The Canadian telecom market is transforming. The oligopoly market was controlled by the top three players — Rogers Communications, BCE, and Telus (TSX:T) — who did not compete on price. They spent billions of dollars on world-class fibre infrastructure on the vast lands of Canada. They monetized the infrastructure by offering various services. As there was no overlap of infrastructure, except in big cities, telcos enjoyed better returns on their infrastructure spending.
The world has changed for Canadian telcos
However, the world changed for Canadian telcos when the telecom regulator opened the fibre infrastructure of BCE and Telus to competitors. Now, competitors can lease the fibre infrastructure and offer communication services. While this arrangement encourages price competition, it discourages investment in fibre infrastructure as the returns are diluted.
The outcome is that BCE and Telus reduced their capital spending on 5G infrastructure, starting to focus on offering various services at competitive prices. While BCE is still fighting with the regulator, Telus has adapted to the change and is offering its bundled services on a competitor’s infrastructure.
How will 2025 be for Telus?
Among the top three telcos, Telus is better positioned to adapt to the change. Price competitiveness reduced its average revenue per user (ARPU), but new connections and a significant jump in Telus Health and digital experience increased its revenue.
Until now, the revenue growth has been a result of investing in spectrum licenses. This year, the company will focus on reducing its debt and operating costs and monetizing the infrastructure. The net profit seems to have bottomed out, and from here, it might see a recovery.
However, new immigration policies could reduce the number of immigrants and slow net additions. It means telcos will compete for a limited number of customers, further intensifying competition.
The weak macroeconomic environment and a slowdown in consumer spending due to the indirect impact of the tariff war could see moderate revenue growth.
How will 2026 be for Telus?
The next year could see an improvement in Telus’s earnings as capital spending slows and debt repayment accelerates. The company might also restructure its debt to reduce interest expenses.
Unlike BCE, which has cut dividends to strengthen its balance sheet, Telus has slowed its dividend growth rate to 3-8% for the 2026 to 2028 period from the previous growth range of 7-10%. The dividend growth slowdown reflects the impact of price competition and debt on the company’s free cash flow.
How will 2027 be for Telus?
By 2027, Telus’s share could recover from the backdrop of the structural change in the telecom sector and define the new normal for the industry. The dividend growth could probably be higher than in 2026 as Telus monetizes on the 5G infrastructure. Its share price could also see a gradual recovery to its normal trading price of $28.
I will not rule out the possibility of any regulatory change reversing the price competitiveness. However, BCE might probably reduce its share in the Canadian market and expand in the United States, where the fibre network is unregulated. Telus could continue to take market share from BCE.
In short, Telus is a stock to buy and hold:
- for the next three years, for a recovery in the stock price;
- for the next five years, for its dividend growth; and
- for the next 10 years, for the compounding effect of the dividend-reinvestment plan.
