Telus cutting 6,000 jobs as second-quarter profit falls

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Telus Corp. T-T is shrinking its global headcount by 6,000 people, the company announced Friday as it reported a lower second-quarter profit amid what it calls a challenging macroeconomic, competitive and regulatory environment.

The reductions include 4,000 positions at Telus and 2,000 at its digital customer-experience subsidiary, Telus International, representing roughly 5.5 per cent of its total work force. Telus had 108,500 employees at the end of 2022, including 73,300 at Telus International, according to its most recent annual report.

“Our industry is going through a very transformative period and it’s moving fast. We’ve got evolving regulators, the competitive environment, the macroeconomic backdrop – all of those items are contributing to this difficult decision that we’ve had to make,” Telus chief financial officer Doug French said in an interview with The Globe and Mail.

“Customers want self-serve options, and so as we’ve evolved and invested in those, it’s also created some efficiency opportunities,” he said.

The layoffs further include the “tail end” of the integration of its recent acquisitions, Mr. French told The Globe. Telus closed its takeover of human-resources firm LifeWorks Inc. roughly a year ago and has also made a number of smaller acquisitions through its Telus International and Agriculture & Consumer Goods subsidiaries.

Roughly one-third of the job reductions will be achieved through attrition or by offering voluntary departure and early-retirement packages, Mr. French said.

The restructuring effort will cost Telus up to $475-million this year and will result in annual cost savings of more than $325-million, the company said.

Telus’s rivals, BCE Inc. and Rogers Communications Inc., have also been trimming their headcounts. BCE recently cut 1,300 positions, citing declining legacy phone revenues and losses in its news and radio operations, while Rogers has been eliminating duplicate roles after its $20-billion takeover of Shaw Communications Inc.

Telus had $4.95-billion in revenue for the three-month period ended June 30, up 12 per cent year over year from $4.4-billion. The company said its revenues were boosted by a number of factors including the Lifeworks acquisition, growth in wireless subscribers, and new clients and services at Telus International.

The company’s second-quarter profit was $196-million, down 61 per cent from the same quarter last year, when it reported $498-million of profit. The earnings amounted to 14 cents a share, compared with 34 cents a share during the same period last year.

The telecom attributed the decline to higher depreciation and amortization relating to acquisitions and investments in its broadband network, increased financing costs and higher employee benefit expenses relating to restructuring.

After adjusting for various items including restructuring and income tax, its profit came to $273-million, down 35 per cent year over year from $422-million. That amounted to 19 cents a share, down from 32 cents a share.

Analysts had been expecting 23 cents a share of adjusted earnings and $4.95-billion of revenue, according to the consensus estimate from S&P Capital IQ.

Telus also added approximately 110,000 net new wireless subscribers during the quarter, up 17,000 or 18 per cent year over year but falling short of BCE Inc.’s roughly 126,000 net new mobile phone customers and Rogers Communications Inc.’s 165,000.

Mr. French said the company is continuing its strategy of focusing on attracting profitable customers, but needs “to be a little better at gaining some of the new Canadian market.” He also noted that Telus has had to offer more discounts, particularly on its television services, amid heightened competition in the industry.

Telus president and chief executive Darren Entwistle said the company’s technology businesses, Telus International and Telus Agriculture, are facing macroeconomic headwinds, as their larger technology clients are themselves under pressure and scaling back spending.

Those headwinds are expected to continue for the rest of the year, Mr. French said.

Telus International recently slashed its annual guidance in response to economic pressures, causing its share price to tumble. Telus spun off the subsidiary through an initial public offering in 2021 but remains its controlling shareholder.

“Our [Telus International] team has actioned significant incremental cost-efficiency programs, including staff reductions, to address lower service volumes, and is driving additional automation and generative AI-enabled solutions to further optimize its cost structure,” Mr. Entwistle said in a statement.

“Despite these near-term challenges, we remain highly confident in [Telus International]’s strategy and investment thesis,” he added.

Scotiabank analyst Maher Yaghi said that Telus continues to experience good growth, although its results are “unfortunately being overshadowed by [Telus International’s] recent more difficult performance.” He also noted that churn – the rate of customer turnover on a monthly basis – rose 10 basis points year over year to 0.91 per cent because of “higher competitive intensity” in the sector.

“While the cost-cutting measures should contribute to higher estimates for next year and are well-timed given our expected more difficult wireless pricing environment to come, investors who usually invest in a defensive sector like telecom might not appreciate the successive recent guidance reductions from the company,” Mr. Yaghi wrote in a research note.

Telus shares declined by 6 cents, or 0.26 per cent, to $23.03 in Friday afternoon trading on the Toronto Stock Exchange.