TELUS CORPORATION
DBRS Morningstar also confirmed the rating of TELUS' Commercial Paper rating of at R-2 (high) and the rating of
TELUS' earnings profile continued to be supported by its strong incumbent wireline position in
TELUS' leverage increased at YE2020, primarily driven by modest EBITDA pressure in the telecom business related to coronavirus headwinds (the absence of roaming and coronavirus-related expenses) and debt-financed acquisition activity. Although YE leverage was above what would be appropriate for the current rating, it reflects debt-financed acquisition activity without the benefit of the associated earnings. Further, Q1 2021 witnessed several material capital market activities that suggest TELUS' leverage peaked at YE2020 and that, while currently weakener in comparison with prior historical periods, the Company's forecast financial profile remains sufficient for the current rating.
TELUS' EBITDA is expected to grow in the high single- to low-double-digit range over the near term, which should support a recovery of the earnings profile within the rating category beginning in 2021.
TELUS' decision to aggressively diversify its operating business exposure while continuing to invest heavily in its telecommunications network has elevated TELUS' financial leverage. DBRS Morningstar believes the Company's financial profile will remain supportive of the current rating over the near to medium term based primarily on EBITDA growth, while capital allocation is managed in such a manner that debt levels remain near current levels, resulting in leverage moving towards 3.0x by 2022.
If TELUS were to experience a fundamental deterioration in operating performance and/or pursue more aggressive financial management, including large debt financed acquisitions such that leverage is maintained in a sustainable manner above 3.5x, a negative rating action may occur. While not currently anticipated, a positive rating action may occur if the Company's earnings profile accelerates meaningfully for a sustained period and gross leverage moves structurally toward 2.5x.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.
Notes:
All figures are in Canadian dollars unless otherwise noted.
The principal methodologies are Rating Companies in the Communications Industry (
For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.
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Ratings
Date Issued Debt Rated Action Rating Trend Attributes
i
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
03-Jun-21 Senior Debentures Confirmed BBB (high) Stb CA
Date Issued Debt Rated Action Rating Trend Attributes
i
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
03-Jun-21 Issuer Rating Confirmed BBB (high) Stb CA
03-Jun-21 Notes Confirmed BBB (high) Stb CA
03-Jun-21 Commercial Paper Confirmed R-2 (high) Stb CA
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