The Canadian telecom sector underwent a complete makeover as everything came at the same time. The technological upgrade to 5G, the move to digitization, and the consolidation of the two largest telecom operators, Rogers Communications and Shaw Communications. While these were planned and cyclical changes, the biggest change was the introduction of Mobile Virtual Network Operator (MVNO) rules by the telecom regulator. It shifted the competitive landscape. Every telecom company had to restructure operations to adjust to the new norm. While some resorted to dividend cuts, Telus Corporation (TSX:T) continued to pay investors every three months and increase the amount by 3.5% every six months without fail.
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Telus recoups from the regulatory change
Even Telus took a hit from the regulatory change as the MVNO rule forced it and BCE (TSX:BCE) to give MVNOs access to their network at wholesale rates. So, while the two telcos spent billions of dollars on building the 5G infrastructure and buying spectrum licenses, MVNOs piggybacked on them to offer wireless services.
This rule benefited Quebecor and Cogeco Communications as they could offer services at a very competitive price. Telus and BCE struggled to match the price and took a margin hit. They reduced their capital expenditure and shifted focus to technology solutions that are not a part of the MVNO rule.
In July 2025, Telus gave Cogeco wholesale access to its broadband wireless network in Ontario and Quebec.
You may think there is no point investing in BCE and Telus. But here is a catch.
MVNOs that have been piggybacking on the large telcos have to build their own network somewhere in Canada. It calls for significant capital expenditure (capex), and MVNOs are not used to it. Since BCE and Telus already have the widest network infrastructure, they can cut capex while Cogeco and Quebecor increase capex.
This is the point where Telus and BCE will benefit from bundled services, which MVNOs don’t offer.
How Telus continued to pay investors every three months
Amidst 5G investments and regulatory changes, BCE reduced its dividend and shifted its capital expenditure focus to the United States. It did so as it had been paying more than 100% of its free cash flow (FCF) as dividends since 2021. With revenue falling and interest rates rising, the company could not sustain its dividends. Shareholders welcomed the dividend cut as it addressed the elephant in the room of funding dividends from cash reserves.
| Year | Telus Dividend Payout Ratio | BCE Dividend Payout | BCE Leverage Ratio | Telus Leverage Ratio |
| 2024 | 81% | 125% | 3.8x | 4x |
| 2023 | 77% | 111% | 3.5x | 3.7x |
Among the two telcos, Telus had manageable debt and dividends. Although it had high net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA), its FCF kept growing, giving it some flexibility to increase dividends.
Telus is now looking to deleverage its balance sheet. The last two years increased its debt due to the 2023, 2023, and 2024 spectrum payments. With all the payments behind it, the telco will reduce capex and slow its dividend growth to 3–8% in the 2026–2028 period to channel its cash towards debt repayment.
The company has already brought the dividend payout ratio in line with its long-term range of 60–75%. The next step is to bring its leverage to its target range of 2.2 times to 2.7 times from 3.7 times on June 30, 2025. So far, it is aiming for a 3 times ratio in 2027 and will gradually bring it to the target range.
Telus will continue paying investors every three months
The fundamentals are now recovering, suggesting that the company may continue to pay quarterly dividends and meet its target of 3–8% annual growth. This target reflects the telecom industry’s price competition and regulatory landscape.
