Doug's comment about the guidance for free cash flow for 2022. Doug, I think you mentioned some spending related to handsets and handset investments. I just wanted to see if you can elaborate on that a little bit as to whether there is -- is this volume-driven purely or if there's some assumption regarding competition around handset subsidies? The second question is around the 5G ecosystem. I think, Darren, you've talked a lot about commercialization of new 5G applications as a long runway and opportunity. Just wondering if you can give us an update as to how you see 2022 progressing on that front and if there is any contribution, I guess, in revenue related to the 5G new applications in your 2022 guidance?
Doug, go ahead.
On the cash flow one, when you think through the last couple of years, digitization was a significant opportunity and success for us. There was a great mix of, call it, contracted customers and BYOD. And there was also a lot of deferrals of business and consumer customers who just waited to upgrade and not do it on a digital environment. So everything that's included in our 2022 forecast is volume-related. There is nothing built in to assume increased subsidy beyond a normal market condition.
Maybe I'll ask Navin to comment on the commercialization in just a second. You're quite right, Jeff. We've said repeatedly that 5G is a marathon, not a sprint. In a lot of other jurisdictions, the expectations have been overcooked, and I don't think that serves anyone particularly well. For us, as we deploy new spectrum, new technology and develop the right product, services and applications for commercialization that takes time, particularly given this is a B2B opportunity that we're pushing. I would note that atypically, at TELUS versus other companies around the world, we're progressing into 5G from a position of superior strength as it relates to both our 4G LTE network and its performance relative to 5G operators in other jurisdictions as well as the fact that our wireless network technology is complemented by our PureFibre network that underpins it. And of course, leveraging the network sharing agreement that we have in place with our partner helps everything in terms of deployment, the competitiveness of our functionality and the cost efficiency of putting the 5G infrastructure in place. But I do believe that this is going to be meaningful for this organization. It's not hugely material in our '22 results beyond the CapEx that we're spending to enable it. We're going to be pushing up over 80% coverage on our 5G footprint. By the time 2022 finishes off, we'll be operationalizing our mid-band spectrum, and we will have our stand-alone 5G network operational by the midpoint of the year. Clearly, the focus for us as you've got smartphone ubiquity leveraging 5G network connectivity is to be smart creators of data usage. The machine-to-machine opportunity within the IoT world is huge, and we are excited by it. And as you know, it has particularly pertinent applications in verticals that are key to us whether it's logistics, the manufacturing or ag and health care are pretty exciting. And of course, it's not just the data flows and the bandwidth, but the data analytics that you can monetize as well along the way. And we are excited by what that's going to do to support ARPU amelioration in the years ahead as well as the fact that the cost curve on 5G should support the margin strength of the wireless business. So I'll hand it over to Navin to give you a flavor of what we're thinking about from a commercialization point of view, as it relates to our product portfolio and the market opportunities that we're seeking to address.
Yes. Thanks very much, Darren. And thanks for the question, Jeff. So I would start by reiterating Darren's point that 5G and IoT is a marathon, definitely not a sprint, and we're quite bullish on our plans to commercialize 5G and IoT. And a big part of our return to growth in B2B overall is our ability to outrun declining parts of our business with next-generation growth capabilities, and we feel confident that we can continue to accelerate that growth in 2022 and beyond. We believe 5G and IoT will be a significant part of that continued accelerated growth, along with other key fixed and wireless next-generation services. And our plan to commercialize 5G includes a few components. So of course, fixed wireless solutions, monetizing mobile edge computing as well as network slicing capabilities. We'll also be enabling key vertical solutions. You heard Darren just speak about agriculture and health. Another key vertical is smart cities, where you may have seen our press release from yesterday around the ecosystem that we're creating for municipalities in partnership with Google and NXN. There will also be a number of horizontal capabilities that we'll be commercializing. So one example is transportation. Our recent General Motors strategic partnership being a great use case of what we're doing there. And in terms of IoT, we expect growth in terms of not only connections but also ARPU growth as we will see industry shifting on to 5G networks as chipsets and device availability improves and the number of the OEMs start embedding those newer 5G chipsets into their equipment. In addition, given the high quality and large volume of data that will come from the combination of our networks, both 5G as well as fixed broadband networks services and overall industry solutions and the ecosystem associated, we'll also see acceleration in our ability to add value to this data and monetize it. And Darren mentioned the importance of data in ag and health, and the combination adjacencies of our overall B2B data across those verticals will be a very important component of our go-forward commercialization plans. I would end by saying that all of this bodes well for strong growth in 5G and IoT devices, data usage and industry solution value-add use cases in the coming years, not only for our net new customers, but as Darren said, we have a very strong foundation of IoT subscribers that we can build off of and grow from.
Our next question comes from Vince Valentini from TD Securities.
I want to stick with that handset comment you made, Doug, for a second. I appreciate the color on just being volume-related that you're expecting, but just to make sure we have the quantum right within your guidance. It looks like it's about a $200 million to $300 million impact if we triangulate your free cash flow guidance versus the EBITDA and CapEx and interest and other -- and cash tax guidance you've provided. I want to make sure that sounds right. Or is there some other working capital usage that accounts for the delta in the free cash flow other than just handset volumes? Second, just a clarification from you is I want to make sure I just understand, when you're saying 7.3% organic EBITDA growth for TTech versus 6.7% reported. What are you adjusting for? Is that just the financial services business that you sold? Or is there something else? And then third, last question, maybe for Zainul, or Doug, you can take it. I want to just make sure I have this math right on the fiber program you're disclosing. So if you have 1.3 million fiber subs on a footprint of 2.7 million homes that are now upgraded or premises upgraded and 11% of customers in those areas are still on copper, that implies 1.46 million total customers on that 2.7 million total footprint or approximately 54% penetration. So I just want to make sure we're reading in, triangulating the numbers you're disclosing to us properly.
