The last five years were disruptive for Canada’s big telcos. One regulatory change altered the very strength of the oligopoly market led by Rogers Communications, BCE, and Telus (TSX:T). They surged in the first two years and came crashing down in 2022, losing 18–40% share value. Meanwhile, Quebecor stock moved in the opposite direction, surging 58% as it gained market share from them. What happened?
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How was 2020–2025 for Telus?
All three telcos started the 2020 decade with significant 5G infrastructure investment and/or acquisitions. Their strength was in their monopoly in the area where they laid the fibre. The infrastructure expenditures delivered a good return on investment (ROI) because telcos could charge a higher price for their premium service. Thus, the three took on high leverage to expand and enjoy the high ROI of the 5G infrastructure, which provides low-latency internet that could facilitate artificial intelligence (AI) at the edge.
However, a regulatory change in 2022 forced them to share their infrastructure with competitors at discounted rates, removing the edge of upgraded infrastructure. Smaller players had not taken on significant debt to build fibre infrastructure and could still access it. They offered internet at a lower price and thus began a price war.
The price war affected the margins of BCE and Telus. They paused their capital spending and started restructuring the business as the new law did not support high ROI on infrastructure development, but low-priced broadband.
What they were left with is significant debt and lower profit margins. While BCE slashed dividends, Telus has paused dividend growth. The price war eased in 2025 as Quebecor and other telcos now have to invest in fibre infrastructure.
Where will Telus stock be in the next five years?
Telus has slowed capital spending and is monetizing non-core assets to repay debt. In September 2025, it sold a 49.9% equity interest in wireless tower operator Terrion GP for approximately $1.3 billion and reduced its net debt to 3.5 times its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). Even this is high compared to its target range of 2.2–2.7 times.
In the next three years, the company looks to monetize its Telus Health business. It has paused dividend growth even though its free cash flow (FCF) is growing, as it wants to channel that cash flow into debt repayment. More such non-core asset sales could come in the next five years. Also, it will focus capital spending on using existing infrastructure to earn more money.
Telus has consolidated Telus Digital to bring $150 million in annualized cash synergies. The next five years could see the streamlining of business to improve profit margins. Meanwhile, the 5G opportunity could gradually increase returns through AI at the edge and autonomous cars.
Can Telus’ share price grow in the next five years?
Telus’ share price fell below $18 because of the leveraged balance sheet. It aims to reduce this leverage and focus on share buybacks to improve the share price. When debt per share is lower, the stock price will grow. It will also resume dividend growth once the balance sheet leverage comes within the target range, and the dividend yield and share price reflect the business performance.
Now is the time to buy Telus stock as deleveraging will help you earn from the stock recovery rally. You can also lock in an 8.8% dividend yield as compared to the average 6%.
What will happen to its dividends?
There is a risk of a dividend cut as the dividend reinvestment plan (DRIP) offered treasury shares increases the share count. Now, Telus is tweaking its DRIP and will use the dividend to buy shares from the open market, which will keep the share count stable. How will it change the metrics?
In the 12 months ending September 2025, Telus declared $2.48 billion in dividends as against a FCF of $2.17 billion, which comes to a 115% payout ratio. However, the $860 million dividend was from the DRIP. This money was given in treasury shares and the $860 million in cash was used to reinvest and earn ROI.
The new Telus will resume dividend growth but at a slower rate of 3–8% from the previous 7–10%, thereby adjusting to the new regulations.