On the free cash flow one, there is some other small items in there, I'd say, when you include cash taxes and other items, but I would say they are less than 100 million. So your reconciliation is directionally reflective. On your second question, no, it's not the TFS sale that organic is. We actually have made some investments, particularly in our virtual platforms for health care that have required some investment initially that are paying off very shortly into the future, but we drive a lot of synergies with our product set. So there's actually the other acquisitions that have been a little bit dilutive out of the gate and the J-curve investment leading to that longer-term integrated strategy. So TFS, that is not an impact at all.
Zainul?
Thanks for the question, Vince. So I think the challenge on the fiber footprint and comparing that with copper is that as we continue to build out the fiber footprint, whenever it's a new footprint, we're, of course, in a lower state of both penetration organically as well as in a lower percentage of copper to fiber migrations for that respective new footprint. So in addition to that, the numbers that you've quoted, we've quoted in terms of our footprint represent both business and consumer connection and capability, and we look at that on a premise basis. And then to look at -- to try and triangulate that back to a share or penetration view, there's several things in terms of, is that footprint actually occupied? And then what's the rate of growth of occupation and the penetration of the overall Internet service?So it's not a clear triangulation. But I think what you can deduce from all of the disclosures that we've provided, is we're continuing to grow the footprint. We're continuing to penetrate the footprint, both organically in terms of net new additions as well as in the copper to fiber migration. And we're doing that at a very aggressive pace, and we are making commitments on ensuring that we get to a closure on that base by the end of the year.
Next question comes from Simon Flannery from Morgan Stanley.
Great. It was good to see that your margin -- your EBITDA guidance is pretty consistent with your revenue growth guidance for 2022. I think we're getting a lot of questions on inflation. You obviously flagged supply chain around inventory, so perhaps just talk to us about how you're managing costs and how you're ensuring that you're able to keep fairly stable margins in the businesses and what's happening with inflation in your various segments.
Thanks, Simon. There's a couple of items there. We definitely have worked through a lot of our supply chain to get multiyear commitments and ensure that we're getting the supply we need for a lot of the most essential services. But you are right, there are pressures coming in on, call it, the more variable supply chain that everyone is going to have on an annual basis. All the initiatives that we've been talking about in our capital acceleration from copper to fiber migrations, to the digitization investments, to the simplification programs that we've done with our customers is going the other direction and driving efficiency and effective throughout our business. So we're continuing to, say, offset and mitigate some of those external pressures with our internal operational excellence, and that is how we're keeping the margins flat to improving over time.
Okay. And any color on supply chain easing over the course of the year and better handset supply?
Yes. Q4 was an interesting quarter. It was quite competitive. We saw much more rate-based promotional activity from the flanker competitors due to some inventory constraints. On our side, we've weathered the storm very, very well. Our investments in digital, our investments in omnichannel capabilities enable us to optimize our inventory across channels. We weren't stranding inventory in our store footprint, and we could get our inventory to the customers and maximize the supply that we had. Additionally, our investments on CPO and Mobile Clinic played a really key role in providing additional device supply, which we benefited from. So we felt really, really good in terms of those investments, put us probably in a very good spot in managing the ups and down on the inventory. And then we're driving better -- also better mix and financial outcomes from that.
Thanks, Simon. Darren, over to you for closing remarks.
In the vein of trying to be helpful for investors and the analyst community, I'd like to postulate a 3-part model, which I would recommend be the models that you use to assess our business over the next 3 to 5 years.So module 1 within that construct would be our ability to leverage the significant momentum that we have created within our FFH and mobility business, both individually and collectively. And certainly, you've seen that in our results, and I think that bodes well that momentum for the future. Second component would be our B2B profit resurrection strategy so that we get an accretive profitable contribution, not just as it relates to '22 on the momentum front but thereafter on the B2B front, and that's been something absent from the TELUS story for the past 6 years. The other component of module 1 would be our leadership on technology. Clearly, for us, what we've been able to do on fiber, what we've been able to do on 3G, 4G and now 5G as well as our leadership position on digital is making a huge difference in terms of the competitive advantage. And when you combine that with the next element, which is our customers' first service excellence culture at our organization, yielding retention scores with customers that are global best, you have a lifetime value creation via wireline or wireless that, frankly, is unsurpassed. And then the last component of module 1 is cost reduction, cost reduction, cost reduction. We need to do it to fund our business, and we need to exact cost efficiencies from our tech investments from 5G and fiber all the way through to digital. The second module is our ability to scale and create value from TI, health and ag. So it's a simple story. We want to drive these business at scale, and it's a valuation conversation. We're looking to build significant value within that asset base and rinse and repeat on TI and follow the path of TI and whether it relates to health or ag.The third module is cash generation, and so it's a story for us of quality EBITDA growth coming from modules 1 and 2. sustainable, quality, significant EBITDA growth coming from modules 1 and 2, complemented by ameliorating capital appetite such that we get into a situation, a growing situation, where the sources of cash are chronically exceeding the uses of cash. And that is a fantastic combination of modules 1 and 2 in concert. And then, of course, the final element of module 3 is what do we do with that cash? And I think you know the answer to that question, which is returning it to shareholders. And so that's really the model for looking at our organization, not for next quarter, but for the next 3 to 5 years across those 3 modules as to what you can expect from us when it comes to value creation.
Thank you, Darren. And thank you, everyone, for joining us today. Please feel free to reach out to the IR team with any follow-ups. And take care, everyone.
Everyone, this concludes the TELUS 2021 Q4 Earnings Conference Call. Thank you for your participation, and have a nice day.